Land prices climb steadily in the Baltic States

Strong economic growth, with GDP growing over 7.5% per year on average for the last seven years, is pushing all real estate prices toward Western European levels. Land is no exception. As residential prices grow by 10-25% annually, and commercial rents continue their steady climb, Ober-Haus Real Estate Advisors sees land prices continuing their upward rise.

Strong economic growth is pushing demand for space, and therefore land prices grew more than 40% in the suburbs and more than 60% in the city centre in 2006, although price increases have slowed somewhat in the first half of 2007.

As anywhere, prices for land depend on allowable building volumes. The price of land for residential development range from €600-800 per sqm of net sellable area in Tallinn city centre and from €320-400 per sqm of net sellable area in suburbs and adjacent to the city borders.

Prices of commercial land near the city limits on main roads range from €35-220 per sqm. Land plots for industrial premises in technology parks are sold for €40-125 per sqm. Prices of commercial land plots in prime locations on main traffic roads with extensive building rights start from €250 per sqm.

There are very few large sites remaining in the city centre, only those in the harbour area, the former TVMK plant site (“Luther Quarter”), and Juhkentali Quarter. For commercial development, there are sites on the junction of the Tartu and St. Petersburg Roads. Land for industrial development exists in the city on the St. Petersburg Road, as well as on the Tartu and Pärnu roads outside of the city limits, and on the ring road. For any large residential project, developers have to look for plots outside the city limits.

There are number of enterprises who want to move their existing production and distribution facilities situated inside the city to better locations and others who need space for extensions. The biggest demand is for properties outside of Tallinn on main highways to St. Petersburg, Tartu, and Pärnu and alongside the Tallinn roundabout connecting the highways. Residential land divided to appropriate land plots for houses as far as 20-30 km outside of Tallinn in good location is also in need.

The reconstruction of several main roads has begun, such as the expansion of the Tartu Road, reconstruction of Merivälja Road, construction of Mustakivi Road extension and connection between Smuuli and Suur-Sõjamäe Roads. The planned reconstruction of the Ring Road to four-lanes with multi-level intersections means that some of the existing off-ramps will be closed in the future, which might leave some land plots without access to traffic.

The price of land grew over 60% on average in 2006, and another 25% in the first half of 2007. The prices of land plots located in the city centre for constructing commercial projects and apartment houses range from €400 to €3500 per sqm, but in suburbs the lands of the same purpose range from €100 to €600 per sqm, depending from possible construction intensity. The most expensive land plots for private houses in Riga are located in Mezaparks, Teika, Vecaki and Kipsala, where supply is restricted.

The master plan of Riga is valid from 2006 to 2018. The master plan dictates the allowable use of land and possible number of storeys.

During the accounting year, the prices of land plots suitable for construction of both commercial and residential buildings in Vilnius and surrounding areas increased an average 50-100%.

Prices for land plots in the central part of the city, the Old Town and other prestigious districts and suitable for construction of apartment houses and commercial projects currently range from €700 to €3,000 per sqm. The prices of similar land plots in the suburbs range from €150 to €600 per sqm, and land plots near the city limits cost from €120 to €200 per sqm.

Building land in the suburbs may sell for €100 to €400 per buildable square metre of housing, while land in more prestigious districts will sell for €900 to €1,500 per buildable square metre of housing.

In 2006, the Vilnius City Council approved the concept of the General Plan for the Municipality of Vilnius until 2025, which specifies decentralized concentration as the city’s strategic development trend, and the optimal option for city development was chosen. According to this concept, external development in the city’s most favourable areas will be combined with the conversion of areas that are being used ineffectively. This provides opportunities to invest in both the city centre and the periphery in the direction of Pilaitė, Povilionys, Gulbinai, Lentvaris, and the Pavilnys area.

For more information or market reports, visit www.ober-haus.com