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The Baltic Bubble That Burst

This is not a strictly Eastern European phenomenon but Latvia is an excellent case in point. At the beginning of the 21st Century, Latvians with higher purchasing power exploited low real estate prices by purchasing whole blocks of flats, houses and hotels. These people gradually owned the lion’s share of the property market and kept prices at unrealistically high levels. Thus they manipulated the market, instead of leaving it to its own regulatory mechanisms.  

The real estate market in Eastern Europe has started to slow down. Prices in Bulgaria and Slovakia are predicted to rise by 15 per cent this year and by 12 per cent in Croatia. Prices in Estonia and Lithuania will remain stable, but in Latvia will continue plummeting. Yet the situation is Latvia is not beyond redemption. The country has been adapting successfully to the European Union and has gathered sufficient economic momentum to leave this difficult period behind. Nevertheless, the Latvian example will give serious pause for thought to all property buyers who used to believe that a European price collapse is inconceivable.