In this article, Corvin Real Estate focuses on the winds of change affecting the development of the suburban property market and the almost dying market players - large mansions.
Since information and communication technologies rapidly intertwine with people's daily lives, the rhythms and habits have changed significantly in the last twenty years. Remote work and study opportunities, socialization opportunities in a virtual environment, travel dynamics and many other areas – are no longer separate phenomena, but more a catalyst for much wider economic and social change. The new era has come with new conditions for how domestic migration takes place and what housing people choose to live in today.
General trend: Abandonment of private homes. Moving to cities
Only 10-15 years ago people furnished their homes thinking that they will spend their whole lives in there and then pass it on to future generations; but now things have changed. Today people are much more open to global mobility, freedom is valued more than real estate, and it is no secret that one- or two-person households are becoming more common. Due to the above and many other reasons, people in the Western Europe tend to return to cities. This is fostered by the growing tax burden on private housing and management costs. In Europe's most developed cities, urban planners, urbanists and landscape architects are fully prepared for such mobility, making urban public spaces more sustainable and liveable. The quality of the urban environment is being improved by implementing infrastructure projects, developing climate-friendly green area facilities, thinking about the interaction of different social groups and communities, etc.
Latvian trend: Desire to live in small private houses. Suburban development
In Latvia, the trend is slightly different: people still want their own private houses. Paradoxically, compared to more successful countries in terms of economic development, the number of private houses in Latvia is higher. It must be admitted, however, that people in Latvia are not ready to settle down in their private houses far from the city. The overall trend is slowly abandoning the old stereotype about Latvians as people from remote farmsteads, and Latvia is strengthening its position as a one-city country. As per information compiled by the Central Statistical Bureau (CSB), starting from 2000, 68% of the population have lived in cities, but 32% in rural areas. It is already clear that suburbs in Latvia are growing rapidly, while wonderful properties in more remote corners of Latvia are being sold at an extremely low price, without attracting buyers. If local governments will be able to ensure the necessary infrastructure, access to educational, cultural and medical institutions, in the future such Riga-adjacent areas as Mārupe and Babīte will continue to develop rapidly. People who can afford it will choose to live there, not only due to financial reasons, but also due to the specifics of their occupations, which allows them to work remotely. According to Corvin Real Estate's observations, it is already possible to sell a house in Ādaži faster than a house in Baltezers for the same price. Unfortunately, the scenic Baltezers is not competitive in terms of proper infrastructure. If decision-makers in the Riga City Local Government will act wisely, Riga will be able to unleash its potential, thanks to the considerable diversity of waterfront, proximity to forests and other green areas.
Strong winds of change also shake the foundations of large houses. Corvin Real Estate has already noticed that stakeholders from real estate market who earned their capital in the 1990s, and are now reaching the age of 70 or 80, start selling their large properties in Jūrmala or Baltezers desiring to move to a smaller area. The rapid rise in property taxes is only exacerbating this trend. People are ready to give up these large houses, but it is not easy to sell such properties in the today’s market.
Undeniably, the demand for large houses still exists, but it is extremely low. Large mansions (300m² or 500m²) mainly serve for a representative function. The most liquid places where the market of such properties still remain are Mežaparks, Baltezers areas by the lake, as well as the most prestigious districts of Jūrmala. It must be said, however, that even the wealthy segment of buyers who are ready to buy an exclusive property still do not want it to be big. These people often already own properties in several countries and want to be as free as possible in managing their estates. This "beginning of the end of megalomania" can be seen not only in the demand for houses, but also in the demand for apartments. Currently the best apartments are no bigger than 150m² - instead of 300m² some time ago.
Corvin Real Estate predicts that some of the large mansions will be divided into several parts with smaller apartments. This already happens in Germany. Of course, as long as the architecture and layout of the house, as well as the appropriate location allow it. Alternatively, buildings could be demolished because they are often located in good places where more profitable and sensible real estate projects could be implemented.
Thinking about the requirements of the new era, Corvin experts recommend that when building new properties, think about the proportionality of the space, functionality and possibilities to transform or adapt the building.