With annual real estate price gains in the region of 40% achievable from certain areas of the Latvian property market, surely the key to successfully investing in real estate in Latvia is just getting into the market right now and enjoying the record price increases?

Well no actually!

While property price gains of 40% in parts of Latvia's capital city of Riga have been recorded and have resulted in a surge of overseas investor interest in this new European Union member state, the key to long term success is in understanding the local Latvian economy.

Although Latvia is an attractive, interesting and historic country of diverse geography which creates a stunning natural environment for tourists to explore, it is not a tourism hotspot and not a country trying to target tourism. Rather it is a country with a government committed to transforming its economy from the one paying the lowest wages in Europe to the one attracting the largest amounts of foreign direct investment in the European Union.

The success or otherwise of the Latvian government's commitment to improving levels of foreign direct investment and boosting the local economy is key to the ongoing and long term success of the investment real estate market in Latvia.

Why?

Because a real estate investor's target audience - whether for rental property or resale real estate - is the local Latvian people. And if their government can continue to improve their economy, push up GDP, increase the wealth of the common man and make owning property a real prospect for more and more Latvians as is their vision, then a real estate investor buying into an incredibly cheap market now will have a growing audience gaining in wealth status to target for his rental income or equity appreciation in the future.

An indication that the Latvian real estate market is going to prove successful and that property investors who carefully select their investment real estate assets in Latvia will profit from them over the medium to long term is that the mortgage market in Latvia, which is in its absolute infancy, is gaining substantial strength.

Interest rates in Latvia are incredibly low in real terms and outstanding mortgage loan figures in Latvia are at least 40% lower than in other EU countries. This means that more and more local and international lenders are becoming aware of the huge potential for profit in Latvia and are beginning to enter the marketplace - this should give an investor great confidence for two reasons...firstly the financial institutions committing to the mortgage marketplace are not in it for the short haul and secondly the increase in availability and affordability of home loans means that an increasing number of Latvians are being afforded greater purchasing power and are gaining in financial strength. Because, as stated, it is the local market that will ultimately provide an investor with his target audience, this bodes well for the long term profitability of property investments made in Latvia today.

About the author:

Rhiannon Williamson writes about real estate investment in emerging markets worldwide. To read more about property investment in Latvia click here.