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Desperate developers offering bargains in Baltic states for commercial real estate investors

According to an appraisal of the area by property advisors Re&Solution Group, the impact of the global credit crunch means that desperate developers have to sell.

Property prices decreased in Lithuania in 2008 and the number of transactions also decreased even though it was the best year yet in terms of total volume with investment exceeding €300 million.

The main issue hampering sales was lack of funds. A number of transactions were halted because of borrowing conditions.

Despite a promising start at the beginning of the year Latvia suffered a pretty catastrophic 12 months with expected all time high investment volumes not materializing because of the economic downturn.

And in Estonia investment market remained relatively stagnant and many investors disappeared from the sector due to high volatility of the market and remarkably worsened financing conditions.

However, analysts report that many investors are still actively watching the market with the intention of entering it when they see the first positive signals.

So across the region the economic slowdown, increased cost of borrowing and previously excessive appetite of property developers all lead to risky engagement in real estate activities and a speculative approach by developers, many of which were non-professionals.

Consequently, the market faces an increasing amount of distressed property owners, forced to desperately dispose of their properties at bargain prices and this is now likely to attract those seeking good deals.

'We believe that the wait-and-see mood, which prevailed at the end of 2008 among potential investors, will now change as the market offers distressed properties and more opportunistic transactions. A number of specialized funds for such transactions are currently taking a close look at the Baltic market,' the company says.