Latvia’s economical situation in recent years has developed very dynamically. Also the real estate market has developed dynamically. There have been rapid price increases and falls. Rapid changes in the real estate market are largely dependent on the changing external economical environment, because such factors as unemployment, gross domestic product, inflation and commercial bank lending activities have been subject to many changes over the last three years. The real estate market is influenced by these and other factors and these factors can change both the number of transactions, as well as the transaction volumes in real estate market. The real estate market may be affected not only by economical factors but also political and social factors. The real estate market is subject to numerous government regulations and laws. The recent history is a proof that government decisions can significantly affect the real estate market. Before mentioned factors are not the only ones that can affect the development of the real estate market cycles. Other factors associated with the economy, politics and related subjects may also impact the real estate market. The objects of the real estate market, namely, the living-space is used and consumed by the population and changes in population and the location will definitely cause an impact. Over the past twenty years Latvia’s population has decreased by 420 thousands inhabitants. The proportion of inhabitants living in urban and rural areas has not substantially changed during this time. Also in 2010 the number of Latvia’s population is declining each month and no improvements of the situation are forecasted in the near future. An important figure for the real estate market evaluation and forecasting of its possible development is the total housing fund of all citizens. But more important indicator is the number of square meters per capita. This indicator compared with other countries can demonstrate the possible industry development potential. In Latvia this figure is 27 square meters of living space per capita. Developed countries have an average of 40 square meters per capita. The drop in the number of population, as well as the increasing emigration will affect the real estate market more negatively. The main conclusion of this article is that if the current demographic situation continuous in the negative direction, when the number of population is decreasing due to emigration and the negative birth and mortality ratio, the demand of housing areas may fall. The demographics and population regional living space arrangement should be carefully analyzed.