The real estate market in Latvia and everywhere in the world develops depending on external economical, political and demographical environment. The evolving external environment can change the directions of the real estate development and affect real estate cyclic development, turning points, duration and depth of the cycles. The most important factors of the last decade which influenced the real estate market cycle were the growth of crediting, overall prosperity and economical development. The real estate researchers consider migration and structure of population, development of new households and fluctuations of the number of population (demographical factors) as the most important factors influencing the real estate market. The number of inhabitant in Latvia since 1990 has decreased by 430 thousands, in cities as well as in countryside. Besides this indicator is the official statistics which as admitted by some experts do not discover the actual demographical situation. There is a reasoned opinion that the number of emigrated inhabitants is much greater. The authors in this article paid attention to the fluctuations of the number of inhabitants in Latvia and its possible and actual influence on the real estate, dwelling space market in Latvia. As the number of inhabitants decreases in a particular region, also the overall demand for dwelling space declines in this region. Although the average dwelling space for one person in Latvia is lesser by one third comparing to European developed countries, the decrease of the number of population will put increasingly more pressure on the market prices. The authors do not declare that there will not be a need for new dwelling space but when planning development of new dwelling space the demographical situation and its development in the particular region should be considered seriously. The real estate market should conform to this actual situation thus ensuring a long-term development.