Review of construction sector in Azerbaijan (January 2014)

According to the Azerbaijani State Statistical Committee, the construction work totaling 352.7 million manat was conducted in Azerbaijan in January 2014. The volume of construction work will reduce by 6.7 percent compared to the same period of last year.

According to the committee, some 57.6 percent of the total volume of construction work accounted for primary construction, reconstruction and expansion, 19.6 percent - overhaul, 2.9 percent - current repair and 19.9 percent - other construction work.

Some 75.6 percent of the construction work was carried out by non-state construction companies.

Main indices of construction sector in Azerbaijan in Jan. 2014

Source: State Statistics Committee

According to the Azerbaijani State Statistical Committee, 120,500 square meters of housing were commissioned in January 2014 or by 8.2 percent less than in the same period of 2013 (131,200 square meters).

Baku's real estate market is expected to be greatly changed in connection with the demolition of the old houses on the Nariman Narimanov prospect (former Sovietskaya). According to MBA Group consulting company, the demolition of almost 10,000 residential houses on this territory allows to predict a hike in market prices.

Up to 2,000 apartments are offered on the market monthly. The matter rests in the demand for 10,000 apartments as all these people will search for new houses after receiving compensations. The new buildings are being built in the city, but mainly premium and business class. The lack of middle-class apartments and such a great demand will lead to a significant increase in the market prices - up to 10 percent.

Primary housing market

According to MBA Group consulting company, the average cost per one square meter of primary residence in Baku in January increased by 3.05 percent - up to $1,181.

The primary housing increased by 33.9 percent compared to January 2013.

The recent price hike continued in January 2014. The reason is the expansion of a demolition process in the capital, the gradual decline in the share of cheap apartments in connection with a decrease in the construction volume. As a result, the apartments ( offered at a high price ) were bought. Earlier, there was a low demand for them.

Moreover, a square meter of non-residential buildings on the primary market in January increased in price by 10.9 percent and by 13.87 percent compared to January 2013. Its average price was $3,225 in January.

Secondary housing market

The cost of one square meter of secondary housing in the Azerbaijani capital of Baku has risen by 3.71 percent from 1,807 to 1,874 in January, according to 'MBA Group' consulting company.

The cause of price hike was a small number of housing offered for sale and the assumptions of the population that the price will increase in the country this year. One of the reasons is the increase in fuel prices at the end of 2013. The seasonal factor affects the rise in housing price.

Most of the portfolio included cheap houses within a month proceeding from market conditions or the nature of demand. In January, the share of expensive homes decreased from 45.42 to 44.17 percent, while cheap ones increased from 54.58 to 55.83 percent. The average price of expensive houses increased by 4.75 percent, cheap ones - by 2.4 percent.

Most of the portfolio (35.9 percent) accounted for apartments worth $85,000-$95,000.

The average number of sold rooms was 2.57, the average price of a flat was $65,983, the average cost of an apartment was $166,937 in January.

Building material market

In January 2014 the companies engaged in production of construction materials in Azerbaijan produced goods worth 23.2 million manat, which is 7.8 percent more than the figures for 2013, according to a report from Azerbaijani State Statistics Committee.

In January 2014 the companies produced 164.9 tons of cement (an annual growth of 41.5 percent), 9,300 tons of plaster (a decrease of 52 percent), 63,800 tons of ready-mixed concrete (a decrease of 25.4 percent), the committee said.

The production of concrete building structures has doubled, reaching 5,300 tons, recycled marble, travertine, alabaster - by 61.7 percent to 686.6 tons.

Land market

According to MBA Group consulting company, a decision of demolishing the houses in the center of Baku (Sovietskaya) led to a rise in land prices in the capital.

The land prices increased in January despite the cheap land trend observed in Baku in the second half of 2013. This can be connected with the gradual completion of the winter season and beginning of seasonal months for the construction sector, as well as a new stage of demolition of old buildings in Baku.

The average cost of the hundredth part of land in the capital increased by 2.35 percent - from $17,240 to $17,646 in January.

The land mainly increased in price in the areas remote from the center. At present, the most active districts on Baku's land market are Nasimi , Yasamal , Narimanov and the most passive - Sabunchu and Garadag districts. During the month, the most expensive land plot was offered in Nasimi district ($ 350,000 per the hundredth part), the cheapest one - in Masazir settlement ($383 per the hundredth part).