Review of construction sector in Azerbaijan (january-june 2014)

According to the Azerbaijani State Statistical Committee, the construction work totaling 3.67 billion manat was conducted in Azerbaijan in January-June 2014. The volume of construction work increased by 5.2 percent compared to the same period of last year.

Some 63.2 percent of the total volume of construction work accounted for primary construction, reconstruction and expansion, 18.7 percent - overhaul, 4.7 percent - current repair and 13.4 percent - other construction work. Some 80.1 percent of the construction work was carried out by non-state construction companies.

Main indices of construction sector in Azerbaijan in January-June 2014

Source: State Statistics Committee

Commissioning of housing increased by 65.8 percent in June compared to May 2014 and decreased by 20.4 percent compared to June 2013.

Around 201,900 square meters of housing were commissioned in June compared to 121,800 square meters in May. In total, some 824,600 square meters of housing were commissioned in 2014 which is by 10.2 percent less compared to the same period of 2013 (917,900 square meters), according to the Azerbaijani State Statistical Committee.

According to MBA Group consulting company, real estate prices increased by 9.5 percent in the first six months of 2014. The largest price increase was observed in the housing market - 18.9 percent.

The supply decreased on the housing market amid growing demand. So, prices maximally increased. Today, business and elite housing is mainly built in Azerbaijan. Mass housing and economy-class housing in the country is not built. Therefore, average prices are rising so rapidly.

This situation is also observed in the land market. Land prices are increasing because of rising real estate prices. The rise in prices in the land market was 7.3 percent in January-June. Rental prices in the commercial real estate market remained unchanged in the first six months of this year.

The price increase for the first six months amounted to 17 percent on the primary housing market, while on the secondary - five percent.

According to MBA Group forecasts, decline in prices is inevitable in summer, so the prices will fall by the end of summer by two or three percent. The growth rate can be around 20 percent during a year.

The Central Bank of Azerbaijan reported that in the first half of the year the real estate market turnover increased by 29.67 percent year on year. Its growth was 40.9 percent in 2013 compared to 2012. In 2012, it increased by 24.86 percent compared to 2011.

According to the CBA, as of July 1, 2014, the real estate market turnover (cash turnover of notary offices) amounted to 2,383,577 million manat compared to 1,838,256 million manat a year earlier.

The proceeds on the account of notary offices dealing with the real estate purchase / sale amounted to 1,099,355 million manat compared to 802.278 million manat the previous year (+ 37.03%). Some 1,284,252 million manat were written off from these accounts compared to 1,035,978 million manat (+ 23.97%).

The Central Bank stressed a 20.9 percent decline in the share of mediators (banks, notaries and realtors) in residential real estate transactions in January-June. As of July 1, 2014, the share of mediators was 184.897 million manat compared to 233.7 million manat a year earlier. At the same time, the share of mortgage loans of banks given general participation of mediators amounted to 33.64 percent in January-June. The banks issued mortgage loans worth 62.2 million manat compared to 64.2 million manat a year earlier. Mortgage ensured only 4.84 percent of payments on real estate transactions in January-June.