Prices in Real Estate Market in Azerbaijan Increased by 10 Times: Interview with Chairman of public organization Participants of Real Estate Market

Business Materials 18 April 2008 19:39 (UTC +04:00)

Azerbaijan, Baku, 18 April /corr. Trend U.Ismaylova / Immediately after the collapse of the Soviet Union, the real estate market of Azerbaijan incurred temporary stagnation. After 1995, the real estate market has intensified in many ways and currently 20-22 storey buildings are being constructed in Baku. The development of the construction sector in the recent years led to flow of huge foreign investments.

Trend 's interview with the Chairman of public organization Participants of Real Estate Market, Elman Asadov:

Question: How do you assess the current real estate market of Azerbaijan?

Answer: The real estate market of Azerbaijan is dynamically increasing and the price increase for apartments testifies it. This dynamic will be continuing in the next several years. The prices in the real estate market increased by 10 times over the past six years. For instance, if in 2002 it was possible to purchase a one room apartment for $6,000 in Ahmadli settlement of Baku, today the cost of one room apartment here totals at least $50,000.

Question: How is the construction market currently developing in Country's regions?

Answer: The market in the region have intensified after 2005 after the realization of State Social-Economic Development Program, and it lead to improvement of the living conditions of population in the regions of Azerbaijan. In the regions, population does not have much interest in the first market because they prefer to live in the private houses because of the availability of land plots. One more reason for intensification of the market in the regions of Azerbaijan is the development of tourism. In several regions, for instance in Ganja, the prices for real estate are nearly similar to the prices in Baku due to the constant flow of other region's residents to Ganja.

Question: How does the collapse of 16-storey building in Baku in August affected the activity of the market?

Answer: After the August event, the activity of the first market decreased by more than 30%. Despite that the construction has still increased significantly in the market, but the demand has still not increased. I think that this period of distrust will continue for a certain period of time. However, the demand in the second market has grown; people have started approaching this market.

Question: What are the average prices in main segments of the market?

Answer: The average price in the primary housing market dropped in March by 5% to $1,076 per sq m, in the secondary market the average price for per q m climbed up by 9.1% to $1,638. In the land market, the average price rose in a month by 3.4% to $23,800 per 100 sq m. From Jan to March, the prices in the real estate market averagely increased by 10-12% and are expected to rise by another 16-18% by the end of the year. The activity of the market will rise by 25% by the end of the year.

Question: Recently property is sold through long-term crediting. How does that impact the market?

Answer: The soft credits offered at the market are useful for the population. It is known that not every one can afford to pay the full price of a flat at once. Credits for up to 25 years are offered to the population. Construction companies compete with each other and the customer benefits from that.

Question: In many countries the number of cheated people who pay beforehand for construction of property for them is rising. Has Azerbaijan experienced such cases?

Answer: So far Azerbaijan has not faced such cases. The only problem that the Azerbaijani purchasers of apartments in newly-constructed buildings face is, delay in the completion of construction. The people do not apply to the court in this regard. The main cause of the delay is not the construction work, but the construction of telecommunication hubs.

Question: Imported construction materials make up about 60% of the Azerbaijani market. How does that affect the prime cost of the property?

Answer: Construction materials are one of the most important causes for rise in the property prices. It would be good for the companies to produce their own construction materials and to use them in construction, through that requires large expenses. Only several companies in Azerbaijan can afford to do that.

Question: Are imported construction materials better than the local ones?

Answer: Local construction materials are not worse than the imported ones. The problem of construction sector is not the quality of construction materials, but the way it is used. After the collapse of a building in August 2007, the Government has improved the measures in this regard. Previously, construction materials at the construction sites were checked 1-2 times in a month, but now they are examined more frequently.

Question: What about the staff potential at the property market of Azerbaijan?

Answer: Azerbaijan's property market is experiencing deep lack of specialized staff. Almost all employees at the construction sites are residents of regions in the country, who have come to the capital city to earn money and have nothing to do with construction. I think the problem could be resolved by opening the specialized training centres and licensing the employees in order to prevent accidents. Though, as compared to 2007, the number of death cases has dropped by 25% in the first quarter of 2008.

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