Operations on sale and purchase of real property cut by half in Azerbaijan in 2008

Azerbaijan, Baku, Jan. 12 / Trend , U.Ismayilova /

Despite of the growing demand for dwelling and commercial premises of the population, the number of operations on sale and purchase of apartments dropped by 40.3 percent with compared to previous years. The average prices were cut by 4 percent and price index - by 1 percent, the consulting company MBA Group reported. 

"In 2008 the activity on the market dropped by 8.8 percent and profit - by 3.3 percent," the company said.

According to MBA Group experts, the prices on the first market for real property of Baku were increased by 8.9 percent. If in previous years the average square of apartments made up 138-145 square metres, then companies started either decrease quadrate, or divided apartments into parts and sold them separately.

Changes on the real property market of the country mainly affected the secondary real property market. If the changes had positive influence on the market from 2003 to 2007, then it had a negative influence in 2008.

The summary table shows changes in prices on the second real market in 2007-2008 in USD per square metres: 

2007

2008

+/- in percent

1-room

1686

1582

-6,6

2- rooms

1511

1474

-2,5

3- rooms

1606

1562

-2,8

4- rooms

1629

1511

-7,8

5- rooms

1408

1423

1,1

In 2008, the period of capitalization of property was reduced by nine percent - up to 14 years and 6 months on the rent market. At the beginning of 2008 the profit ratio grew from 0.64 to 0.72, and the activity on market was reduced from 0.35 to 0.12.

Project of buildings

In 2008 (in USD per square metre)

In 2007 году (in USD per square metre)

+\- within a year

Architectural

2258

2172

-4

Akhundov

1881

1680

-12

Experimental

1777

1672

-6.3

Italian

1387

1277

-8.6

Kiev

1381

1261

-9.5

Leningrad

1520

1377

-10.4

Minsk

1700

1459

-16.5

German

1647

1589

- 3.7

Stalin

1886

1830

-3.1

French

1602

1409

-13.7

Khrushov

1715

1663

- 3.1

Special

1629

1569

- 3.8

New building

1459

1309

-11.5

In average in city

1617

1478

- 9.4

In 2008 the cutting of squares in buildings was observed as a result of decrease of consumers' demand.

The summary table shows changes in quadrate in 2008:

Apartments

In 2007 (per square metres)

In 2008 (persquare metres)

Changes in percent

1- room

36.9

37.4

-1.3

2- rooms

56.9

59.5

-4.4

3- rooms

72.1

85.2

-1.,4

4- rooms

90.6

111.2

-18.5

5- rooms

101.7

140.9

-27.8

17.1 percent reduction of average prices for private apartments was also observed in 2008. However, this was deceptive index, as the drop in prices took place due to cut of squares in average to 16.4 percent and farmlands by 21.7 percent.

Indices

2008

2007

Changes in percent

Average prices (in USD)

189 819

229 064

-17.1

Accommodation (per square metres)

165

197,3

-16.4

Land plots (10x10)

4,7

6

-21.7

Number of rooms

3,85

4,25

-9.4

Prices in USD (per square metres)

1150

998

15.3

As for 2008 reduction of activity was observed on the real property market of Azerbaijan in the housing segment, which is mainly explained by a drop in buyer ability, but increase in prices is due to increase in consumers expenditure.

"Experts consider that the real property market of Azerbaijan survived seven development stages and formation since 1993 and until 2008", expert of the consulting company BMA Group Faig Ibrahimov said on Monday.

"The first stage began in 1993, when flats became privatized in the country, and this caused the dynamic development of market. But because of absence of regulated law and because of created price vacuum on the dwelling on the market they began sharply growing", Ibrahimov said.

According to him, during this period the profitableness of market also began actively growing and professional participants have joined it.

Second development stage of the real property market is connected with the period of development of legislative acts, since the beginning of active operation on the bank market, insurance companies, estimators, but prices constantly grew during this period.

During the third development stage of the real property market of Azerbaijan the decline on world oil market occurred, some petroleum projects became unpromising; many foreign companies left the country. As a result a drop in dwelling demand was observed in the country and a two-fold drop in its prices, correspondingly, occurred.

The fourth development period of the real property market of Azerbaijan began since 1999, when stability began to reign on the market, prices were stabilized, and new proposals appeared on the primary market. Gradually the activity of the economy of the country, reduction in inflation rate, devaluation of manat, arrival of new investors into the country was observed.

The fifth development period of the real property market of Azerbaijan was memorized by passage from stagnation period to the more active period - new constructions began to actively draw population.

The sixth development period, which became most active and memorized, is characterized by the sharp reanimation of market. With respect to economic development in the country dwelling demand began to be formed, and an improvement in the world petroleum exchange has positively influenced the domestic market, in particular on investors. On the other hand, began to create favorable conditions for work on the market within the framework of its liberal policy. Specifically, during this period the real property market of Azerbaijan survived vertical development and it became foremost among other spheres of the economy. But, at the same time, risk level on the market has sharply grown, the presence of nonprofessional participants have considerably increased, and the need for the government control over the sphere have also increased

The last, seventh development stage of the real property market of Azerbaijan began since 2007. It was memorized by unofficial limitation to obtaining of permission on building, with the high level of inflation, with unreal exaggeration of prices of real estate, by freezing of state mortgage underwriting until indeterminate time and so on. As a result significant exceeding of proposals above demand had been observed. In autumn 2007 the activity began sharply falling on then real property market, but an artificial increase in prices in spite of this continues to be observed. At the same time the world financial market begins to be activated and its influence on the Azerbaijan market, which is observed since September 2008, continues to this day.

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