Azerbaijani real estate market not expected to reach pre-crisis level next 5-7 years
Azerbaijan, Baku, June 28 / Trend, A. Akhundov /
In the next five to seven years, the real estate market of Azerbaijan is not expected to reach the pre-crisis level of activity, MBA Group consulting company CEO Nusret Ibrahimov told Trend.
"In the 1990s, especially in the first half, Azerbaijan's construction sector was paralyzed, so there was great potential demand at the beginning of the 2000s. Later there was boom in construction development and many new products arrived in the region," Ibrahimov said.
He said investors who managed to save up money but who were unsure of where to invest helped this boom intensify.
"They considered it risky to invest money in banks, and a well developed securities market did not exist at the time. They considered investing in the real estate market the only way to protect their money from inflation. This, however, has led to an increase in prices and financial activity", Ibrahimov said.
He said today peoples prefer investing their money by depositing it in the banks.
"Today's banking sector is experiencing a period of development; the risk is much less severe than ten years ago. In addition, the profitability of bank deposits (10.8 percent) is higher than the profitability of real estate (6.2 percent per year). So today people trust banks more and prefer to invest money by depositing it," Ibrahimov said.
In this regard, he said, buying investors are using the real estate market.
"Only those who really need homes remained in the real estate market as buyers. They are virtually unable to influence prices and real estate activity. In addition, excess supply can be observed in the market and until this supply is reduced, there is little expectation that prices will change. Some 1.5-3 years is needed for a final reduction in the excess supply, after which the market will become stable," Ibrahimov said.
He also considers a decline in foreign investment to be natural.
"Today there is no flow of foreign investments coming into the country as there was before. In particular, there was a great flow of investment into the country's real estate from Russia. In the past two years it has practically stopped," Ibrahimov said.
According to the State Service for Real Estate Registration, in 2010 foreign citizens held 1,110 properties in Azerbaijan. Of those, 765 were registered in Baku, 66 in Sumgayit, over 50 in the Ganja and Yevlakh territorial administrations, and 30-32 in the Jalilabad and Yevlakh territorial administrations.
Foreign citizens mainly purchase property in Azerbaijan to reside and work here.