Construction sector

The real estate market of the country became the first sphere of the country's economy, which incurred the impact of the financial crisis. Over the past five years, 2008 became most passive in the real estate market of Azerbaijan on all market multipliers. In 2008 the average number of apartment sale-purchase operations in the country exceeded 2,000 as compared to more than 4,000 in 2007. The activity of the real estate market in January 2009 reduced by 30% as compared to the same period of 2008, but increased by 13% compared to December 2008.

According to the data provided by the State Statistics Committee of Azerbaijan, in 2008 the amount of the construction works in Azerbaijan being carried out by the construction companies totaled AZN 3.5bln or 59.8% more as compared to 2007. The share of the public sector in the construction made up AZN 9.5mln, and private sector - AZN 2.6bln.

Of them, AZN 2733.4mln (76% of the gross volume) fell on the newly constructed buildings, AZN 509.5mln (14.2%) - capital repair, AZN 152.5mln (4.2%) - current repair, AZN 202.5mln (5.6%) - other works.

Dynamic of construction works being carried out by construction companies

Source: State Statistics Committee

According to the data provided by the State Statistics Committee, in 2008 the volume of housing area given into use in Azerbaijan comprised 15,600 sq.m, an increase of 8.6% from the same period of the last year. In 2008 AZN 5.62bln was invested in the construction-assembly works, which is 56.7% more than last year.

During this period, more than AZN 9bln was invested in the construction sector of Azerbaijan, an increase of 34.3% from the same period of 2007. AZN 6.51bln was invested in the construction of the production facilities, an increase of 26.3%.

According to the data provided by the MBA Group consulting group, in 2008 the apartment sale-purchase operations reduced by 40.3%, and the average price fell by 4%. Last year the activity of the market in Baku fell by 8.8% and profitability by 3.3%.

In the first housing market, the average prices grew by 8.9%. If in the previous years the average area of apartment was 138-145 square meters, then the construction companies began either to reduce quadrature or to divide large apartments and sell them separately because of the problems with the realization of objects.

Changes in the real estate market of the country in last year affected the second housing market. If in 2003-2007 the change in the market favorably affected the second market, last year the influence was negative.

Summary table of price change in the second market in 2007-2008 in USD per sq.m. 

Last year, the period of capitalization of real estate in the market of renting of real estate facilities reduced by 9% to 14.6 years. As of beginning of 2008, the coefficient of profitability grew from 0.64 0.72, and the activity of market reduced from 0.35 to 0.12.

Summary table of change of quadrature of housing in 2008:

Last year 17.1% decrease was also observed for the average prices of private houses, but the prices fell due to the reduction in the area of houses.

Source: MBA Group consulting company 

In December, due to the global financial crisis, the average prices for the building materials in Baku reduced by 15.4% as compared to November. The prices reduced by 34% as compared to the beginning of 2008, 33.8% to 2007. The price reduction took place mainly due to the price drop in imported building materials.

The prices of local building materials also reduced in December, and their share made in the market up 51.2%. 

In December the public organization Participants of Real Estate Market held monitoring over 82 types and 36 varieties of the construction materials. Reduction was observed on 51 and stability on 31. 

In 2008 the most expensive land plot was proposed in Nasimi district of Baku for $410,000 per one hundred sq.m and the cheapest for $350 in Surakhani district of the capital. During the year the price for the land plots grew by 4.3% to $22,290 per one hundred sq.m.

The prices in the land market of Baku have been growing since 2001, but their decrease began from the third quarter of 2008 under the effect of the global crisis. Prices fell as a result of deficit of land plots in the central zones of the city. However, the prices grew in the second and third zones of the city because of the large flow of population and correspondingly, increase in the demand.

Summary table of price change for the land plots in Baku:

The periods of exposition of the land plots last year grew by 57.1% to 253 days due to the financial crisis and reduction in the rates of construction in the country.