Review of construction sector in Azerbaijan (January-June 2010)

In January-June the amount of construction works increased in Azerbaijan by 22.3 percent. The construction works in the public sector amounted to 29 percent during the year, in the private sector - 71 percent.

The amount of construction work implemented by the state companies made up 29.4 percent and by the private companies - 70.6 percent.

Of the total construction works, 70.3 percent accounts for the primary construction, reconstruction and expansion, 19.7 percent - capital repair, 5.7 percent - current repair, 4.3 percent - other construction work

In January-May, 56,500 people were involved in the construction sector of Azerbaijan, nominal wages in the construction sector amounted to 497.3 manat, which is 10.7 percent more than January-May 2009, including wages in state-owned companies amounted to 348.9 manat (with a 5.7 percent reduction during the year), private companies - 653.9 manat (with growth at 27.6 per cent).  

Total area of residential buildings put into use in Azerbaijan in January-June made up 705,000 square meters, which is 38.3 percent more than the same period of last year.

1.933 billion manat was invested in the construction of production facilities or 24.9 percent more than the same period of 2009, 1.833 billion manat (2.7 percent less) in the facilities in the service sector.

Total investments in the main capital amounted to 3.766 billion manat, increasing by 10.9 percent during the year. Funds spent on construction works amounted to 2.483 billion manat, or 5.3 percent more than January-June 2009.

Primary housing market

Average price per square meter in June in the primary housing market remained at the level of April- $870 per square meter, Participants of Property Market public organization said.

Prices in June fell by 1.1 percent compared to the beginning of the second quarter, 3 percent compared to early 2010, and 7.8 percent compared to the same period of the last year. Price compared to pre-crisis peak point (September 2008) fell by 27.1 percent, the report says.

The index of prices remained without changes, and this figure was 333.4 as in May.

The greatest demand on the primary housing market was observed on the three-room apartments. Five-room apartments are mostly offered in the first central zone of the city, and one-room apartments in the third zone of the city.

In June construction of 440 residential buildings were continued, and contraction companies hit 153 compared to 152 in last month.

Summary table shows the prices in primary housing market of Baku:

Secondary housing market

The dynamics of bargaining declined by 0.3 percent in the Baku secondary real estate market, the Property Market Participants public organization.

The share of new buildings in the housing market continues to grow in Baku, and in June this figure was 61.2 percent. Despite this, there was a relative decline in the share of new buildings in the secondary housing market - at 0.3 percent compared to May.

Despite the 1.4-percent decline in proposals on the market, the average price fell by 1.9 percent. Under the influence of mortgage lending in this segment of the market the liquidity remained stable, but the risk is still high. According to studies, on the secondary market price index declined by 1.9 percent compared to the cost of apartments. Prices index on the secondary market remained unchanged at 204.3.

As a result of decrease of proposals by 1.4 percent, the number of apartments proposed to the market was ($1,161 per square meter) 6,460. Share of Yasamal, Nizami, Narimanov and Khatai districts in the portfolio of this segment was 80.3 percent.

In June, price increase was not observed in any districts of Baku, and the most significant decline in prices was observed in Yasamal district of Baku - by 2.4 percent. Average price per square meter of secondary housing was $1,110, and the share of apartments proposed to the market below the average price amounted to 57.5 per cent in the total portfolio of the market.

In June, the average figure for an apartment was amounted to 2.53, and the average price of one room was $45,437, the average price for an apartment - $116,342.

Khatai, Yasamal, Binagadi and Narimanov were the most active areas for the activity coefficient, since these districts were the most attractive in terms of the mortgage.

During last month number of three, four and five-room apartments decreased. The most significant decline in proposals was observed in four-room apartments - at 1.8 percent. Proposals on two-room apartments increased by 0.9 percent.

Land market

The average price of one hundred square meters of land in June reduced by 0.3 percent - up to $14,062 compared to the May index of $14,108, NGO property market participants said.

"The decline in prices was observed in all areas of the city. It is connected with excess of market prices over the real," a statement said.

The average price in the first zone reduced by 0.1 percent - up to $171,832 per one hundred square meters, the second - by 0,2 percent - up to $95,620, third - 0.6 percent - up to $18,540, and the fourth zone - one percent - up to $3,564.

The organization experts said that too high prices for land in the center of the city resulted in a decline in demand in the first and second zones of the city and lower prices.

Prices began to stabilize in June in the first and second zone as opposed to May.

The excess price over the real value did not not seriously affect the profitability of land, but  had influence on increasing of the exposure period and reduction of liquidity.

Meanwhile, interest in this type of property is reduced due to the fact that the land still can not be the subject of pledge.

The most significant decline in prices in June was observed in Yasamal district - 0.7 percent. The relative increase in prices occurred in Khazar (Azizbayov) district of Baku - 0,3 percent due to the beginning of the summer season. The most active were Binagadi and Nizami districts on the land market last month. The most passive, as in previous months, was Nasimi district.

The most expensive plot in June was offered to the market in Nasimi district of Baku for $250,000 per one hundred square meters, the cheapest - in the Absheron area for $ 350 per hundred square meters.

In June, about 797.4 acres of land was proposed on the land market in Baku, of which 77.8 percent were vacant lots, the remainder - non-residential areas and older residential areas. Price index. in the land market reduced by 0.8 points and reached the level of 237.5.

The period of land exposure increased by 0.8 percent - up to 258 days compared to May. This situation is explained by changing demand and supply, as well as seasonal factors.

Building materials

In June, prices for construction materials in Baku declined by 2.46 percent compared to May, the NGO Property Market Participants said.

Experts of the organization researched 38 items on 88 varieties of building materials. An increase in prices for three building materials was observed.

The monitoring revealed that the proportion of local production of building materials was 54.55 percent of the total portfolio in this segment of the market.

According to experts of the organization, passivity has been observed on the building materials market since early 2010. A similar situation on the construction market in neighboring countries (Russia, Ukraine) led to lower prices, both for local and imported building materials. In particular, lower prices for materials of metal, made by Russian Magnitogorsk and Taganrog metallurgical plants and steel mill Severstal, as well as metal goods produced by Ukrainian producers is explained by the lack of buyers.

Prices for construction materials (sand, gravel, etc.) increased in May as a result of the floods in the regions of Azerbaijan (Aran part). But in June they reduced to previous levels. No changes were observed in the prices of the main producers at the local market for building materials - Akkord İnşaat ve Senaye, Qaradağ Sement, Metanet-A, Gilan İnşaat.

The following construction materials increased in prices (in percentage):

Prices reduced for the following construction materials:

Commercial facilities

In June, commercial facilities market in Baku decreased by 0.3 percent, rent of commercial buildings - by 0.2 percent, the public organization "Participants of property market" said. Number of Proposals on the market decreased by 3 percent in June. "Despite the stabilization of prices, the low level of proposals has not lead to an increase in exposition time", the organization's experts say.

Price index for Baku decreased by 3.2 percent compared to the last year, compared to May - 0.4 percent .

During June, proposals decreased by 6.5 percent due to the deepening of passivity on the market because of seasonal factors.

In June, a relative decline in prices was observed on commercial areas and lease market. Price of non-residential areas fell 0.4 percent, and the rent - 0.3 percent.

The average price of a square meter of non-residential facility area decreased in May and was $2,950 in June. According to the held studies, lower prices compared to the first quarter amounted to one percent, as compared with June of last year - 2 percent.

Prices for non-residential areas in the zones of the city fell by 0,1, 0,2, 0,3 and 0,6 percent respectively. Over the past month increase in the average price on the market was not observed in any of the areas of the city, but the most significant decrease was observed in Binagadi district - at 0.8 percent.

The share of commercial buildings, proposed on the market below the average price amounted to 53.4 percent of the market portfolio.