Review of construction sector in Azerbaijan (2011)

In 2011, socio-economic processes in the country laid foundation for implementation of new infrastructure projects. Business centers, hotels, recreation centers are actively constructed, parks are created, some of which have been already put into operation. This trend has influenced the primary real estate market in Baku. Buildings, construction of which began several years ago and for some reason were suspended, or went slowly, were commissioned.

According to the State Statistics Committee, in 2011, the amount of construction works increased in Azerbaijan by 26.9 percent compared to 2010. The construction works in the public sector amounted to 25.2 percent during the year, in the private sector - 74.8 percent.

Of the total construction works, 76.5 percent accounted for new construction, reconstruction and expansion, 16.2 percent - capital repair, 3 percent - current repair, 4.4 percent - other construction work.

In December 2011, compared to November, commissioning of housing in Azerbaijan increased by 4.7 times, and a new record was made in commissioning residential areas in 2011.

According to State Statistics Committee, in December 342,500 square meters of housing were commissioned (the best rate in 2011) compared to the 72,900 square meters in November.

In 2011, 1.922.500 million square meters of housing were commissioned, which is 6.8 percent more than in 2010. In December 2010 155,700 square meters of housing were commissioned.

Exposition term of expensive new buildings in 2011 remained high. It can be associated with the fact that prices and volume of supply of such apartments do not meet real needs of the market.

Changes in the sector of housing construction and in concluding transactions on the next steps will depend on changes in energy prices, as today in many countries trend of stability in real estate market processes remains.

Primary residential market

According to the Property Market Participants public organization, in December 2011 prices on the primary residential market in Baku declined compared to the previous month by 0.3 percent and hit 825.2 manat per square meter.

Compared to early year and the same period of last year, prices fell by 2.7 percent. Compared to the crisis period (September 2008), prices fell by 30.9 percent.

Price index in December fell by one point - up to 316.1 points.

In December, the number of buildings built, but not yet sold, as well as buildings, which are under construction in Baku, hit 424, as it was in the previous month, while the number of construction companies decreased by one and hit 151.

In December, as in previous months, the majority of apartments in new buildings were three-room. Average area of ​​one-room apartment in the new building hit 60.7 square meters, two-room - 92.1 square meters, three-room - 131.8 square meters, four-room - 182.9 square meters, while five-room - 238.3 square meters.

The number of buildings in the primary housing market, withdrawn from sale in 2011 was 20 compared to 22 in 2010. Although there was a downward trend in prices, in general the market was stable. In 2011 nine buildings were put up for sale.

Secondary market

Average price on the secondary market in Baku declined by 0.4 percent in December 2011. Supply in this segment of the market in December increased by 1 percent. Over 7,500 apartments were offered to the market in total.

Average price per square meter on the secondary housing market in December 2011 decreased by 0.4 percent and amounted to $955 compared to $959 in November. No price increase was recorded in any of the districts of Baku. The most significant decline (by 1.2 percent) accounted for Sabunchi district.

Most of the market supply accounted for apartments in the Yasamal, Nasimi and Narimanov districts of Baku, which hit 78.7 percent of the market. The share of apartments offered to the market at a price lower than average, hit 52.1 percent. The average room rate in the proposed housing on the secondary market was 2.55, the average price of each room $43,166, whilst every apartment - $111,334 in December.

Building materials

According to the NGO "Property Market Participants", in December 2011 prices of building materials in the market in Baku declined by 0.47 percent compared to November. The share of domestic production in total volume of building materials in November 2011 hit 51.9 percent.

Monitoring was conducted on 38 items and 88 types of building materials.

Activity and price rise, which started from the beginning of the year, also continued until November. Even the price index in the third quarter of 2011 exceeded the highest prices in 2008. This trend is associated with intensified construction work in the country, increased volume of investments allocated to the housing market, increased local production, removing imported goods from the market and replace them with alternative domestic building materials, as well as seasonal factors.

Seasonal factors and the resulting inactivity in the market led to stabilization and relative drop in prices by the end of the year, at the same time, prices for building materials rose by 15.7 percent from early 2011.

It was the result of an upward trend in prices for imported building materials. In December, compared to January 2011, price for dict of Russian production grew by 17 percent, wood-chip board - 38.8 percent, wood fibreboard - 25.9 percent, reinforcement - 16.7 percent, iron pipes - 11.8 percent, iron layers imported from Ukraine - 14.3 percent, zinc layers - by 19 percent.

The summary table shows the construction materials. The prices on these materials decreased (in percent):

Prices on other building materials remained stable.

According to the State Statistics Committee, in 2011 companies engaged in production of building materials in Azerbaijan, produced goods worth 270.7 million manat, which is 4.4 percent more than in 2010.

In 2011 1.4 million tons of cement, 100,300 tons of gypsum plaster, 1.2 million tons of finished concrete was produced.

During the reporting period, 354,400 tons of asphalt, 44,300 cubic meters of prefabricated concrete building constructions, 249,200 cubic meters of building bricks were produced.

By Jan.1, 2012 stocks of finished construction products worth 9.7 million manat were set up at enterprises' warehouses, which makes up 3.7 percent of the total finished product, available in the country's warehouses.