Review of construction sector in Azerbaijan (I Quarter 2013)

The analysis of trends of developing the Azerbaijani construction industry allows evaluating the enormous potential of the industry. The construction industry has recently become one of the driving forces of the country's economic development. The volume and rate of growth have significantly stimulated the development of other sectors of the economy. A significant amount of funds has been concentrated in this sphere of material production. The efficiency of the economy depends on the turnover rate. The qualitative characteristics of created facilities and their compliance with international standards is a prerequisite for further progressive development and progress in human welfare.

According to the State Statistics Committee of Azerbaijan, in March 2013 the volume of construction work increased by 28.8 percent in Azerbaijan compared to February 2012 and amounted to 1.505.8 billion manat. Of the total volume of construction work, 71.7 per cent accounted for the primary construction, reconstruction and expansion, 16.1 percent - major repair, 2.7 percent - current repair, 9.5 percent - other construction work.

In March 2013 the volume of housing commissioning in Azerbaijan increased by 9 per cent compared to February. According to the State Statistics Committee, 124,700 square meters of housing were commissioned in March 2013 compared to 114,400 square meters in February 2013. In March 2012, commissioning volume were 83,900 square meters. Overall, 370,700 square meters of housing were commissioned in January-March 2013, which was 12 percent higher than the same period in 2012 (331,000 square meters).

Main indicators of construction sector in Azerbaijan in first quarter of 2013

Source: State Statistics Committee of Azerbaijan

In addition to the facilities mentioned in the table, since early year clubs for 584 people, wine-making factory in Gabala, shipbuilding and repair plant in Baku, dairy and livestock complex and others have been built in the country.

In 2013, Azerbaijan has already completed the construction of 100 new industrial enterprises, and some 90 companies are under the process of construction.

In 2013, according to experts of the construction sector, an increase is expected in the price of the real estate market of Azerbaijan, which will be primarily observed in residential areas. Doubling of the budget funding for grant of preferential mortgages will contribute to it. This will lead to increasing activity in the real estate market, and higher prices. In addition, preparations for major international events, including the European Olympic Games to be held in Baku in 2015, will have an impact on the real estate market

As part of the preparations major construction and improvement work is envisaged, which contributes to the attraction of additional resources to the real estate market.

In addition, implementation of a plan of resettlement of residents of former "Sovetsky" and "Kubinka", because these territories are outdated in moral and physical terms, will also impact the housing market. These housing areas do not meet today's requirements, therefore, they are going to be demolished. The construction work to be conducted in these territories, as well as issuing compensation to the residents will lead to an increase in funds aimed at housing market.

Market of construction materials

According to the State Statistics Committee, in January-March 2013 companies engaged in the production of building materials in Azerbaijan, produced goods worth 70.5 million manat, which is 42.4 percent more than in the first quarter of 2012.

According to the information, the companies produced 427,700 tons of cement (an increase of 35.6 per cent), 52,500 tons of gypsum cement (increased 3.9 times) and 281,200 tons of ready-mixed concrete (an increase of 14.8 per cent) in January-March 2013.

Stocks of building materials worth 15.6 million manat or 5.4 per cent of the whole volume of finished products available in the warehouses of the country have been created by April 1, 2013.

According to the Public Association "Property Market Participants", in March, the price of building materials increased by 0.22 percent in March, while compared to the same period last year - by 1.8 percent.

The share of the proposed building materials of domestic production exceeded imports, making up 53.7 percent of the total supply.

In March, the market research was conducted on 37 items and 87 typess of building materials.

Primary housing market

According to the Public Association "Property Market Participants", by the end of March 135 construction companies carried out construction of 400 new buildings in Baku.

Most new buildings are now being built in the Yasamal district, followed by the Khatai and Nasimi districts.

Two thirds of all new buildings are being built in three districts in Baku.

The average price of apartments sold in new buildings in March increased up to $857.8 per square meter. In March apartments in new buildings went up by only 0.5 percent. The prices rose by 4.4 percent compared to the previous year, while compared to the pre-crisis September 2008 fell by 28.2 percent. At that time, the price per square meter in the primary housing market amounted to in 1,194 manat.

Specialists links the rise in average prices for new buildings with putting a major new residential massive for sale in the center of Baku.

Secondary housing market

According to the Public Association "Property Market Participants", offers decreased by 4.4 percent in the secondary housing market in Baku.

In March, sales in secondary housing market in Baku rose nearly by 3 percent. In total 5,700 apartments were proposed to the market in March.

In March, 78.7 percent of the portfolio of the secondary housing market was formed by apartments in Yasamal, Nasimi, Narimanov and Khatai districts of Baku, which is associated with the transition of apartments of the primary market in these areas to the secondary market.

In March, there was a 2.9-per cent growth in transactions. The average price of apartments in the secondary housing market increased by 1.7 percent - up to $1,202 per square meter. In most areas, stability of prices was observed. The significant increase in prices occurred in Khatai district - by 5.1 percent. On average an apartment in the secondary housing market of Baku in March was 2,79 rooms, the average price of one room was $46,331, one apartment -$112,914.

Table of average prices per square meter of dwelling space has been prepared based on the Public Association "Property Market Participants."

Prices as of March 2013