Review of Construction sector in Azerbaijan (Jan-Sept. 2014)

According to the Azerbaijani State Statistics Committee, the construction work totaling 5.984 billion AZN was conducted in Azerbaijan in January-September 2014. The volume of construction work increased by 3.8 percent compared to the same period of last year.

Some 63.9 percent of the total volume of construction work accounted for primary construction, reconstruction and expansion, 16.9 percent - overhaul, 5.7 percent - current repair and 13.5 percent - other construction work.

Main indices of construction sector in Azerbaijan in January-September 2014

Source: State Statistics Committee

In September, the volume of housing commissioning increased by 1.97 times compared to August 2014, but by 54.9 percent compared to September 2013.

According to the Azerbaijani State Statistics Committee, around 313,800 square meters of housing were commissioned in September compared to 159,060 square meters in August. Around 1.459 million square meters of housing were commissioned in 2014 or by 3.8 percent less than in 2013.

Housing market

According to MBA Group consulting company, the prices on Baku's real estate market in September increased by only 2.19 percent. The prices increased by 5.11 percent on the primary market in September but by 13.09 percent since early 2014. The prices reduced by 1.04 percent on the secondary market, but increased by 15.55 percent since early 2014.

The hundred part on the land market of Baku in September cost $18,271 or by 1.97 percent less than in August and 5.98 percent more than in early 2014. The average price on a square meter at commercial facilities has amounted to $4,114 last month, increasing by 6.66 percent during a month and 2.4 percent since early 2014.

The market activity was generated at the level of 13 percent. The prices hiked in February because of the stir associated with the demolition of houses on "Sovietskaya" street. Only 10-12 percent of the population of this territory bought 1-2-room apartments in the center. The rest settled in the suburbs. The market activity has fallen by almost 30 percent since that period. Only 12 of 100 proposed apartments per month are sold on the market.

The Central Bank of Azerbaijan said that the real estate market turnover increased by 24.51 percent in January-September from year to year. As of 2013, its growth was 40.9 percent compared to 2012. In 2012, it increased by 24.86 percent compared to 2011.

As of October 1, 2014, the real estate market turnover (cash turnover of the notary offices) amounted to 3.632 billion AZN compared to 2.917 billion AZN a year earlier.

The proceeds at the accounts of notary offices dealing with the purchase / sale of real estate amounted to 1.688 billion AZN compared to 1.379 billion AZN the previous year (+22.43 percent). Around 1.943 billion AZN were written-off from these accounts compared to 1.538 billion AZN (+26.39 percent).

At the same time, the Central Bank for the first time stressed a 60.69 percent increase in the share of mediators (banks, notaries and realtors) on residential real estate transactions from year to year. Its decline was 14 percent as of September 1.

As of October 1, 2014, the share of mediators was 254.972 million AZN compared to 158.672 million AZN a year earlier. The share of the banks' mortgage loans given the general involvement of mediators was 30.8 percent in January-September. The banks issued mortgage loans worth 78.6 million AZN compared to 82 million AZN a year earlier. The mortgage ensured only 4.04 percent of payments on real estate transactions in January-September.

Building material market

In Jan.-Sept. 2014, the companies engaged in building materials manufacturing in Azerbaijan, produced goods worth 328.5 million AZN, or 19.4 percent more than in the same period of 2013, according to the Azerbaijani State Statistics Committee's report for nine months. During this period, Azerbaijan produced 2.16 million metric tons of cement (a 38.4-percent increase versus the same period of 2013) and 143,100 metric tons of plaster (a 30.9-percent decrease), said the report.

Azerbaijan also produced 1.3 million metric tons of ready-mixed concrete (up by 25.1 percent), 290,300 metric tons of asphalt (a 4.1-percent decrease), 27,600 cubic meters of precast concrete building structures, 3.45 million metric tons of processed marble, travertine, alabaster and items made of them.

The volume of construction work in January-September 2014 amounted to 5.237 billion AZN.

Some 63.9 percent of the construction work accounted for new buildings, reconstruction and expansion, while 16.9 percent of work accounted for capital repairs, 5.7 percent - for the ongoing repairs and 13.5 percent - for other construction work.

Commercial facility market

The commercial facility market has not virtually worked this year, MBA Group consulting company said. The activity is very low. On the land market, it applies only to the cheap land plots worth $5,000-6,000 per hundred part. The transaction amount on expensive land plots greatly declined. The reason is that the real estate market is indirectly connected with the oil and gas sector.

The oil prices have recently reduced [about 20 percent from June to October]. The budgetary costs reduce respectively. People try to minimize their expenses. Thus, money supply decreases. If this trend continues in the future, there will be a decline in real estate prices by late 2014-early 2015.

The investors are not active in real estate area. In early summer, there was great interest in investing in the real estate sector. But today investors have a wait-and-see attitude as if observing the further events.