Review of construction sector in Azerbaijan (January-November 2014)

The construction work increased by 2.3 percent and hit 7.386 billion AZN in Azerbaijan in January-November 2014, according to the Azerbaijani State Statistics Committee.

Some 63.7 percent of the total volume of construction work accounted for primary construction, reconstruction and expansion, 16.9 percent - overhaul, 6 percent - current repair and 13.4 percent - other construction work.

In November, the volume of housing commissioning increased by 2.9 percent compared to October 2014, but by 7.5 percent compared to October 2013.

According to the Azerbaijani State Statistics Committee, around 161,200 square meters of housing were commissioned in November compared to 156,500 square meters in October.

Around 1.806 million square meters of housing were commissioned in early 2014 or by 3.6 percent less than in 2013.

Primary housing market

The average price per square meter on the primary housing market in Baku for the year increased by 22.6 percent and amounted to 1,080 AZN ($1,377). For comparison, the price per square meter on the primary housing market in Baku in November 2013 amounted to 881 AZN ($1,123), according to a report by the MBA Group consulting company.

The price on one square meter of housing on the primary market of Baku has increased by 16.6 percent since the beginning of 2014. The average price per square meter of housing in Baku was 926 AZN ($1,181) in January 2014.

The supply on the primary housing market in Baku for the period amounted to 535, which is 0.04 percent more than in the same period of 2013.

Thus, 45.8 percent of the total portfolio of supply accounts for housing with the average price per square meter of 800-1,250 AZN, 27.1 percent for the primary housing (an average of 800 AZN per square meter), 27.1 percent for housing (an average of over 1,250 AZN per square meter).

So, 46 percent of the housing offered for sale on the primary market accounts for Yasamal district of Baku, 13 percent - Nasimi, 11 percent - Khatai, 8 percent - Absheron, and 6 percent for Narimanov and Binagadi districts.

Secondary housing market

The average price per square meter on the secondary housing market in Baku in November 2014 decreased by 0.56 percent and amounted to 1,619 AZN ($2,065). For comparison, the price per square meter on the secondary housing market in Baku in November 2013 amounted to 1,628 AZN ($2,076), according to the report of the MBA Group consulting company.

The highest prices per square meter on the secondary housing market in November were recorded in Sabail and Nasimi districts of the capital - $3,100 and $3,300 per square meter. The lowest prices were recorded in Khatai and Binagadi districts - $650 and $670 per square meter.

According to the report, most of the portfolio sales on the secondary market of Baku in November accounted for expensive houses (over 1,250 AZN per square meter), which accounted for 80.7 percent.

Cheap apartments (less than 800 AZN per square meter) amounted to 0.9 percent of a total sale volume. The rest part, that is 18.5 percent, accounted for apartments with the price of 800-1,250 AZN per square meter.

The supply on the secondary market in Baku for the period amounted to 2,055, which is 9.97 percent less than in the same period of 2013 or by 22.4 percent more compared to the previous month.

In November, the prices on one-, two-, and four-room apartments reduced by 1.98, 0.87 and 1.42 percent, respectively, the prices on three-room apartments increased by 0.67 percent.

Most of the portfolio sales (35.9 percent) on the secondary housing market account for the three-room apartments, 32.6 percent - two-room apartments, 19.4 percent - one-room apartments, 10.4 percent - four-room apartments, 1.7 percent - five-room apartments.

Commercial facility market

According to MBA Group consulting company, the number of commercial facilities put on sale increased by 3.8 percent in Baku in November 2014 compared to the previous month.

Around 187 commercial facilities were put on sale in November, while in October the number reached 180. Meanwhile, around 116 transactions on commercial facilities were concluded in November.

The major share (52 percent) of commercial facilities put on sale accounted for "vacant land plots" (a type of sites which can be used as an office, a shop and other purposes), 25 percent - the service facilities, 18 percent - shops, five percent - offices.

The average area of non-residential facilities was 231.7 square meters or by 44.8 percent more compared to the previous month.

An increase in the area of non-residential facilities can be explained by an increase in supply for the sale of building sites with a large area.

The largest land plot in Baku was registered in Nizami district - 8,000 square meters, the smallest land plot in Binagadi district - 8 square meters.

In November, the average cost of a non-residential area increased by 7.04 percent, reaching $4,593 per square meter. The average rent per square meter in November was $17.

The price index in November 2014 increased by 7.71 percent and hit 6.43 compared to the same period of 2013.

The relative decrease in rental prices in November was observed in the first, second and third zones of the city, but remained unchanged in the fourth zone as in the previous month.

Prices on non-residential areas change depending on their destination:

Land market

According to "MBA Group" consulting company, in November 2014 the average price on one hundred square meters of land in Baku increased by 2.2 percent - up to $19,476. Around 403 land plots were put on sale in November, whereas in October - 237.

An increase in supply is connected with increased activity on the land market. This led to an increase in prices. In November, the largest increase in prices was observed in Nasimi and Narimanov districts of Baku - by 3.95 and 2.18 percent respectively.

Despite an increase in prices on the land market, a decrease in prices was observed in Absheron, Binagadi and Khazar districts of Baku. This can be explained by the relative activity of the central areas compared with the outskirts.

The most active districts in November were Binagadi, Sabunchu and Surakhani. The most passive districts were Nasimi and Sabail.

In November, the prices on land plots in the Absheron district decreased by 12.4 percent - up to 4,270 AZN per one hundred square meters, Garadagh district - by 0.6 percent (4,060 AZN), Khatai district - 7.3 percent (29,220 AZN), Khazar district - 4.8 percent (4,160 AZN), Yasamal district - 4.9 percent (102,680 AZN).

The prices increased by 7.7 percent - up to 17,100 per one hundred square meters in Binagadi district, 2.2 percent (117,760 AZN) - Narimanov district, four percent (114,180 AZN) - Nasimi district, 7.7 percent (28,680 AZN) - Nizami district, 11.6 percent (5,290 AZN) - Sabunchu district, 0.8 percent (60,400 AZN) - Sabail distirct, 0.2 percent (5,900 AZN) - Surakhani district.

Rental market

The rental market in November 2014 saw a decrease of activity, but due to the large area of apartments offered on the market, the average price increased from $830 to $970 per square meter compared to October of 2014.

The rent price per square meter reduced by 2.8 percent - from $11.8 to $11.47 per square meter, said the report of the consulting company MBA Group, published on its website.

"The rise in prices for rental housing during November 2014 amounted to 16.87 percent, and the prices rose by 23.9 percent, from $783 to $970, compared to November 2013," said the report.

In November of 2014, the share of expensive housing in the portfolio of demand (rental value of over $1,000 per month) increased by 62 percent, reaching 40 percent, while the share of cheap houses (less than $500 a month) was 48 percent.

"The market rental housing in November 2014, the bulk of demand was provided by citizens waiting for commissioning of houses under construction, and migrants who have arrived in Baku for work," said the report. "A small portion of demand accounted for tenants, which signed a contract for one or two months."

Construction material market

The companies engaged in building material production in Azerbaijan, produced goods worth 417.4 million AZN in January-November 2014, or 19.8 percent more than in the same period of 2013, according to the Azerbaijani State Statistics Committee's report for 11 months.

During this period, Azerbaijan produced 2.72 million metric tons of cement (a 38-percent increase versus the same period of 2013) and 172,700 metric tons of gypsum plaster (a 26.8-percent decrease), the report said.

Azerbaijan also produced 1.55 million metric tons of ready-mixed concrete (up by 24.3 percent), 372,300 metric tons of asphalt (a 1 percent increase), 31,700 cubic meters of precast concrete building structures (a 45.4 percent growth), 4.67 million metric tons of processed marble, travertine, alabaster and items made of them (a 70 percent decrease).

The construction work volume hit 7.386 billion AZN in January-November 2014.

Some 63.7 percent of the total volume of construction work accounted for new buildings, reconstruction and expansion, 16.9 percent - overhaul, 6 percent - current repair and 13.4 percent - other construction work.