Review of construction sector in Azerbaijan (2014)

According to the Azerbaijani State Statistics Committee, the construction work increased by 2.3 percent and hit 8.283 billion AZN in Azerbaijan in 2014.

Some 63.8 percent of the total volume of construction work accounted for new buildings, reconstruction and expansion, 17.2 percent - overhaul, 6 percent - current repair and 13 percent - other construction work.

Main indices of construction sector in Azerbaijan in 2014

Commissioned:

2014

Compared to 2013, %

residential buildings, total area, thousand sq. m

1978,3

82,3

Hospitals

280

16,0

Secondary schools, educational facilities

29230

55,1

Pre-school educational institutions, facilities

1332

39,3

Funds directed to fixed capital, in mln AZN

17615,8

98,3

Including:
- for the construction of production facilities

11255,2

122,0

- for the construction of facilities in service sector

6360,6

73,1

- for construction and installation work

13285,9

111,8

In December 2014 housing commissioning did not reach the record level of 2013, when it exceeded 2 million square meters per year for the first time in the history.

In December 2014, the volume of housing commissioning increased by 6.6 percent compared to November 2014, but dropped by 1.54 times compared to December 2013.

According to the Azerbaijani State Statistics Committee, around 171,900 square meters of housing were commissioned in December 2014 compared to 161,200 square meters in November. Around 1.978 million square meters of housing were commissioned in 2014 or by 7.5 percent less than in 2013.

The prices on the housing market of Baku decreased by 1-1.5 percent for the last 2-3 months of 2014. According to MBA Group consulting company, other situation is observed on the market of land plots and commercial facilities. There is no price fluctuation, except for slightly increased prices on land plots.

The rise in prices on the housing market was 24 percent in 2013 and 14 percent in 2014. Such prices are too high for potential buyers, so they were forced to go to the land market. We can say that almost a half of buyers went to that market. Currently, the price pressure and gradual increase are observed at this segment.

A decrease in prices is also caused by the processes in Russia and Ukraine. The worsening economic situation in Russia and Ukraine reduced inflows of money in Azerbaijan. The volume of Russian investments on the local real estate market was 6-10 percent in 2013 and the first half of 2014. Their share has actually diminished for the last 3-4 months of 2014.

Primary housing market

The average price per square meter on the primary housing market in Baku for 2014 increased by 18.5 percent and amounted to 1,062 AZN ($1,354). For comparison, the price per square meter on the primary housing market in Baku in December 2013 amounted to 899 AZN ($1,146), 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 14.6 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 in December 2014 amounted to 535, which is 0.01 percent more than in the same period of 2013.

Thus, 50.9 percent of the total portfolio of supply accounts for housing with the average price per square meter of 800-1,250 AZN, 25.7 percent for the primary housing (on average, less than 800 AZN per square meter), 23.4 percent for housing (on average, over 1,250 AZN per square meter).

So, 38 percent of the housing offered for sale on the primary market accounts for Yasamal district of Baku, 13 percent - Nasimi, 12 percent - Khatai, 10 percent - Narimanov, 9 percent - Binagadi, 8 percent - Absheron and 5 percent for Sabail and Sabunchu districts.

Secondary housing market

The average price per square meter on the secondary housing market in Baku in December 2014 increased by 0.67 percent and amounted to 1,630 AZN ($2,079). For comparison, the price per square meter on the secondary housing market in Baku in November 2014 amounted to 1,619 AZN ($2,065), according to the report of the MBA Group consulting company.

The highest prices per square meter on the secondary housing market in December 2014 were recorded near 28 May subway station - 4,500 AZN per square meter. The lowest prices were recorded in Nasimi district of Baku - 650 AZN per square meter.

In December, the most expensive apartment on the secondary housing market was recorded in Khatai district - $ 1.5 million, but the cheapest apartment - in the Absheron district ($44,500)

According to the report, most of the portfolio sales on the secondary market of Baku in December accounted for the houses ($1,200-2,000 per square meter), which accounted for 67.2 percent.

Expensive apartments (over $2,500 per square meter) amounted to 19.5 percent of a total sale volume. The rest part, that is 13.3 percent, accounted for apartments with the price of less than $1,500 per square meter.

The supply on the secondary market in Baku for the period amounted to 1,997, which is 11.82 percent less than in the same period of 2013 or by 2.9 percent less compared to the previous month.

In December, the prices on one-, two-room apartments and apartments with many rooms increased by 3.13 percent, 2.59 percent and 2.78 percent, respectively, the prices on three-room apartments decreased by 2.79 percent.

Commercial facility market

According to MBA Group consulting company, the number of commercial facilities put on sale increased by 10 percent in Baku in December 2014 compared to the previous month.

Around 206 commercial facilities were put on sale in December, while in November the number reached 187. Meanwhile, around 113 transactions on commercial facilities were concluded in December or by 2.6 percent less than in November.

The major share (54 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), 28 percent - the service facilities, 11 percent - shops, 7 percent - offices.

The average area of non-residential facilities was 173.09 square meters or by 25.3 percent less compared to the previous month.

A decrease in the average area of non-residential facilities can be explained by the sale of the facilities with a large area.

The largest land plot in Baku was registered in Narimanov district of Baku - 3,000 square meters, the smallest land plot in Nizami district - 15 square meters.

A decrease in activity for the last month also caused an increase in an exposure period of facility sale. An exposure period of non-residential facilities amounted to 152 days within a month.

In December, the average cost of a non-residential area decreased by 2.94 percent, reaching $4,458 per square meter. The average rent per square meter in December was $18.8.

The price index in December 2014 decreased by 2.94 percent and hit 6.24 compared to the same period of 2013.

The relative increase in rental prices in December was observed in the first and the second zones of Baku, but partial price decrease was observed in the third and the fourth zones.

Zones

November 2014

December 2014

%

First zone

23

24,18

0,05%

Second zone

18

18,83

0,05%

Third zone

13,56

13,36

-0,01%

Fourth zone

8

7,94

-0,01%

Average price

15,64

16,08

0,02%

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

Land plots

November 2014

December 2014

%

Shops

4928

4860

-1,38%

Land plot

3994

4037

1,08%

Service facilities

3684

3732

1,30%

Offices

2779

2737

-1,51%

Basements

1050

1050

0.00%

Industrial facilities

690

690

0.00%

Average price

2854,16

2851

-0,09%

Rental market

The average housing rental price increased by ten percent in Baku in December 2014 compared to the same period of 2013. But it decreased by 12.89 percent, amounting to $845 compared to the previous month.

The rent per square meter increased by 1.13 percent - from $11.47 to $11.6 per square meter compared to November, MBA Group consulting company's report says.

The expensive housing share in the portfolio of demand (with a rent over $ 1,000 per month) was 28.1 percent, while the cheap housing share (less than $ 500 per month) amounted to 18.98 percent in December 2014. The main part of the portfolio of demand accounted for housing worth $500-1,000 - 52.92 percent.

The number of transactions on the rental market reduced by 1.38 percent - from 145 to 143 compared to November. In December, the supply on the rental housing market increased by one percent - up to 274 apartments.

"The non-seasonal months are the main reason of the low level rental market activity for the last few months," the statement says. "The stagnation in the construction sector in the winter months weakened this segment. The number of workers, having a need for housing and coming to Baku from other towns, decreased."

Land market

According to "MBA Group" consulting company, in December 2014 the average price on one hundred square meters of land in Baku decreased by 2.77 percent - up to $18,937. Around 248 land plots were put on sale in December 2014, whereas in November 2014 - 403.

A decrease in supply is connected with decreased activity on the land market. This led to a decrease in prices.

In December, the largest decrease in prices was observed in Binagadi, Sabunchu and Sabail districts of Baku - by 6.51 percent, 7.44 percent and 5.46 percent respectively.

Despite a decrease in prices on the land market, an increase in prices was observed in Absheron district of Baku. This can be explained by the deficit of land plots in the central areas.

In general, if we take into account that the population's demand for private houses increases, then we can say that the price increase on the outskirts is normal. Other areas were passive in December except for the Absheron district of Baku.

In December, the prices on land plots in the Absheron district increased by 12.2 percent - up to 4,800 AZN per one hundred square meters, Narimanov district - by 3.1 percent (121,400 AZN),Khazar district - 0.9 percent (4,200 AZN), Yasamal district - 0.3 percent (102,990 AZN). The prices remained unchanged - 29,200 AZN in Khatai district.

The prices decreased by 6.5 percent - up to 15,990 per one hundred square meters in Binagadi district, 2.1 percent (111,750 AZN) - Nasimi district, 0.2 percent (28,600 AZN) - Nizami district, 0.3 percent (4,100 AZN) - Qaradagh district, 7.4 percent (4,900 AZN) - Sabunchu district, 5.5 percent (57,100 AZN) - Sabail distirct, 0.8 percent (5,900 AZN) - Surakhani district.

Construction material market

The companies engaged in building material production in Azerbaijan, produced goods worth 458.3 million AZN in 2014 or 22.2 percent more than in the same period of 2013, according to the Azerbaijani State Statistics Committee's report.

During this period, Azerbaijan produced 2.98 million metric tons of cement (a 40.5-percent increase versus the same period of 2013) and 192,800 metric tons of gypsum plaster (a 23.3-percent decrease), the report said.

Azerbaijan also produced 1.68 million metric tons of ready-mixed concrete (up by 21.7 percent), 402,400 metric tons of asphalt (a 2.9 percent increase), 34,200 cubic meters of precast concrete building structures (a 23.9 percent growth), 5.57 million metric tons of processed marble, travertine, alabaster and items made of them (a 65.8 percent decrease).

The construction work volume hit 8.283 billion AZN in 2014.

Some 63.8 percent of the total volume of construction work accounted for new buildings, reconstruction and expansion, 17.2 percent - overhaul, 6 percent - current repair and 13 percent - other construction work.

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