Review of construction sector in Azerbaijan (january-september 2015)

Some 65 percent of the total volume of construction work accounted for primary construction, reconstruction and expansion, 17.1 percent - overhaul, 5.7 percent - current repair and 12.2 percent - other construction work.

Around 157,880 square meters of housing were commissioned in September 2015 or by 49.7 percent less than in September 2014.

Around 313,800 square meters of housing were commissioned in September 2014.

Some 1.33 million square meters of housing have been put into operation in Azerbaijan since early 2015, which is nine percent less than in the same period of 2014.

According to MBA Group consulting company, the prices on the real estate market of Baku in dollar equivalent decreased by 1.28 percent in September 2015.

The prices decreased by 18.55 percent on the real estate market during the year, while by 22.01 percent since early 2015. In general, a downward trend in prices is still observed on the market. This trend mainly affects the commercial facilities, as their profitability continues to decline.

The prices on commercial facilities have reduced by 31 percent since early 2015, while the prices reduced by 24 percent on the primary housing market, 22 percent - on the secondary housing and rent market, 26 percent - rent of offices. The situation is relatively good on the land market. The prices reduced by 3.7 percent in September and by only 11.47 percent since early 2015.

The downward trend in prices on the market will continue until the end of the year, as there is a direct link between the dynamics of oil and real estate prices. The main proceeds to the segment of real estate were directly related to the cost of oil. If we compare the real estate prices in oil equivalent, then we can see that they have reduced by 19 percent since early 2015. The prices increased by 81 percent during the year. This means that oil becomes cheaper more rapidly than the real estate.

In general, the stable real estate prices in oil equivalent vary from 18 to 24 barrels per square meter. But today, the figure is 33.7 barrel per square meter. The real estate prices will drop to the level of 18-20 barrels / square meter. It is necessary to expect a decline of 25-30 percent, or a rise in oil prices.

The acquisition of the partially constructed real estate on mortgage terms can slightly stabilize the prices.

This is envisaged in the "Instructions for the description of the real estate, real estate rights, registered in the public register, and their limitation", approved by the Cabinet of Ministers of Azerbaijan.

If the large amount of money is directed to the market, in this case it is possible that it can be stabilized. A similar phenomenon was observed in 2009. The inflow of funds to the real estate market helped to stabilize prices.

Primary housing market

The average price per one square meter on Baku's primary housing market was $1,005 (1,053 manat) in September 2015 or by 3.1 percent less than in the previous month.

Most of supply on the market relates to the economy-class apartments (up to $ 1,000 per square meter) and middle class ($1,000-$1,500). The share of apartments in this price range is 65 percent and 28 percent of the total portfolio of supply. The average price per square meter in these apartments is $725 and $1,140 respectively. The share of apartments worth more than $ 1,500 per square meter is 7 percent. During the reporting period, the average price on such apartments was $ 2,080 per square meter.

Last month, the largest number of residential buildings was built in Yasamal, Nasimi, Absheron and Khatai districts of Baku. Some 76 percent of the entire supply accounted for them.

Thus, 33 percent of housing put up for sale on the primary market accounted for Yasamal district of Baku, 15 percent - Nasimi, 11 percent - Khatai, 7 percent - Binagadi, 7 percent - Narimanov, 16 percent - Absheron, 3 percent - Nizami, 2 percent - Sabail, 2 percent - Sabunchu, 2 percent - Surakhani, 1 percent - Qaradagh.

The average area of ​​apartments offered in September decreased by 9 percent up to 108.46 square meters compared to August. The average area of ​​one-room apartments was 60 square meters, two-room - 87.2 square meters, three-room - 124 square meters, four-and five-room - 180.3 and 254.7 square meters.

The supply increased by 1.7 percent on the primary housing market in September compared to August. Two- and three-room apartments accounted for most of supply on the primary real estate market. Some 34 and 33 percent accounted for them respectively. Some 19 percent of the supply accounted for one-room apartments, the remaining 14 percent - the multi-room apartments.

The average price per square meter on the primary housing market in Baku's districts is as follows:

Secondary housing market

According to MBA Group consulting company, the average price per square meter on the secondary housing market of Baku in dollars increased by 4.45 percent and hit $1,618 in September 2015, while in manat - by 4.47 percent - up to 1,696 manat compared to August.

The rise in prices observed in the previous month is associated with structural changes on the secondary housing market. In other words, the share of expensive apartments put up for sale increased in September compared to the previous months. This is connected with the sale and consequently the decrease in the share of cheap apartments in the portfolio of supply.

In general, according to the MBA Group's report, a low level of purchasing power increased the portfolio of supply. As a result of the passivity of the secondary housing market, the portfolio of supply increased by 6.8 percent in September compared to the previous month, from 1,083 offers to 1,163 offers.

However, the number of apartments put up for sale decreased by 39 percent in the previous month compared to September 2014.

The decrease in the volume of supply on the secondary housing market during the year shows a serious stagnation on the market. The apartment owners prefer to wait due to the events on the domestic and foreign markets.

Most of housing was put on sale in Yasamal, Nasimi, Narimanov districts of Baku in September. Some 56 percent of total supply accounted for these districts.

According to the report, the houses with up to $1,500 per square meter (the average price - $1,195) accounted for the main part of the sales portfolio on the secondary market of Baku in September.

The apartments ranging $1,500-2,000 per square meter (the average price - $1,720) accounted for 41 percent of the total sale volume. The rest (17 percent) accounted for the share of apartments with more than $2,000 per square meter (the average price - $2,445).

The most expensive apartment (72 square meters) was observed near "Sahil" metro station in September worth $4,600 per square meter, the cheapest apartment - in the Muhammedi village of the Absheron district (80 square meters) worth $571 per square meter.

The average market prices per square meter in Baku's districts in September 2015 are as follows:

Construction material market

The companies engaged in building material production in Azerbaijan, produced goods worth 348.8 million manat in January-September 2015, or 12.2 percent more than in the same period of 2014, according to the Azerbaijani State Statistics Committee's report.

During this period, Azerbaijan produced 2.05 million metric tons of cement (a 14.4-percent increase versus the same period of 2014), 572.3 tons of glass fiber (an increase of 3.1 times) and 147,900 metric tons of gypsum plaster (a 3.6-percent growth), the report said.

Azerbaijan also produced 769,900 metric tons of ready-mixed concrete (a 40.4 percent decrease), 310,800 metric tons of asphalt (a 0.2 percent growth), 18,000 cubic meters of precast concrete building structures (a 36.2 percent decrease), 9,330 metric tons of processed marble, travertine, alabaster and items made of them (a 2.7 times growth).