What causes rise in prices of real estate?

There are definite nationwide market rules. The major factor defining the price of real estate in the country even in the end of 2006 was the rise in demand. The market mechanism dictates the dependence: high demand вЂ" high price. The prices will increase until the buyers are ready to pay. Of course, it is dealt with solvent buyers with high incomes, but not the poor, who cannot afford even the smallest house in the capital city.

Capital investing in the real estate market becomes more and more popular. So, investing assets in real estate becomes more profitable and reliable way of investing. According to specialist of the Finances Ministry, rise in profitably in this market will be observed at least for 4-5 years.

Another factor affecting the real estate price in Azerbaijan is non-profitability of investing in dollar or euro assets, which makes the most сегодня СЃРѕРіР"асно С'енденции, набР"юдаемой РЅР° рынке, инвесС'ирование средсС'РІ РІ РІР°Р"СЋС' of the population to get rid of money through purchase of real estate.

High demand for newly constructed buildings testifies for increase of confidence towards these building in people. According to researches by Public Union Participants in Real Estate Market", special weight of new buildings rose in the portfolio of supply from 15.3% to 26.4%, whereas supply of old' designs reduced from 25.8% to 18.8%.

Taking into consideration rise in inflation in the country some specialists urge that the figure might reach 25-30% shortly and further rise in prices of construction and other construction work, which increase expenses by 12%, will result in considerable rise in prices of new buildings. Drop in rate of construction of new buildings led to dynamic increase of their prices.

New tax rules also promote rise in prices. Thus, the construction companies are committed to pay 10 manats per 1 sq m of the apartments in the buildings which will be constructed beginning from 1 January 2007.

Development of mortgage (cut in interest rates, drop in amount of initial fee, rapid consideration appeals) also boosts demand for property, at the same provoking price rise. Rise in mortgage is observed because of improvement of a mechanism on issue of mortgage and les of issue on privileged mortgage. So far, a total of 260 credits worth 5,945mln manats have been issued by the Azerbaijan Mortgage Fund at the National Bank of Azerbaijan.

Average indices on issued mortgages

Increase in the number of population and migration flows also boost demand. Birth rate in Azerbaijan exceeds the level simple reproduction. In the beginning of the year the figure was 2.33. The co-efficiency of birth rate considerably rose in Azerbaijan in the group of countries entering the Council of Europe вЂ" by 0.28 (from 2.05 in 2004 to 2.33). In some CE countries, including Russia, Moldova, Belarus, Ukraine, this co-efficiency did not exceed 1.3.

Toughened migration rules in Russia since the beginning of 2007 resulted in serious flow of migrants to Azerbaijan. Since the beginning of the year the Consulate Department of Azerbaijani Embassy in Russia have issued around 3,000 documents for Azerbaijanis residing in Russia, whereas 21,620 certificates were issued for return of Azerbaijan.

Having summarized the data and studied forecasts by analysts, leading realty companies and banking specialists one can conclude that it would be utopia to expect fall in prices for apartments in the nearest future.

The construction remains to be one of dynamically developing fields of the country. According to the State Statistics Committee, the amount of capital investments in Azerbaijani economy made up 5,985,7bln manats in 2006. The amount of the spent capital rose 14.8% as compared to 2005, while investments in construction and assembly sector rose 9.7%. Some 54% of investments in major capital was comprised of foreign investments, while 70% of used in the construction sector falls on private sector. In 2007-2008 the Azerbaijan Government plans to increase expenses for implementation of construction projects by approximately 35%.