Sales of land plots for residential development in Tbilisi down

Georgia Materials 6 June 2023 11:10 (UTC +04:00)
Sales of land plots for residential development in Tbilisi down

BAKU, Azerbaijan, June 6. Sales of land plots for residential development in a number of Georgian cities, including Tbilisi, Rustavi, Kutaisi, Telavi, Gori and Gudauri showed decrease in 2022, Trend reports.

According to the study by TBC Capital, the statistics of land sales indicate that the number of transactions in these cities in 2022 exceeds the level that existed before the COVID-19 pandemic, but lags behind the indicators of 2021 in most cases.

The level of land sales remained approximately the same as in 2021 and decreased by only 1 percent in Tbilisi. A similar situation is observed in Rustavi, where the number of land transactions decreased by 11 percent over the year. In Kutaisi and Gori the decrease was 11 percent, in Telavi - 18 percent, in Gudauri - 4.6 percent.

The only cities where annual growth in land sales was recorded in Batumi (+16 percent), Bakuriani (+2 percent) and Zugdidi (+21 percent) in 2022.

The company's analysts also explained that the process of implementing development projects includes several stages: drawing up a project plan, searching for a land plot and obtaining a construction permit.

According to the analysts, the success of development companies and their profits are associated with the company's reputation and experience in construction, favorable location of projects, an effective marketing campaign and a qualified sales team.

The average cost of development projects per 1 square meter of space in Tbilisi was $546, and in Batumi – $502, in 2022. The average selling price of residential space in development projects was $1,092 per square meter in Tbilisi and $1,159 per square meter in Batumi.

According to development projects, the main costs are construction materials (57 percent) and wages (27 percent) as for construction costs.

The company notes that the demand for construction materials in the market decreased in 2020 due to the spread of COVID-19 and related restrictions.

Demand for building materials began to recover (with a 7 percent increase in US dollars) in 2021, while government capital expenditures and the residential real estate market increased by 36 percent in US dollars in 2022.

The construction materials market, including the production and import of valves, steel materials, cement, concrete, inert materials and wall blocks, increased by 30 percent in US dollars and by 18 percent in lari compared to 2021 (excluding exports) as a result of increased demand in 2022.

According to information from TBC Capital, prices for construction materials in Georgia increased sharply in the spring of 2022, especially against the background of the conflict in Ukraine. This is due to the partial destruction of the production infrastructure in Ukraine and the temporary shutdown of the production process.

Analysts note that prices for construction materials in Georgia increased by 23 percent in 2021 and by another 14 percent in 2022 in lari (and by 19 percent and 26 percent in US dollars, respectively) as a result of these factors.

However, commodity prices on world markets began to decline due to a slowdown in economic growth in China, the projected economic downturn in the EU and the US, as well as an increase in interest rates, starting in the second half of 2022.

Prices for construction materials slightly exceed the level that existed before the conflict, but only slightly, by February 2023.