After housing boom resulting from Russia influx, realtor in no hurry to make projections for “highly sensitive” market
10 minute read
![After housing boom resulting from Russia influx, realtor in no hurry to make projections for “highly sensitive” market](http://armenpress.am/resized/480/static/news/b/2023/02/1103040.jpg)
YEREVAN, FEBRUARY 1, ARMENPRESS. In 2022, there was a boom in the Armenian real estate market with growing numbers of transactions. Moreover, foreign nationals were parties to over 4,900 of the over 52,000 sales and purchase transactions. Furthermore, most of the foreigners who bought real estate in Armenia in 2022 were Russian nationals.
Unprecedented activeness was recorded in 2022 in the rent market. In Yerevan, rent transactions grew around 10% and a real estate agency recorded nearly 100% of increase in rentals, which has since dropped in the past two months.
Data released by the Cadastre Committee shows that in 2022, a total of 204,910 real estate transactions were carried out in Armenia – a 1,7% growth compared to 2021 (201,563 transactions).
In 2022, 52,928 trade (sales and purchase) transactions were carried out in Armenia (5,6% drop compared to 2021’s 56,044). Although trade transactions in the real estate market dropped in general, the sales and purchases of apartments grew 3% compared to 2021 – totaling 17,084. Foreign nationals were party to the transaction in 4,936 real estate trade deals, or 9,3% of the total transactions of sales and purchases of real estate.
In 2022, foreign nationals bought 1,950 units of real estate in Armenia – 22,9% more compared to 2021, and sold 3,173 units of real estate – 0,6% more compared to 2021. Foreign nationals bought 991 apartments – 36,9% more compared to 2021. Foreign nationals bought 330 residential homes, 369 units of land plots, 25 buildings of industrial significance, 82 buildings of public significance and 153 garages. Growth is recorded in all transactions compared to 2021.
Most sales and purchases in the real estate market conducted by foreign nationals were made by Russian citizens. Russian citizens bought 1,207 units of real estate in 2022, which is 44,9% more compared to 2021, and sold 2,380 units of real estate, 7% less than in 2021. U.S. citizens are second in the number of transactions conducted by foreign nationals: 240 units of real estate were bought and 274 units of real estate were sold by U.S. citizens. Iranian nationals bought 84 and sold 67 units of real estate in 2022.
In terms of rents, last year a total of 10,638 rent transactions were recorded, which is a 6,9% decline compared to 2021’s 11,432. However, apartment rent transactions grew 3,9% and comprised 1,761. The rents of buildings of industrial and public significance also grew – 950 and 4,736 respectively. In Yerevan, rent transactions grew 9,7% compared to 2021 and totaled 5,957.
The Kentron Real Estate Agency said they’ve been observing a boom in the real estate market in the past few years. Last year, due to the Russian-Ukrainian conflict, a big inflow from Russia in two phases brought to a boom in rent transactions, and subsequently to an increase of rental prices and apartment prices. Despite pessimistic projections, the agency had many clients in the beginning of last year.
“We were getting ready for a pessimistic scenario, but nevertheless as a result of the restrictions imposed on Russia a big inflow of people began, those applying and calling us were mostly from IT companies. They started moving their businesses together with their staff,” Kentron Real Estate Agency Director Vahe Danielyan said.
These are mostly companies who are working with Europe and the US. Many commercial and residential areas and apartments were rented. “For instance, if a 50-man company was moving to Armenia, they would rent a big office and 50 apartments for around 50 employees. They would rent for at least 1 year term,” Danielyan said, adding that as a result the prices of rents increased around 100%.
There were cases when the landlords wanted to abruptly increase the rentals. In many cases the agency itself tried to remind the landlords that they have contractual obligations and don’t have the right to do so. Some accepted, but in some cases the landlords nullified their contracts to find other tenants who’d pay higher rentals.
Danielyan said the second wave of the inflow and boom in rents began in September when Russia announced mobilization. However, if most of those (80%) coming to Armenia before September were arriving for business to rent commercial areas, after September private individuals were arriving. They would mainly rent apartments for three to six months, mostly for 3 months. However, in the same period, there were few Russians to buy real estate in Armenia, most of those who bought apartments were Armenians living in Russia.
“Last year there were Russian buyers, albeit few. In the past years we had ethnic Armenian buyers from Russia, but there were virtually no Russian buyers. Meaning, 2022 was unprecedented, we’ve never had such a year before,” Danielyan said.
The increase in rentals impacted the sale prices as well. Danielyan said in 2022 the prices of real estate grew 50%. He explained it with several factors. “A part of our local owners simply decided not to sell because they could lease it with high price. In addition, demand increased, people saw that they can buy an apartment and lease it for a very good price and the profit will cover the interest rate of the mortgage. Meaning, demand increased, supply dropped, which logically led to increase of prices.”
Speaking about the current situation, Danielyan said the high prices for apartments for sale are maintained, but not the rentals. “The renting market is dropping for already one or two months. If this pace continues, the prices will reach the level which was before the beginning of 2022,” he said, adding that most of those who came since September have returned and the apartments are being vacated.
Currently, the monthly rental for a 1-room apartment in downtown Yerevan starts from 300,000 drams. Furthermore, this is already the decreased price, in 2022 it had reached up to 450,000. But before that the prices started at around 180,000 drams. “For already a few months now we are getting calls every day saying that their apartment is vacant and are asking to find new customers. Prices are dropping because supply is increasing in the market, there are more vacant apartments but less renters.”
Prices of apartments for sale are maintained in the high levels of 2022, however.
The price for one square meter in downtown Yerevan is estimated between2000-3000US dollars, reaching 5000 dollars in new buildings. The lowest prices in downtown are around1700-1800dollars per square meter in old buildings.
In the Zeytun district the price per square meter starts from 1300 dollars.
According to Danielyan, people are actively buying homes in newly built buildings after the law on return of income tax took effect. “Sometimes, regardless of whether or not they need an apartment, people buy it thinking that prices are increasing and they will later re-sell for a higher price or lease it,” he said.
If rentals continue to drop it could also impact the prices of sales.
But the real estate agency director is in no hurry to make any projections regarding the market because it is linked with the regional developments and the events pertaining to Russia.
“Our market is very sensitive. Real estate is not an essential need. In many cases people buy it as an investment, and not as a residence. And every little change in the political and economic arena has big impact on the market,” he said.
Nevertheless, even if the above-mentioned developments hadn’t taken place the prices of apartments in 2022 would have increased to some extent anyway, he added.
Anna Grigoryan