Friday, October 28 2011 14:06
Real estate market suffering hard times in Armenia
ArmInfo. ArmInfo's interview with Artyom Pribylsky, Director General of the Yerevan Real Estate Exchange, Candidate of Sciences, Economics
Mr. Pribylsky, by data of the real estate register housing in Armenia fell in price 4.2%. Prices fell 0.2% for August alone...
I have no official data on the real estate market for August and September since the agency that handles these figure has not yet published them on its website. Therefore, I will comment on your data. The 4.2% reduction means nothing. The housing prices in Armenia are not going down and will not do so for a long time yet.
And what does such a peculiar stability in the housing market mean?
According to the market laws, prices stay unchanged only when there is demand on the market. The real estate market depends on the economic situation.
It turns out that nothing has changed in the market over the year. How long will this situation continue in the market? How will the market respond to the deterioration of the socio-economic situation in the country predicted by experts?
In the last years the social-economic situation in our country has not changed. And so, there have been no changes on the real estate market. Today, just like in 2005 and 1995, Armenia has a transfer economy. The only difference is that since 2002 most our compatriots and local businessmen started investing in construction of dwelling houses due to the price hike in the housing market. In fact, on 2008 the share of construction in GDP exceeded 30%.
Some analyst said it was good for the market, however, it was a negative tendency since focusing on one sector, especially construction, is very dangerous for the economy of Armenia. Construction is carried out in the territory of Armenia as counterbalance to, industry, for instance, which implies also export. It should be noted that production of building materials began to develop in Armenia in the pre-crisis period. However, it did not grow and created no export opportunities for producers of building materials. The biggest part of our construction industry remains in our small country with its small sales market.
And the current stagnation of the sector...
I would not call the situation in the construction sector stagnating. It is more or less developing. The point is that the two vital sectors of our economy - agriculture and industry - do not operate properly. We are not competitive now even in the region. Most of the Armenians live on money transfers received from abroad (80% from Russia). That's why the social situation in Armenia depends on the economic situation in Russia and, consequently, on the oil prices.
The prices in the country are not high as compared to developed countries. But the wages of the citizens are incomparable with the prices. To soften the situation, it is necessary to wage the right policy in the sphere of agriculture that still suffers from backwardness. If the financial state of our population is improved, the situation in the real estate sector will change as well.
Mr. Pribylsky, will the growing migration scales affect the housing prices? Or maybe the deteriorating situation in Russia will certainly stop migration...
Our citizens are very mobile and will leave for other countries, and even the Arab ones. As for migration process, it certainly differs from the situation in 90s when people left the country selling their homes for nothing. Now, people leave without selling their real estate.
Expectations of the potential buyers and sellers also create certain tendency in the market, don't they?
One more factor influencing the situation on the real estate market is the "price" expectations of people - their vision of how the prices will behave tomorrow. If our people go on being pessimistic, like they were in the late 1990s, they will continue selling their houses at giveaway prices just to leave the country, and the real estate may collapse. But, I am sure such scenario will not repeat in the country any more.
What category of people buys real estate in Armenia today?
We do not meet very rich people as they often prefer building their houses on their own. People with average incomes buy real estate and take mortgage loans. There are also people who sell their houses to buy cheaper ones and spend the remaining funds on living. And Diaspora. Here is the entire business. The situation is not easy as you can see.
Is there pent-up demand in the market?
There is always such demand. People having certain resources often prefer investing in real estate and wait for reduction of housing prices.
You have mentioned that the construction sector is developing to some extent. Who and what builds today?
There are mostly new buildings, dwelling houses and private houses. There is an excess of business premises in Armenia.
Mr. Pribylsky, the share of mortgage deals in total in the real estate market exceeds 13%...
It is rather a serious percentage that shows the growth of mortgage, which is very good given the high interest rates in the country. We have had very expensive money for several years already, though they were to become less expensive in the competitive environment.
Is that sector profitable for investors?
Investors get some 20%-30% net profits inclusive of all the expenses and payments.
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