CBA Governor: Overheating of prices in Armenian real estate market  may have ranged from 20-30%

ArmInfo.The overheating of prices in the Armenian real estate market may have ranged from  20-30%. This was stated by Governor of the Central Bank of Armenia Martin Galstyan on May 10, during an event held in Yerevan over the "Perspectives of Regional Economic Development" IMF report, referring  in this regard to the Central Bank's Report on Financial Stability.

He said that the influx of new migrants to Armenia (since the  beginning of the Russian-Ukrainian conflict, ed. note) created some  frustration among local players. "The additional demand in the market  was caused by ordinary citizens who did not need additional  apartments, but considered it expedient to buy and rent them to  foreign citizens who moved to Armenia. These complex interactions  have led to us witnessing our real estate and mortgage markets  overheating," Galstyan explained.

In this regard, the Central Bank decided to tighten LTV  (loan-to-value) more, and also adopted a law that prohibits  individuals from obtaining mortgages in foreign currency, which  helped eliminate exchange rate risk.

"We also increased the countercyclical capital buffer by 150 basis  points, which means we need to build buffers while times are good.  Because it is obvious that risks are accumulating, we will inevitably  face them in the future. In this sense, it is very rational both on  the part of the banking sector and from the point of view of  regulatory policy to increase the ceiling of buffers in order to  protect against possible negative shocks that we may see in the  future," Galstyan said.

According to the Financial Rating of Banks and Credit Companies in  Armenia as of September 30, 2023, prepared by ArmInfo , mortgage  lending in Armenia accelerated the y-o-y growth rate  from 20.5% to  24.8%, ensuring a volume of 1.3 trillion drams ($3.2  billion). This  is the total volume of mortgage lending from all 18  banks and three  mortgage companies - the National Mortgage Company, Affordable  Housing for Young Families and the First Mortgage Company, but the  dynamics of the previous year also considers the Artsakh Fidesz  mortgage company, the activities  of which were suspended after the  September events of 2023.