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.
