IMF: Armenia`s real estate market continues to be overvalued

ArmInfo. The real estate market in Armenia continues to be overvalued, as stated by Umang Rawat, the IMF Resident Representative in Armenia, during an event on the fund's report "Caucasus and Central Asia: Economic Outlook and Policy Challenges".  In this context, he noted that according to the IMF and the Central Bank of Armenia, real estate prices in the country could be 30% lower.

At the same time, the Permanent Representative pointed out that a certain decrease in prices has been  observed recently, indicating an adjustment. "However, the  overvaluation persists," Rawat emphasized.

The IMF representative also noted that the Fund and the Regulator are  monitoring the real estate market through stress tests to understand  potential shocks that may occur in the balance of construction  companies and developers in the event of a sharp decline in prices.  "We see that the growth rate of mortgage lending has slowed down,  while the construction sector continues to maintain high growth  rates," he said, pointing out that this situation pose risks that  could later impact the entire financial system of Armenia.

It should be noted that according to the State Committee of the Real  Estate Cadastre of Armenia for the first half of 2024, the average  market value of real estate in apartment buildings in Yerevan  amounted to 458.1 thousand drams / 1 sq. m., with an annual growth of  11.4%. Prices for apartments in the regions of Armenia increased by  15% year-on-year, reaching  an average of 144.8 thousand drams / 1  sq. m.

The highest prices for apartments in the capital are traditionally  recorded in the Kentron (Center) community, averaging 905,000 drams /  1 sq. m. (an annual growth of 12.2%). In the regions, the highest  prices for apartments are traditionally maintained in the resort town  of Tsaghkadzor, averaging 442. 008 drams / 1 sq.m. on average (annual  growth of 10.3%). According to the Financial Rating of Armenian Banks  as of December 31, 2023, prepared by ArmInfo Investment Company,  mortgage lending has stagnated in growth at 28%, slowing down from  35.4% in 2021 to this rate in 2021. As a result, the volume of  mortgage lending reached $2.7 billion.

The total  volume of mortgages from18 banks and three mortgage  companies (National Mortgage Company - NIC, Affordable Housing for  the Young - JM and First Mortgage Company - PIK) slightly increased  in annual growth from 18.5% to 22%, reaching $3.3 billion.  According  to the Ranking of Credit Companies of Armenia as of 31.12.2023,  prepared by ArmInfo Investment Company, among mortgage companies, the  majority share (97%) is held by JM and NIC, which focus on  refinancing mortgages. NIC's annual mortgage growth has significantly  accelerated, while JM's mortgage portfolio has been decreasing for  the second consecutive year.