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Azerbaijan divulges reasons of price hike of apartments

01 April 2013 09:43 (UTC +04:00)

Note that, prices of old apartments jumped 13% in secondary housing market of Baku within the last year. According to MBA Group, price hike was faster in some districts – annual rise was more above 15% in 3 districts, 28.5% in Garadagh, 16% in Nasimi, 15% in Xhazar. Average price hit the level never seen before in some places of the capital. For example, the average price for 1 square meter in Sebail districts makes $2,200, $1,765 in Nasimi and $1,625 in Nerimanov.

According to Ibrahimov, one of the price hike is that price rise is a cyclical process: ‘The practice of the past 30 years shows that the prices go up in every 8-12 years and then fall within the next 3-5 years. At present, we are in a period of price-hike’.

The second and one of the main reasons of price bulge is the upswing of money supply in the country: ‘There is more money in the hands of the people. They prefer to invest it in the market and the appeared pressure increases the prices’. On the other hand, the investors started to invest free cash in real estate.

Other reason of price rise of property is related with mortgage lending. Ibrahimov noted that mortgage lending gives rise to stabilization in the market and this stabilization was replaced with the price rise of property. Recent increase of cheap apartments stipulated price rise: “Mortgage lending was mainly directed to cheaper apartments. Portfolio of cheaper apartments is about coming to an end. In case of decrease of such apartments in the market, their owners started to increase the prices and dictate own conditions. Consequently, prices of cheaper apartments started to increase and this influences the prices in other segments”.

At the same time, price rise of property in Azerbaijan is related with external factors. Expert says the prices rise not only in Azerbaijan, but also in CIS countries and nearer regions: “This influences Azerbaijan”.

Note that the analogical processes are observed in secondary market too.