Infrastructure

Infrastructure

Expert: â€œRise of prices in Baku housing market will continue this year, tooâ€

10 January 2014 10:44 (UTC +04:00)

“As the personal incomes are increasing people try to improve their living conditions, renew their old houses,” he said.

The expert says at the same time, the persons with stable income or those working at large commercial organizations are active in this market: “They use opportunities of mortgage and improve their living conditions purchasing new houses. This causes increase of demand at the market and influences prices in the housing market”.

One more reason of the rise of prices is destruction works in some areas of Baku. Persons, whose house and facilities are knocked down, get compensation from the state. And this influences current prices at the market: “Approximately AZN 1,500 compensation is paid for 1 m² of the demolished houses. This to some extent impacts the processes as a psychological factor. Thus, AZN 1,500 is paid per m², while earlier it was AZN 1,000-1,200”, the expert said.

According to Ibrahimov, the fourth factor influencing the price in the housing market is the migration in the capital: “Birth rate increased in the country. The number of people coming from regions to the capital and from abroad to Azerbaijan increased. They increase demand portfolio and cause rise of prices”.

The expert says all these are factors influencing price rise in the real estate market: “However, there are also external factors influencing prices. Today, the price rise of the houses are not observed only in Azerbaijan, but also in South Caucasus region, including Georgia, Armenia, as well as Turkey, Russia and Central Asian countries. Of course, Azerbaijan is a part of this global market and the market is undergoing external impact”.

According to Ibrahimov, another factor causing rise of prices is that it should be regarded as a part of general development of economy.

“Rising and declining parts of the global economy are sinusoidal. Development, rise of prices are observed at some time, decline is observed at another time. Sinusoidal rise period lasts for 8-12 years, decline for 3-5 years. Currently, we are observing rising part of sinusoidal period. This factor impacts housing market prices,” he said.

Expert said increase of proposals in the real estate market in Azerbaijan resulted in the fall of house prices in 2008-2010.

“Declining tempo of construction since 2008 has caused shortage of flats in the housing market, i.e. in the shortage of proposals. This shortage is especially observed in the group of cheap proposals. Decrease of proposals has resulted in the rise of prices in the housing market. Earlier, a person, who had enough money, could build a house. After 2008, some restrictions were imposed in this field. Of course, the persons, who do not have enough experience and funds, can not be engaged in construction. This sphere has been licensed, therefore, accidental businessmen or accidental construction companies have already left or are leaving the market. Companies, which know their work perfectly and meet standards, remain in the market,” he said.

Expert added that most of companies build houses falling under the “premium” and “elite” classes.

“These companies are not inclined to building cheap houses. This causes shortage in segment and this shortage in its turn has caused rise of prices in the housing market,” he said.

According to Ibrahimov’s forecasts, high prices in the housing market will continue in 2014.

“Stabilization and rise of prices in the housing market started in the 4th quarter of 2010. The rise of prices will be likely continued this year, too. This will not be as in 2013. But observations show that this year prices in Baku housing market are expected to rise by 6-10%,” he said.

Rise of prices in the capital’s housing market was about 3% in the 4th quarter of 2010. Later, in 2011 they rose by 6%, in 2012 by 9.8%, in 2013 in the secondary housing market by 20%, in the primary market by 28%.