The recovery of Georgia's real estate sector has become noticeable since the end of October. However, this tendency has not been followed by significant growth in sales. Mainly demand is on newly constructed and finished apartments, the number of which in the city is too small. Thus, prices on finished apartments in the city center have increased by 15 percent since August! Since August demand has grown on the secondary market as well, prices have not increased. Real estate brokers say that despite a slight recovery in the market, it's too early to speak about the crisis being over. The reason for this is still the weak purchasing power among buyers and inaccessibility of mortgage loans. The non-stable environment in the country is also an obstacle that hinders people's decision to acquire real estate. However, as a whole a significant recovery is obvious on the market compared to spring situation.
Giorgi Bervenishvili, real estate market analyst: "We can say that real estate crisis is coming to an end as there's an obvious recovery on the market. People are willing to buy ready-made product, which is why demand has exceeded supply, even causing supply deficit in central districts of Tbilisi, which on its side has caused 15 to 20 percent price growth on finished apartments. Basic demand is on apartments with the value of 100,000 to 150,000 USD. To my mind, mortgage lending restoration is what the market needs for full rehabilitation, which is expected in February, 2010. It should be mentioned that prices on secondary market almost have not changed. However, there's another tendency outlined, people are ready to acquire apartments in the buildings that will be finished in three to four months. The financial crisis made one thing clear: the so called times of 'air sales' are over. Hence, companies will have to provide their own finances for construction projects, which will be sold only after completion. This way I believe the number of construction companies in Georgia will far decrease and probably only big companies will survive crisis and remain on the market, the ones who have their own finances left or will manage to attract investors. The rest companies will just vanish from the market after the completion of the ongoing projects."
According to Alexander Chubinidze, Chief Broker of Makler.ge brokerage, the market demand is fueling growth. "Active dynamics are being observed, however the demand growth has not been followed by the same high volume in sales. It can also be said that there's a limited option on the market. Main demand on secondary market is on finished or renovated apartments, but even after the selection process, the buyer always requires price correction. Lately the cost of apartments we sell even in the central districts of Tbilisi don't go higher than 1000 USD per square meter. In the suburbs, this figure is even lower. However, the population is expecting further drop of prices."
Developers also speak about the market recovery. However, radical growth in sales has not been the case for developers either. They have to attract additional financing for the completion of the ongoing projects in order to do sales at least afterward. It should be noted that attracting financing has never been simple and even today when banks are facing excessive liquidity issues they prefer to suffer losses than to finance the construction sector. However, there are exceptions.
Giorgi Baidarashvili, PR Manager of Arci developer: "People no longer expect that prices on apartments will fall to 200 USD. After the August (2008) war there were some assessments that apartments would cost much less, but that didn't happen. We did drop prices by 30 percent, but this, was the limit as property prices together with the demand-supply principle, are defined in accordance with prices on product cost. Thus, no company would think it worthwhile selling property with the price lower than its cost and go bankrupt. On the other side, people were not ready either and refused to buy property for 500 USD a square meter. At this point we can say we're through the crisis and the market has recovered thanks to the Tbilisi Mayor's initiative of the project-New Life to Old Tbilisi. This project allowed companies to renew the construction process. In the frame of the project during the first phase Arci will give apartments to 68 families. These 68 apartments were sold in past months while throughout the entire year the number of sales was 21.
This indicator is 13 times less compared to the data from the previous years. For now the feeling of an unstable environment is no longer noticed in the society and potential clients are willing to acquire real estate."
Rezi Nizharadze, Marketing Manager of Axis believes that depressive situation in the construction sector is improved. "Although our sales have been decreased by 60 percent compared to previous years, we still manage to sell stable volume of 400 to 1,000 square meters monthly, mainly in finished and soon to be finished buildings. Getting through with crisis is naturally depended on the recovery of the population's purchasing power. We expect the situation to be improved since the end of the first quarter of 2010.
"The majority of buyers are waiting for the housing objects to be completed. It appears there's a certain social fear that the completion of apartments might again face some trouble. Hence, the demand is mostly on finished buildings and we hope that the four projects that we've started and are now continuing with the financial assistance from OPIC, will instantly be reflected in desired sales results," said Nino Tkeshelashvili, Iberia developer representative.
Real estate market say that when the crisis is over we'll be facing an inevitable growth in supply and price on the market, the reason for which lies in three local factors: first-no European city has the Damaged Fund volume this big as Tbilisi and people who live in these damaged apartments will be trying to change location even with the slightest chance of improving living conditions. Secondly, inside migration is the reason why demand on apartments in Tbilisi is growing daily. As for the third factor, experts link it to the newly established tradition of newlyweds moving out and causing further increased demand on housing estate. All that is linked to the country's main chain. Unless there's no increase in the country's development level and in people's income, the demand will never be met. |
