Real estate sector steps up
20 March, 2014
Real estate sector steps up
The real estate market steps up in Georgia by roughly 10% average in the last four years. Sector pundits expect no breakthrough but a moderate and steady growth unlike the speculative boom that burst in the pre-crisis period of 2005-2007. The construction sector grew by 26% and transactions in real estate witnessed an almost 10% rise in the last quarter of 2013 compared to the preceding quarter, the official statistics body reported on 6 March. According to statistical data, volume of
products produced in Georgia increased by 12% in the report period and exceeded GEL 6.2 billion. The construction sector is number three in the national production statistics after industry and trade. However, it is closely followed by transactions in real estate which is the number five with GEL 440 million in value.
Vako Maghnaradze, Head of Statistics and Analysis Department at Public Registry of Georgia, reported to Georgian Journal that sales in real estate have been going up with an average of 9.8% since 2010, registering 55 829 transactions yearly up to 73 674 transactions concluded in 2013. The trend is not predicting any boom duplicating the 50% growth Georgian real estate witnessed in the pre-crisis period of 2005-2007 which laid ground to speculative deals and the 2008 crisis when transactions on the real estate market plummeted to almost zero. In 2009, the sector started to recover and by 2011 the sales growth figure reached 16.3% on a yearly basis. Since then the sales growth has been diminishing from year to year to 10% and 3.1% in 2012 and 2013 respectively. But sector pundits say the most important point is that the sector is growing reasonably in pursuance of the economic growth of the country which creates stability while the pre-crisis boom was reasoned by speculative demand that ended in a crisis.
According to Giorgi Abashishvili, Deputy Dean of the Business School at Ilia State University, people were purchasing real estate by mortgage loans rather than by savings because their purchase power was low during the construction boom of 2005-2007 and this bubble finally went bust. The crisis taught consumers to be more realistic and have less trust in so called “air sales” when the apartments are already acquired through mortgage loans before the actual construction works on the projected apartment house were started. Now consumers make reasonable purchases focusing on completed projects.
While plenty of construction still lays uncompleted, prices of apartments went up by 10-15% because the demand exceeds the supply. According to recent research of the Business School of Ilia State University, conducted by Abashishvili, prices of apartments grew by USD 63 on average in this past February and accounted USD 1303 per square meter. Broker companies say the real estate sector slowed in pace before the Parliamentary and Presidential elections of 2012 and 2013 respectively and now step up again because after the power shift the situation became clearer and both investors and consumers take an interest in real estate.
70% of sales come from apartments brokers says Tengiz Lomitashvili, Managing Consultant Partner at TBSC Consulting [partner of the JLL Company which is the second largest real estate international company. TBSC runs a special department that offers a full package of consulting service in real estate consulting]. He believes the hotel sector is leading the real estate market at the moment thanks to a significant inflow of tourists in the country which reached 5 million in 2013. He expects this trend to be kept at a lower speed than the pre-crisis speed but on a steady rise especially after Georgia endorses an agreement on associated membership with the EU.

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