Issue 5, 2017. October-November

   

FROM THE EXPERTS: ARE TBILISIANS LEAVING THE CITY?

Investor.ge spoke with three experts in the Georgian real estate market, Managing Director of Colliers International Georgia Irakli Kilauridze, Irakli Burdiladze, CEO of m² Real Estate and Nina Kipiani, the Partner and Head of Country at Cushman & Wakefield Georgia, about whether Tbilisi's city dwellers are moving out to the 'burbs and how the parking problem is affecting developments.

Traffic. Air pollution. Parking.

Every day, especially around rush hour, there seems to be a hundred new reasons not to live in the city.

But are people really moving out? There are also new apartment buildings and developments popping up all over Tbilisi, so where do Tbilisians want to live?

The answer, according to real estate specialists, depends on whom you ask. While demand is growing for private homes - including homes in the villages and communities surrounding Tbilisi - there is still a healthy demand for apartments, especially in popular Vake and Saburtalo.

"During the last decade, demand for private houses notably increased. Besides the sub-districts of the city, such as Dighomi 7-9, Village Dighomi, Didi Dighomi, etc. The process of development has moved into settlements in the surroundings of Tbilisi - Tabakhmela, Shindisi, Tsavkisi, Okrokana, and the neighborhoods surrounding Lisi Lake and Tbilisi Sea," noted Irakli Kilauridze, Mmanaging Director of Colliers International Georgia.

He added that, as of July 2017, 901 private houses have been sold this year, which is 23 percent higher than the same time last year.

"The main drivers of increased demand are clients' desires for an ecologically clean and peaceful environment, protected area, greenery, etc. The most popular townhouse type projects are Lisi Veranda, Tsavkisi Valley, SunCity, American Village, Delta Tabakhmela, and more," Kilauridze said.

"Generally, the average price of a townhouse project is much higher than for flats. However, due to the previously mentioned criteria, a certain segment of society prefers private houses."

Nina Kipiani, Head of Country at Cushman & Wakefield Georgia, noted the Millennial generation has been more interested in leaving the city.

"As Millennials start families, they tend to head for the suburbs. Crushing the old local tradition of up to 'three generations living in the same central Vake apartment,' the newer generation runs counter to the previous quintessential city-dwellers, hence the average household size of 4.2 in 2006 has decreased to 3.6 in 2016," she said.

"A number of developers have taken advantage of such trends and offered gated community housing in the suburbs including the Lisi Lake, Bagebi/Kaklebi, Krtsanisi, etc. Demand here has therefore been supply led and considering the pricing of these developments being rather high, cost-savings could not have been the driver for the buyers. As an example, Lisi Lake has seen a spurt of sales starting in 2012 and increasing by an average of 5 percent annually. In addition to the gated communities, the sales of land plots in the popular residential areas have been on an increasing trend, led by the sales in Dighomi."

Irakli Burdiladze, CEO of m² Real Estate, told Investor.ge that growing incomes are one of the drivers in the new demand for private homes.

"It's natural to expect that economic growth and increase in disposable income will stimulate demand for single family houses in suburban areas as lots of families prefer to live away from busy city centers," Burdiladze said in an email interview.

"This is the trend we observe in more developed economies. It's a matter of affordability. In our country a single family house is still a luxurious product that few can afford thus demand is limited. It should be noted, however, that this demand for houses has grown in the past year, which is in direct correlation with economic growth and increase in family income."

Cars, Cars Everywhere And No Place to Park

The parking problem in Tbilisi requires no introduction. But how is it impacting how developers build - and how people buy - apartments?

Kilauridze said that the parking issue has started to impact not just the residential market but other sectors of the real estate market as well.

"Since 2012, according to our observation, approximately 80 percent of new developments include underground parking in the project. However, only a few developers are selling parking lot spaces with apartments. In central districts, such as Vake and Mtasminda, the selling price of parking lot spaces ranges from $7,000 to $10,000. On average, in the suburban parts of the city this figure varies between $3,000 to $6,000.

Kipiani noted that while there are some developments offering allocated parking spaces, there is not enough evidence to judge if that is influencing buyers. She added that developments in Vake tend to sell up to two parking spots per apartment.

"Notwithstanding the high demand [for parking spaces in the city], especially in central districts, developers tended to save on parking construction, which has resulted in a [parking] shortage and overcrowded yards and pedestrian lanes. With the new regulations put in action, developers are obliged to allocate a parking lot per 130 square meters of living space, which should by all means act as a solution to these problems," Kipiani said.

m² Real Estate noted that demand differs depending on people's income: while those with more disposable income "demand at least two parking places per apartment," people in the market for less expensive real estate would rather spend money "on purchasing extra square meters of living space rather than spending money on parking lots", Burdiladze said.

"When designing our projects we always study potential traffic and parking demand and take this into consideration in preparing the final master plan," Burdiladze noted.

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