Issue 1, 2013. February-March

   

FORECAST FOR HOUSING PRICES IN TBILISI? UP, UP AND UP

As part of Investor.ge's year-long look at the real estate sector, Lika Jorjoliani spoke with three prominent real estate brokers (makleri or makleri in Georgian) about what has kept prices up in the past, and their expectations for 2013.

Lika Jorjoliani


Alex Chubinidze, Director of Makler.ge: Prices stable, quality control an issue

Chubinidze, who started working in real estate in 2004, said prices have been fairly stable for the past two years. He noted that while sellers often inflate prices, there are few apartments that match the expectations of high-end buyers/renters.

One of the largest issues facing the market, Chubinidze noted, is the lack of options on the market that meet current demands.

While a large volume of apartments have been sold in Tbilisi recently, "it is rare that the cost and quality of the apartment match," he said. "All this complicates sales of real estate. Sometimes, several months are required to find an appropriate residence for a client. The building's fa├žade, the state of the entrance, and car parking area [have to be] taken into account."

Guram Palavandishvili, Director of Erdo Group: Prices will grow, demand is increasing faster than supply

Palavandishvili, a real estate broker for 23 years, said prices are primed to increase over the next several years for both property sales and rentals due to increased consumer confidence, low supply, and expectations the economy will continue to grow. He noted that an estimated 90 percent of the population is still living in multi-family apartments, which means the pool of prospective renters - and new property owners - is deep.

A key to keeping the sector healthy, however, is lowering the cost of mortgages, Palavandishvili stressed, adding that this year prices will increase 15 to 20 percent. He noted that rental prices for commercial property are already following that track: on Pekin Avenue, commercial spaces cost as much as $12,000 per square meter prior to the war. Following the financial crisis, prices dipped to $5,000 per square meter but today they are bouncing back, and the average cost is around $11,000 per square meter.

He noted that if there is peace and stability in Georgian politics, the prices can continue to grow.

"Despite the fact that, over the last 15 years, the cost of apartments in Vake has risen from $300 to $1,500-$2,000, the cost of apartments in Georgia overall remains lower than, for instance, in Azerbaijan; in Baku the cost of one m2 can reach $5,000, and in the Baltic region- $12 000."

For prestigious districts like Vake, Vera, Mtatsminda, and Sololaki, Palavandishvili believes apartments could cost as much as $3,000-$5,000 per square meter over the next two years if the current trends in pricing continue.

Zurab Eristavi, Director of Rentals Ltd: High income tax on leases will keep prices up

"Real estate rent today is too expensive in the central districts," Eristavi told Investor.ge, noting that the average cost of apartments for Rentals Ltd clients is between $1500 and $2500 dollars a month. House rentals can go much higher, with prices from $3,500 to $4,000 a month.

Eristavi explained that high rent prices are due to a number of factors, including the increased cost of income tax for leases - in 2010 it was 12 percent, but it increased to 20 percent in 2011.

A second factor is the shortage of available apartments - especially apartments that meet the high standards required by foreign workers and diplomats. "[S]ince 2008, practically no new apartments have been constructed. The apartments constructed earlier have already been occupied, and delivery of new ones has been restricted," Eristavi noted.

"Today, the Georgian market suffers from a deficiency of apartments with standards that meet client's requirements," he said. "Very often leaseholders propose very high costs for their apartments... In Georgia, construction of large apartments is common, but it is very difficult to lease an apartment having approximately 1800 m2 with its own swimming-pool, cinema and so on. The cost of such a lease, in some cases, is as much as $15,000. However, the most popular demand is for houses with three or four bedrooms, with yards, at a cost of $4000 a month. And there is a deficit of such houses on the market."