Georgia’s residential real estate market – trends, challenges, and prospects

Sales slow amid uncertainty

The latest analysis from TBC Capital shows that Tbilisi’s residential real estate market is cooling – posting a 5% YoY decrease in transactions in February and modest 1% YoY growth in asking price.

Tbilisi’s residential real estate market also exhibited modest growth in 2024 compared to recent years, posting a 1% annual increase in transactions and 7.1% growth in total market value, says Galt & Taggart’s latest annual review. But recent developments show a cooling market and demand that is predicted to soften amid concerns of a slowdown in economic growth, GEL depreciation, and lower rental yields.

According to Galt & Taggart’s report, multiple factors may have contributed to this moderation in sales. In addition to domestic political instability that began in the spring of 2024, which has created uncertainty in the market, weakening demand from migrant buyers, who previously played a notable role in driving rental and sale prices, is also making an impact.

Rising property prices across the country, particularly in major cities, has also made homeownership less accessible for some buyers. Furthermore, notes Galt & Taggart, the overall increase in global interest rates has strained affordability, discouraging some potential buyers and impacting the real estate market as a whole.

The residential real estate markets of Tbilisi and Batumi – the two largest markets in the country – are notably distinctive in their characteristics. Whilst Tbilisi remains primarily a need-based market, with purchases driven by local buyers seeking primary residences, Batumi, by contrast, is highly investment-driven, with 60-70% of sales attributed to investors. As such, Batumi’s market is experiencing more of a cooling period, with some developers struggling to maintain sales levels.

Despite these challenges, foreign buyers remain a significant force in the market, particularly in Batumi, where international investors account for a substantial share of transactions. Russian buyers have led foreign acquisitions in recent years, although the composition of foreign investment is gradually diversifying, with increased interest from the Middle East, Israel, and European buyers.

Managing Partner of Rentals and Eristavi Estates and Co-Chair of AmCham’s Construction and Real Estate Committee Zurab Eristavi notes of the shifting buyer demographics: “Foreign investors, particularly from Russia, the Middle East, and Israel, have traditionally played a key role in the market. However, due to political uncertainty and rising property prices, many are now showing a greater preference for short-term rental investments rather than long-term property ownership.”

Rental market trends – will prices hold?

The latest data shows a 12% drop, in annual terms, of rental prices in February and a 1.4% decrease in rental yields. Analysts are closely watching these trends, noting that rental yields could face additional potential declines in 2025. According to TBC Capital, rent prices began to stabilize in 2024 after a period of rapid growth, though future trends will be highly dependent on factors such as economic performance, foreign investment levels, and exchange rate fluctuations.

Eristavi says it is important to note that while these risks must be monitored closely, the current market is still stable: “The rental market remains profitable, but it is heavily dependent on economic stability and foreign demand. If migration declines or tourism slows, we may see rental returns decrease.”

Business and Organizational Development Director at Construction Management & Consulting (CMC) Nino Mesablishvili highlights the evolving market dynamics: “Sales were initially driven by strong foreign investment and high demand for short-term rentals. As migration patterns and economic conditions adjust, we are witnessing a natural shift in investment strategies, encouraging a more sustainable and long-term approach to the market.”

Easing mortgage regulations: a temporary stimulus

The National Bank of Georgia (NBG) recently introduced more flexible mortgage lending conditions to stimulate the real estate sector. With the down payment requirement lowered from 15% to 10% for local buyers and from 30% to 20% for those earning income abroad, the policy aims to boost housing affordability.

However, industry experts remain cautious about its long-term impact. This concern is also echoed by AmCham member companies and its Construction and Real Estate Committee, which regularly brings together industry representatives to discuss sectoral challenges and explore effective solutions.

As Co-Chair of the Construction and Real Estate Committee at AmCham, Founder and General Director of Conformity Assessment International (CAI) Sandro Shelia explains, “This is not a stimulus package like the pandemic-era subsidies that directly encouraged purchases. It will possibly help some buyers qualify for mortgages, but it’s unlikely to significantly drive up apartment sales.”

Future outlook and the need for broader policy support

A current concern raised by real estate analysts is whether construction companies have sufficient capital to complete ongoing projects amid reports from Galt & Taggart that there was a decline in real estate pre-sales in 2024. CMC’s Mesablishvili emphasizes the importance of financial stability in the construction sector, noting: “With strategic planning and diversified funding, developers can navigate market fluctuations effectively. While reliance on pre-sales poses challenges, companies that secure stable financing and adapt to market needs will be well-positioned for long-term success.”

It is increasingly noted that buyers prefer completed properties over off-plan developments, reflecting concerns about project completion. The risk of delays and financing uncertainties may cause temporary market fluctuations. Experts believe that this shift highlights the need for more secure project financing, as developers increasingly struggle to secure sufficient capital to complete construction.

While the NBG’s mortgage regulation changes provide short-term relief, industry experts argue that more comprehensive policies are needed to stabilize the market. Some suggest that the government should implement targeted measures, similar to pandemic-era subsidies, to support developers and home buyers alike.

CAI’s Sandro Shelia points out: “The NBG’s regulations are designed to protect the banking sector, but the real estate market needs broader intervention—either through financial incentives, tax breaks, or foreign investment support—to ensure sustainable growth.”

With Georgia’s EU membership discussions stalled and uncertainty impacting investment sentiment, he notes that broader policy support for the sector will be key to ensuring the market’s long-term stability.