| Construction Companies Believe Real Estate Prices Will Soon Grow |
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01/06/2009 17:06 (985 Day 20:58 minutes ago) | |||||
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The FINANCIAL -- According to construction companies active on the Georgian market, prices will increase after seeing through the end of the financial downturn. However developers say that no dramatic change of prices on the real estate market is expected before the end of the year 2009. Most of the construction companies questioned by The FINANCIAL have declared that they “are currently trying to find a way out of the crisis”.
“Price changes are dependent on demand-supply correlation. At the moment demand has been delayed, that means that there is big demand, but because of political and economic problems investors’ decisions on the purchase of real estate have been postponed for the nearest future. Experts say that while there is no demand, prices should be halved, however the supply statute decrees that the low level of prices regulates costs anyway,” says George Baidarashvili, Head of the Marketing Department of company Arci.
“Last year prices decreased from 15% to 20%. There are different indexes on each of our projects. The prices differ from each other by the districts. The average price per square metre at our company is USD 900,” Baidarashvili notes.
“The developer which directs a construction project’s financial rule in the right way will not sell real estate cheaper than it is worth. That’s why prices are not expected to be reduced more than by 15-20%. If stabilization of the situation occurs, if there is a return in demand for property, and accordingly the rate of sales increases, then this will influence real estate prices,” Baidarashvili says.
Arci says that the company is struggling against the crisis together with other members of the association of developers.
According to construction company Axis, prices of real estate will remain the same in 2009.
“Currently 1 square metre at our company costs USD 800. Last year we reduced prices per square metre by 10% and thus reached the level we are at now,” says Revaz Nijaradze, Representative of the Marketing Department, Axis.
“The stability of the banking sector and being in optimal form reflects directly on the development of real estate, which will cause an increase of sales. We may expect activeness of banks in the direction of giving out mortgage loans after overcoming the global financial and economic crisis,” Nijaradze notes.
Center Point Group, one of the leading developer companies in Georgia, declares that no significant change of prices can be expected this year.
“Last year we offered maximum 15% discounts to our potential clients. At the moment the average price of a square metre that we offer is USD 750,” says Tika Rukhadze, Head of the PR and Advertising Department, Center Point.
Rakeen Development, another large company in the sphere, says that prices are expected to rise after overcoming the economic crisis.
“In general investing in real estate is very profitable and according to sales prices, commercial spaces are usually more expensive. Presumably prices will not radically change before the end of the year 2009,” says Sophio Mamardashvili, PR and Events Manager of Rakeen development.
The cost of one square metre of commercial space offered by Rakeen starts from USD 3,000 and goes up to USD 4,500, meanwhile the prices of office space start from USD 2,000 going up to USD 2,450.
Center Point Real Estate is one of the cheapest compared to prices given by other companies interviewed by The FINANCIAL Despite the August war in Georgia last year and the global economic crisis, company Rakeen Development has not stopped working.
Another development company Olympic Star expects a rise in prices after the stabilization of the situation in Georgia.
“The prices of real estate at our company have been reduced by 15-20%. After August’s events in 2008 sales decreased by 60% in Georgia. We have not reduced prices at the company, but to make the terms of payment more flexible for our clients, we are making mutual decisions,” says Zaza Razikashvili, President of the Development Company Olympic Star.
Asides from Georgia, prices of real estate abroad have fallen even more sharply. Let’s just look at the information provided by Nuwireinvestor. Danish residential property prices are continuing to decline in 2009. Single-family and terrace house prices fell on average by 10.8% (-12.4% in real terms) from a year earlier to the end-Q1 2009, to DKK 12,452 (EUR 1,669) per square metre.
According to the Association of Danish Mortgage Banks (Realkreditradet) this was the fifth consecutive quarter of such price falls.
In Bulgaria, according to the website Novinite, the real estate market has started to recover in the last few months from the decline.
Experts from the National Real Property Association have announced that the number of deals increased in March and April, after the stillness in the market from December 2008 to February 2009. The prices have reached the psychological minimum of EUR 700 to EUR 1,000 per square metre, and cannot be further decreased, analysts say.
Written By Tako Khelaia
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