| Buying Expensive Real Estate |
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05/05/2011 08:25 (391 Day 12:52 minutes ago) | |||||
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The FINANCIAL -- “Most wealthy people in Georgia don’t actually buy expensive houses
these days because they are afraid of blatantly advertising their
wealth.
Brokers from every real estate agency complain that there is little demand for expensive property. According to Aleko Chubinidze, top Broker at Makler.ge, in recent times the number of offers for sale for expensive property has increased. As a rule the agency gets about 100 offers for sale per week. Around 70% of these are for highly-evaluated property, while the percentage of expensive houses actually sold is only 30% as a whole. “Let’s define first of all what exactly the term “expensive” means in Georgia. It could be a house or flat which costs up to 500,000-550,000 USD. These kinds of properties are mostly in central districts, like Vake and Vera. There is neither demand nor choice of expensive real estate in the country. The majority of people don’t have that much money to be able to afford fashionable houses. Unfortunately, in the last 6 months we sold only one commercial space for 570,000 USD and a 400 square metre duplex in Vake for half a million USD. The client paid such a large amount of money, but she had only two options worth half a million out of so many offers,” noted Chubinidze. As he added, almost none of the houses are sold at the prices they are estimated at by auditors. “As there is virtually no demand, we always try to persuade owners to reduce prices, but they prefer to wait a couple of years for the market to pick up than to sell their property at relatively low prices,” continued Chubinidze. Keti Barbakadze, Manager of Real Estate Agency Bina, considers that the prices we have today in the market are relevant and acceptable for the Georgian market these days. “It’s another subject that we are in a process of recession and people don’t have money. Besides, many buildings’ constructions have been delayed or totally cancelled as well. The prices we had before 2008 were dramatically inflated and absolutely unrealistic for the Georgian reality. But after the war the prices have been more or less regulated and are lower than before. Anyway there is no demand for expensive real estate property because of our economic situation. If we sell two-three houses worth up to half a million USD a year then that in itself is a big achievement,” said Barbakadze. Gugeshashvili agrees with the fact that the number of offers for sale of expensive accommodation have increased at their company as well. Due to more people having debts and loans that they have to pay back, they are trying to sell their property to cover their debts. “Many people have loans from different banks which they can’t pay back. Of course in this kind of situation they set lower prices so as to sell the house as soon as possible. However I do think that the current prices have to twice reduce to be absolutely relevant for the Georgian market,” stated Gugeshashvili. According to the brokers the majority of demand is for 2-3 room apartments within the maximum bounds of 100,000-150,000 USD. In recent times demand for flats which are in the process of building, has increased. However in the last 2-3 years the number of flats or houses sold has drastically decreased. People are mostly looking for apartments to rent and mortgaging as well. The main priorities while evaluating a property is its location, the visual side, environment, date of construction, if the building is protected, etc. Almost nobody cares about inside repairs, because they tend to renovate anyway. “Usually when we get an offer for sale the person is stating the price of his/her property. Sometimes they need our help to estimate the house. Besides the main criteria, we do put an accent on comparison. My employees compare the house to similar ones, which have already sold and fix the price at nearly the same. It doesn’t matter if the house is worth more, it won’t be sold for a much higher price than the previous one was sold at,” Gugeshashvili said. “If it isn’t urgently necessary one shouldn’t sell a house today. I needed a certain amount of money so had decided to sell my flat. As brokers estimated I wanted to sell it for 70,000 USD, but nobody wanted to pay more than half of the price. I don’t think that it is we, the owners, that are setting very high prices, rather that people simply don’t have the money these days. So I changed my mind and have started to renovate the flat instead. I plan to rent it out as soon as the works are completed. It’s a kind of small business venture; I’ll have guaranteed income every month. I hope that with the improvement of the economic situation, people will have the possibility to sell or buy any kind of property at realistic prices,” said Natela Mjavanadze, property owner.
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