Real Estate: Prices Rise While Activity Drops

Real Estate: Prices Rise While Activity Drops

Real Estate: Prices Rise While Activity Drops

The FINANCIAL -- The secondary market Price Index as of today is USD 750 compared to USD 315 in the first two weeks of December 2006. Activity index was 456 in the first two weeks of December 2006 while the latest datum is 285. (Georgian Real Estate Index (GREI))


“I don’t think the recent October-November political complications in Georgia could have an instant impact on the local real estate market as it is a highly inert field. It takes months to see obvious influence of internal developments on the sector,” Kote Gabrichidze, IPM Real Estate Project Manager, told The FINANCIAL.


As Mr. Gabrichidze defined, the market supply has increased much since 2003, which was around  a million sq.m while in 2006 the figure had increased up to 1 million 170 thousand sq.m and in February-March 2007 reached 2 million 430 thousand.


“The reason might be that if 2 years ago there was a boost demand on real estate in Georgia, today the dynamic on secondary market has become relatively slow. Or the alterative explanation could be the aggressive activation of the primary market,” concluded Gabrichidze.


From December 2006 start to evaluate the real estate business by Index Method. IPM offers 5 indexes. These are: the Price index of Real Estate; Price expectation index; Real Estate profitability index; Market activity index; and Composite index of the real estate market.


“For the purpose of obtaining information on dynamics of the real estate market, residential apartments and non-residential spaces, you can easily buy GREI - the Georgian Real Estate Index,” said Gabrichidze.


The Real Estate Index studies are common in all countries of the world. Analyzing real estate market this way is also common practice in some of post soviet countries like Russia, Azerbaijan and Ukraine. Technology of index calculation is common; indexes are simple to understand and give the opportunity to make the right decision in a short time period.


“The specially worked-out program gives you the opportunity to have a constant observation of the market always at hand. The company running program pays USD 300 monthly and has access to all the highly important information on the local real estate market,” commented Gabrichidze.

According to Gabrichidze, Georgian banks actively use the program in mortgage operations while evaluating the cost of their clients’ real estate.


The program allows the owner to see what amount of real estate is being sold in Tbilisi in time period, what the total value of sold real estate, what the prices for real estate in diverse geographical regions are, what the price for an apartment, office, or commercial area is, and what the share of commercial or office areas according to first hand and second hand proposals are. bolo fraza ver gavige.


Price index of Real Estate


Price index of real estate represents the average price of an apartment (Real estate) in USD. It is possible to calculate general price index and price index for segments: Segmentation variables may include: district, floor, area.


Market activity index


This index reflects the change in market activity in the given time period. As an example amount of sales, the current month is divided by the same parameters of the previous month.

Market researches in real estate IPM conducted from 2003 .


“This was a period when the market was not highly saturated with competition and you could hardly find a company interested in any type of research. It was only in 2006 that the companies became initiators themselves,” claimed Gabrichidze.


In 2006 by the initiative of Center Point and other most open minded companies – Arci, Iberia Construction, Cid Architect and GRDC it was conducted Real Estate Census Research of Tbilisi, not for only this companies but in the frame of industrial research. 


“The cost of such industrial researches might be USD 500 in the U.S, but in Georgia where information about each development project is not so transparent as in western countries, the actual cost price hits USD 10 000. Though we sell it as low as USD 1 500,” said Mr. Gabrichidze.

On today the list of the companies which are purchasing this research is rather longer.


“The research is conducted twice a year and gives the rare and valuable opportunity to have a kind of snapshot view of sold areas in sq.m in the primary market,” noted Gabrichidze.


REC is for those who want to learn the sales volume of real estate in Georgia, the value of property sold by developer companies, information about leading and non-leading developers and construction companies, the prices of real estate, including residential apartments, offices or commercial spaces in various geographic areas, the share of commercial and office spaces in real estate, price segments of the real estate market, offers of developer companies in these segments, offices or commercial spaces. For any of these purposes you can simply buy the Census Research of Real Estate Business.


REC’s 4th research is coming out in two weeks.


The client obtains information as a single data base as well as processed data in PowerPoint presentation on 150 pages.


As the Amcham magazine July, 2007 edition reports, Critics point to the ballooning number of projects and the high level of speculation but supporters maintain the demand is steady.


The construction boom has hit former Soviet capitals from Tallinn to Baku, with prices climbing in former backwaters like Yerevan as well as cosmopolitan centres like Moscow. Tbilisi falls somewhere in between. While real estate is still a steal compared to prices in Kiev and Moscow, they have jumped from USD 150 per square meter for apartments in new construction projects to a reported USD 1 500 in a matter of just a few years.

According to figures from the Georgian-European Legal Advice Centre’s quarterly review, Georgian Economic Trends, growth in the sector peaked at over 40% while the BP pipeline projects were under construction. The latest data puts the growth rate at a respectable 14.1%. Currently the sector represents two percent of total employment in Georgia and, according to the March 2007 U.S. Department of Commerce’s BISNIS report the “Overview of the Georgian Construction Sector,” made up nine percent of the GDP.