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    Azerbaijan's real estate market to face new fall in prices

    Prediction: Mostly it will be observed in country house property prices

    Baku. 13 December. REPORT.AZ/ Real estate market will keep falling in the years 2017-2020.

    Analytical Group of Report believes, real estate prices will change in dollar equivalent (15-25%) not in manat equivalent. Thus, the agency's analysts believe in 2017 average dollar exchange rate in Azerbaijan will be about 2,05-2,10 AZN / USD, which is higher by 20% compared with current exchange rate.

    Mass sterilization of Manat in 2017, the process of improving banking sector will not solve the problem of liquidity next year.

    Due to the increased prices of utilities in old buildings the demand for new buildings will rise.Cost of new buildings not having gas could fall sharply.

    "The drop mostly will be observed in country house property prices. As these houses mainly used 3 months of the year (in summer), and taking into account new utility tariffs , prices expected to weaken in this segment", the analysts said. 

    Notably, even though at times of global financial crisis in 2008-2009, real estate prices declined, they have been increased even higher than before. Current crisis expected to last longer. As real income of population decreased, demand for real estate severely reduced and this negative trend will continue.

    Thus, the high-income group of people have enough investments and current low level of rents do not attract them to new investments. Notably, the decline in real income of population can induce them to sell their investments in real estate during "oil boom" years. This will lead to an increase in supply in the market.

    The positive factor is that, destruction of old buildings is underway and compensation paid to the local residents helps to maintain real estate market more active. But the fact is new buildings are being constructed in Baku and they create new supply portfolio in market.

    Though there will be 2-3% economic growth in Azerbaijan it will take at least 5 years for real income to reach pre-crisis level. For this reason, the downturn in real estate sector expected to continue. 

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