Increasing demand in real estate market leads to price rise 

Experts think the inertia in the property market, which was caused by the pandemic, gradually slips away as the restrictions are softened and mortgage lending spreads widely. However, there is a strange situation: even though the volume of the market is less than, for instance, two years ago, the prices of houses are high and become higher.

This is not specific for only our country. The prices around the world did not fall as expected. On the contrary, the market is more resistant than the previous economic crisis. According to experts, this is because many people began to see their houses not only as a place to stay at night but also as a place to live and work in.

As a result of this factor, the prices of private houses and garden houses in Absheron’s villages or outside Baku are up by 11%. Due to lockdowns, restrictions in the city, the residents of Baku tried to leave for suburban areas. This tendency is increasing in 2021, too.
However, another factor that caused price rise, according to property sellers, is that purchasers, who delayed their plans to buy a house because of restrictions, are looking for houses.

Moreover, an increase in mortgage lending also affects this issue. According to the Central Bank of Azerbaijan, the Mortgage and Credit Guarantee Fund allocated AZN 16.9 million in January, which is 2.8-fold more than the previous year. In 2020, the mortgage lending amounted to AZN 257.5 million, up 49% from 2019. At the same time, the Fund introduced new mortgage limits to banks in mid-January, the high activity in the market is expected to be observed in March-April.

One more usual factor of price hike in the property market is a rise in oil price. Although there is not a direct dependence, the expectation on business activity increase, as the oil prices go up, which allows growth in personal incomes.

In spite of the fact that the demand in the real estate market does not decline, the supply falls because of new rules on the construction and the pandemic. The area of a real property that is allowed to be built in one hectare reduced from 40-50,000 m² to 25-30,000 m². Therefore, the construction companies try to compensate for their loss by increasing the prices of finished buildings. In a words, construction costs increased by 10-15 percent.

Based on the abovementioned factors, the experts do not have a suspicion that the price will continue.“We expect activity in the real estate market with the application of large-scale programs on the return of Karabakh residents.”

“The price rise will further continue with the help of the seasonal factors laying ahead. Besides, our forecast can be long-term because of an activity we expect from the application of large-scale programs on the return of Karabakh residents,” an expert on real property Ramil Osmanli said.

At the same time, people’s intention to buy new and smart homes in the liberated territories may cause a certain change in demand and supply in Baku.

Nuru Guluyev - expert