By Shakeh AvoyanReal estate prices in Armenia have fallen slightly in 2008 after skyrocketing for seven consecutive years and fuelling a construction boom that has been a key driving force behind the country’s robust economic growth.
According to the State Real Property Cadastre, housing prices in the center of Yerevan, the most expensive residential area, have dropped by an average of 3 percent since the beginning of the year, compared with a price decrease of up to 1.5 percent registered in the rest of the country.
The government agency has also reported a 11 percent year-on-year decrease in the number of property deals registered from August through September. The figure was down by 16 percent from July-June 2008. The official data show that the downward has not yet affected the market value of expensive houses and plots of land as well as commercial space in the capital.
“The last time real estate prices went down was in 2000,” said Vartan Gevorgian, an independent realtor. “They have only grown since then.”
According to Erik Mesropian, who runs a private property research center in Yerevan, the nationwide growth has averaged between 25 percent and 30 percent annually since then. The price rise has been even steeper in central Yerevan where dozens of mostly expensive apartment buildings have sprung up in recent years. Some of them sell for as much as $2,000 per square meter.
“The highest return on investments one could get during this time was probably in the real estate market,” Mesropian told RFE/RL.
The year 2001 also marked the start of Armenia’s rapid economic growth that looks set to stay in double digits this year. The booming construction sector has been one of the main engines of this growth. The sector replaced industry as the single largest contributor to Gross Domestic Product in the third quarter of 2008.
Still, official statistics show that growth in construction slowed from almost 20 percent in 2007 to 12 percent in January-September 2008. The slowdown coincided with the housing market stagnation which appears to have deepened since July.
Realtors are divided over possible causes of the price drop. Some of them blame it on the dramatic aftermath of Armenia’s February 19 presidential election which they say scared away well-to-do Armenians living abroad and Russia in particular. The latter are believed to make up a considerable part of the buyers of luxury apartments built in Yerevan.
But other experts blame external factors for the falling prices. They say the credit crunch in the United States and Europe has made Armenian banks more circumspect in disbursing mortgage loans that were virtually non-existent a decade ago but now finance a large part of apartment purchases in the country. “The credit crisis is affecting us as well,” said Gevorgian.
Gevorg Avagian, director of the Agat property valuation agency in Yerevan, agreed. “The banks have cut back on mortgage lending and the number of buyers has dropped,” he told RFE/RL.