ARMENIA’S PROPERTY MARKET SLUMP PERSISTS
Dec 4 2013
Written by: Global Property Guide
Armenia’s residential real estate boom ended with the beginning
of the global financial crisis and recent data show that there has
been no real recovery since that time. Prior to the crisis in 2008,
Armenians watched as property prices soared 250% and construction
increased fourfold, but the bust has left little in its wake. The
government has started a mortgage fund to assist purchasers and
has offered guarantees to construction firms investing in building,
property transactions have improved little and construction is down
0.5% from the previous year, according to the National Statistical
Service. For more on this continue reading the following article from
Global Property Guide.
Armenia’s property market has not recovered from the 2008 housing
slump, despite robust economic growth. In 2012:
The average price of apartments was unchanged at AMD257,300 (US$633)
per square metre (sq. m.) in 2012, from AMD257,400 (US$633) the
The average price of private houses increased by 0.3% to AMD275,000
(US$676) per sq. m. in 2012, from AMD274,000 (US$674) in 2011.
Source: Yervand Zagaryan, chairman of the State Committee of the Real
In Yerevan, the capital, the average price of apartments and private
houses just slightly dropped during 2012, according to Zagaryan.
“As to the regions, prices are growing there-in apartment buildings
by 3.5% from 2011 to 82, 100 drams (in 2012), and in private houses-by
0.7% to 86, 700 drams (over the same period),” Zagaryan added.
The capital’s Kentron (downtown) administrative district has the most
expensive housing in Armenia, with an average price of AMD424,100
(US$1,017) per sq. m. in February 2013.
>From boom to bust
Armenia experienced a great housing boom from 2004 to 2008. House
prices soared by about 250% over the four year period, based on the
International Monetary Fund (IMF) report Armenia’s Housing Boom-Bust
Cycle. The house price to income ratio in Yerevan peaked in 2007, at
about 16.5. The house price to rent ratio peaked in 2008, at about 28.
Real estate construction increased four-fold during this period. The
construction sector grew exponentially, its share of GDP increasing
from 10% in 2000, to 25% in 2008.
In the wake of the global financial crisis, construction collapsed
to a third of 2008 peak levels. Property transactions plummeted by
almost 30%, House prices fell 15%. The housing market has not yet
fully recovered since then.
To buoy the housing market, the government created a mortgage fund
and granted government guarantees to construction companies.
RELATIVE PRICES IN YEREVAN AND REGIONS COMPARED TO ARMENIA AVERAGE
(Based on contract price of transactions)
Property TypeYearYerevan centerYerevan averageRegions averageArmenia
average Apartments20042.51.40.21.0 20082.01.40.31.0 20184.108.40.206.0
Houses20044.62.70.51.0 20083.52.30.61.0 20220.127.116.11.0 Source:
State Committee of the Real Estate Cadastre, IMF
There are signs of recovery. In August 2013, there were about 16,100
real estate transactions in Armenia, up by 1.5% from a year earlier,
according to the Real Estate Cadastre. Yerevan accounted for about
40.9% of all transactions, followed by Kotayk province (13.2%), Ararat
(8.3%), Aragatsotn (6.9%) and Armavir (6.6%).
Syrian Armenians are boosting housing demand, according to local
real estate experts. “Many came and rented apartments for a month,
and they now extend their rents for another month after hearing news
of the worsening situation in Syria. People are scared,” said Garik
Danielian, a private real estate agency owner in Yerevan.
“There are people who buy homes, there is some movement in the
market, even a slight increase in prices for newly built homes,”
Apartments located in the center of Yerevan and in the prime resort
of Lake Sevan have seen the greatest demand. Gyumri and Vanadzor are
also experiencing increasing demand.
Construction activity remains down
The sluggish construction sector in the country is one of reasons why
the property market remains down, according to Hakob Baghdasaryan,
head of Akcern real estate agency. There were about 434,892 apartment
units in Armenia in 2011, down by 0.5% from the previous year,
according to the National Statistical Service.
Small mortgage market
The size of the mortgage market in Armenia remains very small, despite
recent growth. From just 0.5% of GDP in 2005, the mortgage market grew
to about 3.2% of GDP in 2012, according to the Central Bank of Armenia
In August 2013, total mortgage loans rose 11% year-on-year to AMD136.78
billion (US$336.4 million), according to the CBA.
The construction boom during 2004 to 2008 was largely undertaken by
households, not developers. Property developers accounted for only
22% of total construction, financing themselves by presales with
Foreign individuals can lease
Foreigners may only lease land for up to 99 years. However, foreign
individuals are allowed to purchase a house in Armenia, and a company
registered by a foreigner in Armenia as an Armenian business entity
has the right to buy land.
Robust economic growth
>From 2001 to 2007, Armenia experienced spectacular economic growth,
with an average real GDP growth rate of 12.8%. However, economic
growth slowed sharply to 6.9% in 2008, mainly due to the adverse
impact of the global financial and economic meltdown. Then in 2009,
the economy contracted by 14.15%. The economy bounced back in 2010,
with a real GDP growth rate of 2.2%. In 2012, the economy expanded
by 7.2% after growing by 4.7% in the previous year.
In the first half of 2013, the economy grew by 3.5%, according to
the Eurasian Development Bank (EDB). Armenia’s economy is projected
to expand by 4.6% in 2013 and by another 4.8% in 2014, according to
The 2013 government budget deficit amounted to AMD119.7 billion
(US$294.4 million). This is equivalent to about 2.3% of GDP.
In September 2013, Armenia’s overall inflation rate eased slightly
to 8.2% from 9.3% in the previous month, compared to just 2.5% in 2012.
The high inflation is now wiping out incomes and people’s bank
savings. The average gross salary in the country rose by 5.1% y-o-y
to AMD149,725 (US$368) per month in August 2013. However, real wages
actually declined by 4.2% over the same period.
In an effort to curb inflationary pressures, the CBA recently raised
the refinancing rate by 50 basis points to 8.5%.
Unemployment is another problem. The country’s unemployment rate
stood at 16.9% in the first quarter of 2013, down by 3.2% from a
year earlier, according to the National Statistical Service. The
jobless rate in cities eased to 23.3% in Q1 2013 from 28.8% in the
same period last year. Over the same period, the jobless rate in
villages increased from 6.9% to 8%.
Corrupt and in conflict
Corruption remains a major concern in Armenia. During the 2013
presidential elections, incumbent president Serzh Sargsyan has won
reelection with 59% of the vote. However, Raffi Hovannisian, who came
second with 37% of the vote, alleged electoral fraud.
Mass protests took place. Hovannisian, together with his supporters,
started a hunger strike in Freedom Square. However on 14 March 2013,
the Constitutional Court of Armenia confirmed the victory of President
Armenia is also in conflict with its neighbours. Two important
neighbours, Azerbaijan and Turkey, have closed their borders to Armenia
for political reasons. Azerbaijan and Armenia have not yet reached a
peaceful resolution of claims on Nagorno-Karabakh, an area assigned
to Soviet Azerbaijan in the 1920s by Moscow. A ceasefire in place
since 1994, has failed to deliver any lasting solution. In fact, the
territorial dispute is escalating further amidst a weapons build-up
between the two nations.
This article was republished with permission from Global Property