Real estate market still attractive to investors

By: Nigar Orujova

The inconsistency of the real estate market has not made it unattractive for investments. Prices for real estate will continue to fall in Azerbaijan in the medium term, yet the sector will not lose its attractiveness to investors, experts have claimed.

Real estate has always been considered a reliable investment instrument to preserve and increase capital not only for Azerbaijanis but also around the world. In Baku, real estate prices began to fall at the end of last year, dropping by 18.55 percent over last year and by 22 percent since the beginning of this year. Experts believe that the decline in prices will continue at least until the end of this year or the middle of next year.

“Real estate is considered one of the most attractive investments in the world. However, recently, the number of offers in the country’s real estate market has declined, which has consequently led to lower prices and a decrease in activity,” chief specialist of the evaluating company Koneko Vugar Oruj told Trend.

He said despite the expectation of further drops in real estate prices, investments in this sector would remain profitable.

“Any investment, regardless of the area, is a risk. However, I think that, given the current risks in the market, it is irregular to avoid investments in real estate,” he noted.

General director of consulting company MBA Group Nusret Ibrahimov also believes that investment in real estate has not lost its profitability but that the length of time needed to turn a profit has increased.

“Many people are investing; they want to make money as quickly as possible. Earlier, it was possible to purchase a property and sell it within one or two months to make a high profit, but the current situation does not provide such opportunities. So now is not the best time for short-term investment, but it is a favorable time for long-term investments,” he explained.

At the same time, as Vugar Oruj pointed out, people wishing to invest in real estate should consider all regions of the country.

“Of course, Baku remains a favorable city for investments, but at the same time, given the state program on the development of tourism, it is possible to consider investing in real estate in other regions of Azerbaijan. Here, the Ismayilli, Gabala, and Shaki regions and the adjacent areas should be noted,” he stated.

This period of stagnation in the real estate market could be a favorable time for investment not only for private investors but also for construction companies.

For his part, Ibrahimov thinks construction companies with high financial stability should strengthen their activities in the market.

History has shown that during a crisis, investors have to invest more actively, so that when the economy stabilizes, they already have a finished product for sale, he said.

“During meetings with the representatives of construction companies, I have repeatedly pointed out the need to build now, so that after two to four years, when the situation has stabilized and potential buyers return to the market for the consumption of goods, the investors will have something to offer. If the construction company stops its activities now and does not create a proposal for future demand, then its situation tomorrow will be even worse than it is today,” he stressed.

Oruj predicted real estate prices in Baku would fall by 10-15 percent in 2015-2016.

“We expected that the price of real estate in Baku would fall by 10-15 percent, and that prediction came true. Somewhere, the decline is about 20 percent. I believe that this forecast is accurate for next year as well,” claimed Oruj.

The expert pointed out that the additional funds for mortgage lending, which can be allocated next year, were able to revive the housing market and slow its decline.

“If the mortgage lending conditions were to be relaxed and the lending amount increased, the real estate market would revive to a certain extent. However, this will be possible only in the event that changes in mortgage lending are made in 2016,” said Oruj.

Ibrahimov also stressed that it was difficult to overestimate the impact of the Azerbaijan Mortgage Fund (AMF) on the real estate market.

“Since the beginning of the AMF’s activity, its share in the property market has reached 7 percent. Maybe next year, (due to changes in mortgage terms) the share of the fund will increase dramatically in the market. This situation existed back in 2008-2009, when the sale of apartments actually stopped, but in June 2009, the AMF resumed activity, and in the second half of 2010, the real estate market perked up,” the expert remarked.

At the same time, Ibrahimov noted, the growth of AMF financing contributes to reviving not only the real estate market but also the construction sector as a whole.

The AMF, under the Central Bank of Azerbaijan, granted loans amounting to 77.2 million manat in January-September 2015.

Earlier, it was reported that the country also plans to improve its real estate management to ensure efficiency and transparency in the property system.


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