It’s kind of strange to see a dead real estate market in Yerevan, Armenia. Real estate agencies say that it has been more than six months that the number of their sale deals have gone down almost by fifty percent. Notary officers say the same. Those who are engaged in real estate business divide the real estate market of Yerevan into two parts: newly built buildings and old buildings. The situation in these two sectors differs much. It has been more than six months that the prices for apartments in old high story buildings are stabile. According to specialists, the reason is the fact that the prices during these last two years have increased artificially and were not influenced by the existing demand and supply. The second reason is the fact that during the recent period the demand for apartments in Yerevan has gone down. The demand for one-bedroom apartments has stayed the same, and the reason is the fact that citizens that have sold their big apartments now buy small ones. As for big apartments, people don’t have enough financial resources to buy them because of the current high prices. Specialists say that mortgage credits don’t play a key role in the market. The reason is the high interest rates, short money (short terms of coverage) offered by banks and low level of purchasing power. According to specialists, those borrowing mortgage credits for buying apartments have to at least pay $300-500 to cover the whole borrowed sum within five years. This offer doesn’t benefit most people.
Currently the middle-class that buys apartments consists of small and medium businessmen that buy territories to use for business purposes. The demand for small territories that can be used for business purposes in the city is very high. Specialists say that as soon as they post such announcements they receive numerous applications from potential buyers.
One of the reasons that the real estate market is dead is also the fact that the places in this market that were given to high story buildings are now given to newly built apartments and those who can actually pay for the real estate property they buy in newly built apartments. Most of those people that buy newly built apartments don’t borrow mortgage credits. In this case, it is not worth mentioning that the reason is the low level of citizens’ In spite of all these things there is a new factor in this market: most of those people that buy newly built apartments live and work abroad, even if they have Armenian citizenship. They are currently not interested in the mortgage credit market of Armenia. Real estate agencies say that the cases of buying apartments through mortgage credit services are very rare. Some specialists of this field have come up with a new term for this: “small elite tragedy”. They mean the fact that there aren’t any newly built buildings having small apartments. The average territory of apartments in these buildings is about 150-170 square meters. As for the prices for these newly built apartments, the prices are stable these last six months, besides that some specialists say that these prices have fallen down by almost ten percent. Generally, construction business is considered to be very profitable everywhere. According to specialists in order to build such a building, companies need about $1,5 million. In case of such investments companies get their investments back only after selling about 30% of the building capacity. The rest- 70%- is their income, which, according to specialists, is not taxed. This is the reason why construction companies don’t have to hurry to sell their apartments. When companies sell their newly built apartments they get almost 2,5-3 times more profit that the sum they have invested. During these last years parallel to the rapid growth of constructions an illogical tendency is coming up. The prices for cement and parquet have increased by almost two times during these two years. Logically it had to be the vice versa: in case of demand increase companies had to import more materials thus providing more supply and lowering the price for construction materials. Specialists have found a very interesting explanation for this. Construction works are done either by powerful individuals or by people being backed by powerful individuals. Besides that, those who produce and import construction materials are not less powerful than those who carry out the construction works. Accordingly, the people importing construction materials are trying to make the prices go up and get more profit. As for the other people, they are trying to resist this increase. According to specialists the RA NA speaker Arthur Baghdasaryan owns a part in the business of importing construction materials and the reason that he made criticizing political announcements recently is the fact that he was not able to resist the counter pressure by the other people. But this issue is political and doesn’t concern the economical point of real estate market. On the other hand we know that the real estate market, as the other fields of business in Armenia, don’t only have economical explanations.