In 2009 the consequences of the crisis were evident in Armenia and the topic of real estate prices became one of the most discussed issues.
The reason is the fact that the real estate market is the main and the most sensitive indicator of the financial crisis. As it happened in other countries, in Armenia the crisis resulted in reduction of real estate prices as well. In 2009 both participants of the real estate market and state officials said that the real estate market had difficulties. For example, in 2009 the state cadastre department wrote in its final report that due to the crisis the number of active deals in the market was reduced by 3.1% compared to the previous year.
Besides the number of deals the prices reduced as well. For example, the price for one square meter in Yerevan slumped from 296.300 drams (2008) to 265.800. The prices of real estate came down by 10% in Yerevan. However, the participants of the real estate market say that the prices went down by 20-25%. Officials and private companies did not speak of this rapid slump in order not to create panic in the market.
Officials say the crisis has gone and now they have to cope with the consequences. In 2010 we had good macroeconomic development and instead of the planned 1.2% we had 2.6% economic growth in the end of 2010.
Even though the sector of construction was still going down (in 2010 there was a 3,3% slump compared to the crisis year), the real estate market seemed to be recovering. In 2010 the number of deals connected with real estate grew by 12.6%, including 4.9% in Yerevan and 16.7% in the regions.
The prices of real estate started to grow too. The prices of apartments in buildings of Yerevan (besides the Center and Ajapnyak communities) grew by 2.5%. The average price per square meter in Yerevan reached 272,400 AMD. In the Center the prices went down a little bit, and in Ajapnyak community the prices stayed the same. Of course the 2,5% growth is nothing compared to the 10% slump in 2009, but the important thing is the tendency. The real estate market stopped being a topic of intensive discussions.
During the first quarter of this year the number of sold apartments in Armenia was 3778, including 2491 in Yerevan. During the previous year the number of sold apartments was 3358, including 2223 in Yerevan). The number of transactions with private houses has increased as well.
However, the other important indicator of the situation in the real estate market, i.e. prices are going to the vice direction and the situation with prices is different. As it is shown in the chart, the prices of real estate in March of this year were even lower than the prices in 2010 and even the crisis year, when it seemed that the prices were maximum down. In all communities of Yerevan besides Nubarashen community the price per square meter was lower than in 2009 and the average price per square meter was 257,700 AMD. The dynamics of the prices is negative as well because the prices in March fell down not only compared to the previous year but compared to the previous month as well.
Usually there are factors that should not have allowed the prices fall down. First, according to the official statistics the economy has grown compared to 2009. The incomes of the society have grown as well (both salaries and money transfers). In addition, the slump in the sector of construction that was observed during the past two years means that the number of new constructions has been cut down, which in its turn means that the demand has been cut down as well. In addition, during the past two years the government has been supporting real estate transactions by providing special programs for young families and reducing the interest rates for mortgage credits. However, as we can see, the vice versa is happening. From the first look this can be explained by the fact that the construction sector worked very effectively during the past years and still there are free apartments in newly built buildings that need to be sold. Thus, it is not excluded that the prices for real estate may continue falling down in Yerevan. As for the question why the prices were going down during the construction boom, it cannot be explained with logical economic calculations.