Demand for private homes increased after earthquake in Turkey

Housing prices in Azerbaijan have increased by 8 per cent over the past year. The Central Bank of Azerbaijan's Monetary Policy Review for January-December 2022 provides information on house prices. The review notes that the price index in the housing market in the IV quarter of 2022 rose by 8 percent compared to the corresponding period of the previous year. The price index rose by 7.2 per cent on the primary housing market and 8 per cent on the secondary housing market. But this increase lags behind the official inflation rate (14 percent).

According to the State Statistics Committee, the total area of residential houses commissioned in Azerbaijan in 2022 was 2,593.000 square meters. This is also 24.8 percent more than in 2021.

Last year, capital investment in the construction of houses amounted to AZN 925.4 million. This is down by 5.8 percent from 2021.

A broker by the name of Nizami, who deals with purchase and sale of houses in Baku, told Radio Azadliq that the prices of courtyard houses have increased "on average by AZN 10-15.000. Houses priced at 43.000 are sold for 55.000".

According to him, after the earthquake in Turkey demand for private houses increased: "Prices have risen mainly due to increased demand.

As for housing prices in new buildings, the real estate broker said that although there was an increase at the beginning of the year, prices are now stable.

Real estate expert Nusrat Ibragimov told Turan that no one knows for sure whether Azerbaijan's housing prices will go up or down due to the earthquake in Turkey, as little time has passed.   "In general, demand in the market has fallen partially, activity has decreased and people have retreated to a reserve position. It will probably take two to three months before this condition overcomes a certain psychological barrier."

The expert noted that flat prices started rising rapidly from the second half of 2021.  "In 2022, this has continued. In January this year, there was also an increase in prices. In 2022, the primary housing market saw a price increase of about 12 per cent, while the secondary housing market saw a smaller increase. And in January of this year, the growth in the secondary housing market was about 5 per cent. And the primary housing market is relatively calm".

There is no available land in the city centre that citizens could buy and build a house on, Ibragimov said. "Young families really need a house today. Young people choose housing near their place of work. Jobs are mostly in the city. Even in the city, backyard houses are too expensive, and there is no available space to build an individual house. This means that citizens have to leave the city, but they are not inclined to sacrifice work. Therefore, there is not and probably will not be an increase in demand for backyard houses".

Economist Natig Jafarli told Radio Azadlig that prices in the real estate market in Azerbaijan could not rise in line with the official inflation rate: "The purchasing power of people is not enough for that. In the first half of last year there was activity at the market, as the number of mortgages was higher, but in the second half of the year there was a slight decline in mortgage lending. This is due to the fact that as the central bank consistently raised the discount rate, mortgage interest rates rose as well. As a result, we have seen a decline in sales of flats with mortgages."

According to him, this has also affected the price of housing on the market, "Because the vast majority of people are not able to buy a home with cash. That's why prices haven't risen sharply, because demand has gone down."

Jafarli said that after the earthquake in Turkey demand for land and courtyard houses in Azerbaijan rose to a certain extent: "But I don't think it will be a permanent demand. After some time the demand will come back to normal. Yard houses in Azerbaijan have their own problems - many land plots do not have an extract from the real estate register, and there is a problem with registration of houses built there".

In his opinion, to regulate the housing market in Azerbaijan it is necessary to bring down the price of mortgage loans.

As the reasons for the relative rise in price of construction materials since the beginning of last year, the influx of guest workers to Azerbaijan due to the Russian-Ukrainian war and the attraction of the value added tax from 2020, experts point to the profit of builders.

On 6 February, two earthquakes of magnitude 7 struck Turkey. It destroyed a large number of buildings and killed more than 40,000 people.