Armenian velvet revolution and the “Velvet behavior” of Armenia’s real estate market

If we describe the reaction of the real estate market of Armenia to Armenian velvet revolution in April-May, we can graphically describe it in the same way as “velvet”.
In general, any political event with both economic and political patterns in any country directly affects the economy (in negative way), ups and downs in prices (sharp increase, deficit, devaluation of national currency, etc.), more often economic collapse can happen. In this case, the most sensitive sector is the real estate market. Its sensitivity to political situations is generally explainable. In the case of major purchases or transactions, uncertainty and concerns over the future make people more cautious, as a result, many of them postpone their transactions. It is the same in nearly every country and in almost all political upheavals and drastic changes. And in Armenia, as the revolution was unique itself, not violent and without any shocks, the reaction of economy and, in particular, the response of the real estate market were also unique and without any shocks. The Prime Minister also announced about that, referring to the statistical data, on 17th of August, in a rally dedicated to the 100th day of the new government. He and other members of government have repeatedly stated that the real estate market is stable and even more than 20% of total growth has been recorded in comparison with the same period last year.

Increase in the number of real estate transactions in 2018. In the first half of the year

So what do the statistics and the periodical analyzes of the RA State Committee of Real Estate Cadastre show?
According to the analysis published by the State Committee of Real Estate Cadastre, in the second quarter of 2018, when political events followed one another, 21.6% more transactions were made in Armenia compared with the previous year. Moreover, since 2010 a slightly higher figure than this one was registered only in 2011 (only 230 more transactions). And in the first half of 2018 this figure is record high since 2010, 76,010 transactions ( by the way, in the same period in 2011 it was 72,530 (see Table 1))։

Generally, alienation contracts have the largest part in the real estate transactions, and the increase of all categories is noticeable in comparison with the same period of last year (apartment, private house, public buildings, garage, land), only in the case of industrial buildings, a decrease of about 35% has been noticed. In other words, the business sector and investors have shown and still show some caution unlike individual citizens. Otherwise, the absolute indifference of the market to the political events would be considered as abnormal.
It’s almost the same picture in sales and purchase transactions. By the way, the highest percentage of increase of the number of sales and purchase transactions was recorded in Yerevan – 39%, and the lowest was in Vayots Dzor province – about 2% (see Table 2)

Average market prices have also increased by 1 square meter. Thus, the prices of multi-apartment buildings in Yerevan increased by 10% this year in July as compared to July of 2017, and by about 1% compared to June (according to the analysis by State Committee of Armenian Real Estate Cadastre published in the first half of 2018 in June). And in general, in the first half of 2018, as compared to the same period in 2017, the sales of apartments in multi-apartment buildings has increased by 29% in the scale of whole republic and by 27.5% in Yerevan.

Property prices in Yerevan and Armenia after the revolution

According to the analyses published by realtors and State Committee of Real Estate Cadastre of RA, the post-revolutionary real estate market did not show any sharp fluctuations in prices too. The expectations that the prices would fall, did not come true, and even some increases were noticed.
Thus, according to the same data of State Committee of Real Estate Cadastre of RA, in the first half of 2018, the average market prices for 1 square meter of apartments of multi-apartment buildings in Yerevan have increased of about 5% over the same period in 2017, and more than 5% over the first half of the year.
Experts explain the stability or the small increase in prices by several factors:

  • By fully enacted and adopted law on income tax return, which led to a high demand for apartments in primary market of newly built buildings and the activation of mortgage market,
  • By the revolution and following positive expectations on the background of reforms with our compatriots in diaspora,
  • As well as by revolutionary statements and predictions about potential immigration.

And if everything continues with positive dynamics, excluding further shocks, internal political turmoil and the assurances of the Government of Armenia on economic growth become reality, then, experts do not exclude that by the end of the year the prices will continue to increase and the second half of 2018 Armenia’s real estate market will finish with positive dynamics again.

The demand and the prices for rental apartments have been increased in Yerevan

Apartments from builder

Housing prices in 3 most expensive administrative districts of Yerevan