Advices for investors in Armenian real estate market

Investments are one of the best ways to build financial capital and cash flows. And investing in real estate is the most reliable one. Unlike stock market, the real estate sector is more predictable: generally, the prices of buildings rise as a result of inflation. And only during crises there can be some reductions in prices, which are usually compensated. But at the same time, the purchase and privatization of real estate are much more complicated processes, than investing in securities and bonds.

Over the past fifty years, investments in real estate have grown dynamically in the world. The activity in this sector is visible in Armenia too. Thus, forty thousand transactions were registered in the third quarter of 2018 in the republic. Compared to the same period of last year, there is 9.4% increase in transactions, and 0.2 % -compared to the second quarter of 2018. The largest portion of the growth belongs to the primary market of real estate or newly built buildings, and it is noticeable mostly in the capital Yerevan. This means that activity in investments is apparent, especially among local investors.Foreign investments have also been increased in the sphere of construction.

When making investments you should take into account several factors and act wisely. Each type of real estate has its own peculiarities, so the investments require different approaches. Let’s show 4 of them.

Investments in residential real estate

Mainly local small projects are being implemented in this sector. For example, experienced investors, who are aware of the hidden liquidity of apartments, buy the apartment in high-demand at affordable prices, to sell or lease it in the future. They give the apartment a better appearance, improve the liquidity and then sale or lease it at about 20% higher price for a long-term (annual average yield of 7-9% in the center of Yerevan) or daily basis (annual average yield of 14-17%).

Let’s mention that the smaller and well-used the apartments for rent are, the higher their profitability can be. These are old 1-room apartments of stalin era or panel buildings, which are turned into 2 rooms and are given for rent at a price of a 2_bedroom_apartment.

The choice of a realtor is very important when making an investment, who will present every detail, starting from the evaluation of the apartments to their sale or rental values.

Investments in real estate development

Investing in real estate development is one of the most profitable businesses. This is due to the fact, that the government indirectly supports the construction companies in the Armenian market within the framework of the law of “Income Tax Return”. Real estate developer buys a land area, builds a residential building and sells its apartments. Within the same law, government provides buyers, encouraging them to buy an apartment from the same developer, under the conditions of returning income tax and repayment of mortgage loan interest rates.

This is very attractive both for the real estate developer and for the buyer, thanks to which there is a high demand in the market. Besides construction companies and buyers, banks are also interested in representing good terms of mortgage loans. As a result, competition occurs and interest rates fall.

Investments in commercial real estate

When talking about the development of real estate construction, it is mostly aimed at creating and increasing the demand of commercial real estate.

But if we consider the example of not a single building, but an entire neighborhood, there is also a need to build commercial real estate for the residents of that neighborhood. Naturally, the demand for shops and other institutions, and hence, the demand for commercial areas will be increased in each new district and near the newly built building.

Today, everyone is well aware that Northern Avenue, Cascade and Abovyan streets have the highest profitability in Yerevan. However, this does not mean, that there is no need for investments in the construction, expansion and development of commercial areas in other districts. This problem is interconnected with real estate management pointed below. Let’s see how.

Real Estate Management

Real estate management is an interesting process, because there are other types of real estate besides well-known districts (not only residential neighborhoods, but also production areas, land plots which have a management problem). For example, there are huge facilities in large production areas, which are in a neglected state for years․ If a little investment and creative thinking are shown, they can become unique institutions.

There are also a large number of free land plots on interstate highways. In this case, we need to make an analysis and except for standard gas-filling or petrol stations build shops, food courts, bistros, supermarkets, taverns or other similar institutions. Now, they are needed and along with the development of tourism, the market moves in that direction. Both foreigners and locals have quite enough money to think about other, more interesting options of real estate acquisition and management, besides the option of leasing any area.

In this case, the help of the realtor is needed, who will not only provide with consultation, but also will guide step by step explaining what to turn the purchased real estate into, which at the same time will be a new, interesting and profitable business.