There is a demand for apartments and will continue to be in Yerevan in the next 3-5 years at least in Yerevan

If we summarize the 2019 real estate market with a brief statistics it will become obvious that within a year the inflation in the real estate market in the republic still continues. For instance, let us consider December, one of the most active months of the previous year. According to the analysis published by the RA Statistical Committee, the highest inflation occurred in the capital: housing prices, as they were in the previous years, have mostly increased in the center of Yerevan. So, if the market average of 1 square meter in the December of 2018 it was 569,000 drams, in 2019 it was 655,000 drams, thus in the December of 2019 the housing prices increased to 772,000 drams in the 1st zone of the Center (it increased by about 94,000 drams). By the way, in the Center, according to the zoning, prices are different, but on average the increase is obvious.

Arabkir community is the second zone where the increase of prices is evident. Here in a year the prices of apartments have increased by 65,000 drams (453,000 drams in December 2019 against 388,000 in December 2019). Qanaqer-Zeytun is in the third place with the inflation rate (increase of 1 square meter in a year – 46,000 AMD). The cost of 1 square meter in Nor Nork in December 2018 was 250,000 AMD, and in December 2019 – 292,300 AMD.
The indicator in Avan is from 260 ․ 500 to 295-100 AMD. The increase rate of the remaining communities you can see in the Table below, where Nubarashen community stands out as it has always been considered the cheapest housing community, while the price per square meter increased by 15,000 drams in 1 year (in December 2018 the value of 1 square meter was 173,200 drams, in December 2019 – 188,000 drams).

Factors that have the most impact on the market

What are the causes of the constant rise in the real estate market? According to experts, of course, economic activity is an important factor, but the acquisition of apartments is largely due to the mortgage market in the primary market, ie, income tax refunds when buying apartments in newly constructed buildings. Is housing demand so high that there is a significant increase in prices? By the way, the cost of rented apartments has increased quite a bit. In a recent interview with Aravot daily, Eduard Aprian, Business Development Director at “Red Group”, notes: “Housing price increase is not artificial. Both market values of housing and rent have increased proportionally.” He notes that the increase in rental prices is due to the tourist flow, which “is quite good in fact”. And to the question why prices went up the most in the Center, according to the expert, there is a general tendency that are sold either the best and most expensive apartments because of their singularity or the cheapest ones. For example, only 10 apartments for $ 400,000 can be sold, which is the highest price for the Center.

The Diaspora and the Real Estate Market

To what extent does the activity of our compatriots affect the real estate market? Are they, at least in the center of Yerevan, the potential buyers of apartments? Aprian’s answer is: “Armenians from Diaspora are surely considered the potential buyers, but my experience over the years shows that the increase in the prices often is not connected with foreign investments; in reality, our internal market shapes the price. The impact of foreigners is small”.

Market tendencies

The representative of “Red Group” notes an interesting tendency in the market. There are almost no apartments in the center of Yerevan that can be sold on a tax refund basis. Most apartments in the center exceed the threshold of 55 million drams set by the law. In addition, the construction in the Center is rather limited. There are almost no free plots for construction. “Nowadays apartments of new buildengs are of high demand: they are sold even when they are still in the process of documentation. This way the buyer benefits, who understands that regardless of the loan type, as it is commonly said, he gets an apartment for which he pays in portions. This is quite beneficial” says Aprian.

Income tax law remains an important factor

After the Center and Arabkir, other communities in Yerevan also become more active. Currently, major construction works are underway in Avan, Nor Nork, Malatia-Sebastia, Davitashen, which are already being documented. As for the amendments to the Income Tax Law, there were even opinions that the tax refund should be removed or change the house price compensation threshold. According to Aprian, this change will have a negative impact on the market as more than 80% of buyers acquire property through income tax returns. There are now a large number of people who want to improve their living conditions by moving from old panel buildings to new ones, which is a positive tendency. By the way, new buildings do not thoroughly cover the whole market demand. “Even if the income tax return works for a long time, we will still have demand, the market will not run out,” the expert assured. According to him, in the next 5 years, all the new appartments will have a great demand. The conclusion is that the law must continue to exist and what is more it must even undergone amendments. The country will only benefit from the income tax refund.