Armenia’s property market is recovering gradually
Last Updated: June 30, 2014
Demand is starting to pick up, driven by the inflow of wealthy Armenians from Russia and ethnic Armenians from Syria. In addition, the stimulus package introduced by the government in 2009, which involved the creation of a mortgage fund and granting government guarantees to construction companies, has helped to revive the construction sector.
In 2013, Armenian property prices dropped by 4% from a year earlier, according to Hrachya Hakobyan of Oliver Group real estate appraisal company; already an improvement from bigger declines seen in previous years, mainly due to the global crisis.
Yerevan’s central area has the most expensive housing in the country, with residential property prices starting from US$50,000 for a house in early-2014. In other areas near the capital’s center, such as Komitas Avenue, Baghramyan str, Zeytoun, Daytashen, and Ajapnyak, house prices start from US$35,000. In other areas including 1-5 Nork Massive, Shengavit, and Malatia-Sebastia, house prices start from US$25,000.
Armenia’s spectacular housing boom
From 2004 to 2008, Armenia saw a spectacular house price boom, with residential property prices surging by 250% over the said four-year period, according to a report published by to the International Monetary Fund (IMF).
Moreover, Armenia also experienced surging real estate construction activity, as a result of increasing demand. Real estate construction output increased four-fold from 2004 to 2008. Over the same period, the total share of the construction sector in Armenia’s GDP rose from 10% in 2000 to 25% in 2008.
The massive construction boom during the period was partly due to the influx and massive investments of wealthy Armenians from Russia.
However, in the wake of the global financial and economic crisis, the boom turned immediately into a bust. Property prices were down by 15% in 2009 from pre-crisis levels. In addition, real estate construction activity was down to almost one-third from its peak levels seen in 2008. Demand was also down, with the total volume of property transactions falling by more than 30%.
After hitting a floor in the middle of 2009, property prices saw a mild recovery in the first half of 2010. However, the housing market has been weak since then, despite stimulus packages introduced by the government.
Foreign individuals can lease
Foreigners may only lease land for up to 99 years. Foreign individuals are allowed to lease land. A company registered by a foreigner in Armenia as an Armenian business entity has the right to buy land.
Corrupt and in conflictArmenia (pop. 3.3 million; GDP/cap US$3,208) is in Southwest Asia, east of Turkey. It is a lower middle income country.
It has some positive features. It ranked as the 27th most economically free among 157 nations in the 2006 Index of Economic Freedom. 98.6 percent of its population is literate. The top corporate tax rate is only 20 percent.
On the other hand, Armenia is one of the corrupt nations in the world.
It is also in a state of conflict with its neighbors. Two important neighbors, Azerbaijan and Turkey, closed their borders with Armenia for political reasons. Azerbaijan and Armenia have not yet reached a peaceful resolution of claims on Nagorno-Karabakh, an area officially part of Azerbaijan, but assigned to Soviet Azerbaijan in the 1920s by Moscow.
Armenia’s economy slowed sharply in 2013 with a real GDP growth rate of 3.19%, down from 7.1% in 2012 and 4.7% in 2011, but up from 2.2% in 2010, according to the International Monetary Fund (IMF).