Real estate: most profitable investment tool
By Sara Israfilbayova
Despite recent fluctuations in the monetary market and economic problems by force of considerable slump in global oil prices, the real estate market remains the most profitable investment tool in oil-rich Azerbaijan. The activity is particularly observed in capital Baku, which has seen tremendous boom in its construction sector over the past decade.
Prices for real estate demonstrate stable rise, despite unpredictable developments in the overall economy.
A stable growth in housing prices, particularly in Baku, is explained with high demand for residential real estate. Given the rapid and scaly development of Baku, making it attractive for labor and life, the demand for housing here remains high for many years to come, thus affecting the price situation.
Price per square meter in Baku increased by approximately 350 percent in dollar terms during the period of 2000-2017. In manat terms, the price increased 7 times, according to the Center for Strategic Studies under the “AS Group Investment.”
The average cost per square meter in Moscow for the same period increased by approximately 300 percent, in London – by 200 percent, in Paris – by 180 percent. These cities have a high investment attractiveness, as a result of which the highest increase in prices was registered.
Besides, the area of housing per capita was 17.8 square meters in the country in 2016, according to the State Statistics Committee. This indicator has not changed since 2011.
The Center predicts that real estate in the coming years will remain the most profitable investment tool.
While selecting a real estate, a number of rules must be observed. If an apartment is purchased specifically for investment purposes, it is more appropriate to purchase it in residential buildings under construction. In particular, the price difference between an apartment under construction and an apartment that has already been built is sometimes up to 100 percent, according to the Center.
The rise in prices during the construction process is a general trend, which is observed both in the real estate market of Azerbaijan and other countries. There are residential complexes where during the construction, the price of 1 square meter was 800 ($470) manats, but now price reaches 5,000 ($2,937) manats.
Today, the share of the construction sector in Azerbaijan’s GDP amounts to about 10 percent.
The government plans to achieve a GDP growth by 249 million manats ($ 141.2 million) until 2020, through the implementation of measures envisaged in the Strategic Road Map for the development of housing provision at a reasonable price.
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