Real Estate, Up Again in 2006

I reported in my last post on the rapid growth in construction activity which stood at 584.6 billion Drams in 2006, or 35 percent higher than the 435.1 billion level in 2005. Stated in USD, activity grew from 0.95 to 1.41 billion, or an impressive 47 percent.

2006 was also a banner year for the related real estate market. Real estate prices, as reported on sales transactions by the Cadastre commission, increased throughout Yerevan over the past five years. In Kentron, the city center, apartment prices almost doubled from 187772 Drams per square meter in 2002 to 377600 in 2006. With the appreciating Dram, the increase is more impressive when stated in US dollars as the re-stated price almost tripled from USD 328 to 908 in 2006. The greatest appreciation rate was observed in Nubarashen where the price jumped from 28668 to 108000, or USD 50 to 260.

In 2006, prices appreciated by about 30 percent in the most districts of Yerevan. An exception is the Nubarashen district where prices increased by 55 percent. Stated in USD, prices appreciated by an average of 40 percent; 70 percent in Nubarashen.


Average price per sq. meter, in Drams
Yerevan Districts.. 2002.. 2003.. 2004.. 2005.. 2006
Kentron.......... 187772 222765 246500 288900 377600
Arabkir.......... 114670 161300 193900 235300 298200
Kanaker-Zeitoun... 68802. 98158 119200 143700 186100
Nor - Nork........ 57335. 78538 101700 135100 171100
Avan.............. 61635. 76396. 97000 122800 156200
Erebouni.......... 55902. 83920. 96500 118800 155800
Shengavit......... 61635. 83052 110600 143900 182700
Davidashen........ 63069. 97116 120900 147100 189400
Ajapniak.......... 57335. 84557 109500 138400 171800
Malatia-Sebastia.. 55902. 81779 108600 134500 166800
Nubarashen........ 28668. 36693. 43000. 69600 108000

Drams per USD.... 573.35 578.76 533.45 457.70 416.05


Prices increased in all the regions as well. Transactions in the city of Abovian, in the Kotayk region, fetched the highest price of 98100 (USD 236) per sqm, and the city of Shamlugh, in the region of Lori, fetched the lowest of 2800 Drams (USD 7).

What explains this price appreciation? Demographics may explain some of the increase in demand for housing. With children reaching adulthood, combined with the growing prosperity in recent years, they may seek their own housing arrangements. Also, the trend in the net outflow of the population has reversed itself, and now the number of arrivals in the country exceeds that of departures, but only by about 20,000. Some in the country may acquire second residences, again reflecting the growing prosperity. Also I am sure that there are a number of speculators as well.

So, who is buying all these properties? Equally important, who is selling them? Do we know of any ongoing research on the housing market? Also the price appreciation must have dramatically increased the equity in the homes of most households. Are we seeing any traces of this wealth effect in the economy?