Recession Cuts Armenian Property Prices

YEREVAN (RFE/RL)-Real estate prices in Armenia have plummeted by at least 30 percent this year because of a worsening economic situation and decreased cash inflows from abroad, private realtors said on Tuesday.

The Armenian government reported a far more modest drop, however. According to the State Real Property Cadastre, the average home prices in the country last month were only about 6 percent below the February 2008 level.

Ashot Muradian, a senior official there, told RFE/RL that they even rose by up to 14 percent in some areas outside Yerevan. He said the nationwide number of property transactions was down by 20 percent year on year in February.

Private real estate agencies in the capital painted a different picture in separate interviews with RFE/RL, estimating the price fall at between 30 and 40 percent. Vahan Danielian, director of the Kentron agency, suggested that it was even more drastic in downtown Yerevan, the by far the most expensive part of the country.

“A one-room apartment in the city center was valued at between $80,000 and $100,000 last fall. We’ve just sold it for $40,000,” said Danielian. In his words, a two-bedroom apartment in the city’s northern Nor Nork suburb was worth at least $70,000 a few months ago but would now sell for no more than $50,000.

According to Vartan Ayvazian of Cascade Realty, the prices of office and other commercial space in the capital have also gone down by up to 40 percent. “Quite a lot of commercial space is now vacant in the city center,” said Ayvazian.

Armenian property prices skyrocketed in the years preceding the economic crisis, fueling a construction boom that helped the Armenian economy expand at double-digit rates from 2002 through 2007. The local construction sector contracted by 1.5 percent in January-February 2009.

Torgom Hovannisian, deputy director of another real estate firm, AS, linked the price collapse with decreased cash inflows from Diaspora Armenia’s and Armenian nationals working abroad that have financed a large part of apartment purchases in the country. “Because there is a crisis abroad ; few people from the Diaspora buy homes in Armenia,” he said.

“Another factor is that [real estate] prices were inflated. They would fall sooner or later,” added Hovannisian.

Andranik Tevanian, an economist running the Politeconomia private think-tank, said the fact that Armenian banks have substantially cut back on mortgage lending since October has also played a role. “Commercial banks understand that until the mortgage market is stabilized they can’t make quick decisions and take risks,” he said. “So their lending policy will be quite cautious in the coming year.”

Vahe Avetisian, head of the Shen property valuation agency, said apartment sales are further curtailed by potential buyers expecting real estate to become even cheaper in the coming months. “When they start making transactions the prices will go up again,” he said.

Realtors disagreed just when that could happen. Cascade Realty’s Ayvazian said that the prices will likely stay unchanged at least until this fall, while Kentron’s Danielian predicted their further decline.


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