The FINANCIAL — TBILISI. Construction of dwelling places is one of the most rapidly developing sectors in the economy of Georgia Deloitte & Touche Kiev Office reported last week. According to Black Sea Press research was ordered by Tbilisi Mayor’s Office.
Growing demand of new dwelling places led to increase of the number of both construction and development companies. Local development companies are leading in the field of construction of the dwelling places. Foreign companies are more interested in construction of office centres and hotels, report says.
Construction boom is evident in Tbilisi. Dwelling area per capita made 12,2 square meters in Tbilisi in 2002, while in 2007 it already made 17 square meters. However, it is mentioned in the report that the index in Tbilisi is rather low compared with those in the capitals of the countries of Central Europe and the European Union, where the area per capita makes 24 square meters and 36 square meters, respectively.
30 large housing estates are under construction in Tbilisi. The construction works are implemented by 9 Companies. The construction is expected to be completed within 2008-2012, and the index of square meters per capita will be improved.
The construction boom in Tbilisi led to reduction of accessible places in the attractive districts of the capital. Construction in the suburbs has started consequently. The development companies abstain themselves from complicated talks with the owners of small land lots in Tbilisi, and expansion in the areas with poor competitive situation is conditioned with it.
Money transfers from the citizens of Georgia from abroad increased last time that was a reason of increased demand of dwelling places. Only $180 million were transferred to Georgia in 2003-2005, while the amount reached $545 million in 2006 and $600 million – during 9 months of 2007.
Attractive terms of banking mortgage credits and preferential interest rates is another factor of the increased demand on dwelling places in Tbilisi that in its turn is the consequence of competition in the banking sector.
It is also reported in the review that the amount of average wages in Georgia is much lower than in Europe, and it makes about $130. However, the trend for establishment of middle class in Georgia is evident. There is already a part of employees whose average monthly wages makes $1-1,2 thousand. Those people can afford the mortgage credit, because they are able to pay monthly $500-600 for payments under the credit.
Besides, use of real estate as an investment product is another significant factor that leads to growing demand of dwelling places. Wealthy individuals in Georgia have poor chances of investing in the profitable investment products, while the increased prices of real estate promote investments of surplus money in the above assets.
A large part of the people purchase flats in Tbilisi not for solution of their dwelling problems, but with the aim of investing in the real estate.
As experts say, prices of dwelling places increased in Tbilisi by at least 4 times. The increased demand of flats leads to increase of the price. No reduction of the prices is expected in the nearest future.
Prices of flats make in Tbilisi within $420-2,000 per 1 square meters. Compare: price of flats made $400 per 1 square meter in the centre of Tbilisi in 2003, while that of 2007 made $1,400. As for the prices in the districts nearby to the centre, they made $200 per 1 square meter in 2003, and $800 – in 2007.
According to statistics, price of the real estate increased by 49,6% within 1 September 2005 – 1 September 2006. According to the analysts, it is conditioned with several factors – legalization of the construction industry and the increased prices of building materials.
Cost price of the flats constructed in Tbilisi by leading construction companies makes on average within $300-$1,000 per 1 square meter. Cost price per 1 square meter made $130-250 during last years.
There is no exact statistics data in the sector for clearing of the shares of development companies at the construction market. However, according to unofficial information of the developers themselves and the Urbanization Service at Tbilisi Mayor’s Office, the number of domestic companies-developers exceeds 100. Company Center Point Group is the leading one at the construction market. It occupies about 15-20% of the market. Shares of other developers such as Axis, Iberia and Arsi do not exceed 10%. The rest part of the market is shared by small development companies.
Control of quality of the implemented projects remains as the central risk factor alongside with the terms of completion of the construction. According to experts, any company of the real estate sector with diversified project portfolio and proper systems of both quality management and terms of implementation has the chance of successful use of the potential of the sector.
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