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Serious tendency of real estate prices correction in Armenia

Real estate prices have started falling at the end of summer in Yerevan. According to the monthly report of Cadastre Real Estate Committee, the average price for 1 sq/m of an apartment in Yerevan has fallen by 1,8% in August. The number of the real estate bargains also reduced in August by 15% if compared with July and by 22% if compared with August 2007.

As Director of Armenian Real Estate Market Artem Pribylsky said, prices falling tendency has been preserved, and they fell by 1-3% in September and at the beginning of October. He also added that the world economic crisis has affected the situation at the Armenian real estate market. Armenians of the Diaspora and the local residents, which receive transfers, are the main buyers of the primary accommodation. For this reason because of worsening of the economic situation in the transfer-donor states (Russia and the USA) inflow of cash reduces as a result of which buying ability is also reducing. Pribilsky also said no rush sale of real estate has been noticed at the market because of real estate proces falling. But this does not rule out rush at the mortgage market, where the real estate prices will fall much but the mortgage bank rate will grow because of liquidity falling.

According to the data of ArmInfo analysts, Armenian banks have made the conditions of the mortgage credits giving more severe of the last months. The world liquidity crisis has not yet touched on the banking system of the country since there are no big volumes of the sums attracted from abroad in the liabilities, but the danger of its possible affecting Armenia make the banks to increase “liquidity pillow”. Thus, certain reduction of the mortgage crediting volumes in the country is reducing real estate demand level in some sense and is no more able to keep prices. Moreover, one should take into account that the real estate sector, the “locomative” of the Armenian economy, which almost fully depends on foreign money inflow, still remains the weakest and the most affected by foreign crisis tendencies. The domino effect may work in other sectors of economy as well, in case of stagnation. Nevertheless, as analysts say, today the long-awaited correction of prices has been notices of the real estate market, which have risen up to the inadequate level thanks to foreign money inflow over the last years.