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Real Estate Sales Surge

Development companies prove that real estate sales are growing. Representatives of development companies assert that in the previous year, when the national currency rate collapsed, they started sales of apartments in GEL or in fixed exchange rate.

In that period, sales strategy revision brought certain results. It turned out that the development companies inquired by the Caucasus Business Week (CBW) sell apartments in USD and very successfully.

Nino Kuprashvili, head of DIRSI company marketing department, noted that in September 2015 the company started sales of apartments in GEL after the national currency depreciation. The process lasted 3-4 months. This temporary campaign justified in that period and brought real results.

However, the company has bought building materials  and attracted investments in USD. Therefore, the company faced serious difficulties and finished the campaign, Kuprashvili said.

Sales of new apartments have increased and 50% of all exposed blocks of DIRSI complex have been already sold, Kuprashvili added.

Bezhan Tsakadze, head of G&G development company, said that the company had sold apartments in GEL, when sales significantly declined amid the GEL depreciation period. Starting spring 2016 sales increased, but now the sales indicators have reached its peak.

At this stage, the company has started constructing a new residential complex on Oniashvili street. 75% of the spaces have been already sold despite the complex construction works have not been finished, Tsakadze said.

Sales rose because  solvency of our citizens has improved and development companies have lowered apartment prices, Tsakadze said. The price of one square meter declined by 10-15% as compared to the previous year, he said.

“Moreover, loan issuance procedures were simplified, interest rates have declined. I did not expect similar activation and prices have declined after new companies entered the market”, Tsakadze pointed out.

What has preconditioned growth in sales in development companies?! The field specialists have provided different answers to this question.

Irakli Rostomashvili, head of Association of Developers of Georgia, says that the sales have genuinely increased. As a rule, real estate sales grow in the country, where people have stable living conditions, he noted.

“Seemingly, the society has acquired the sense of stability and collected financial resources. Everything is comparative, but the situation has improved as compared to the previous years, especially compared to the regime of Saakashvili, when people were afraid of showing money. If somebody would buy apartments and new property would be registered, Adeishvili’s office would visit them. Our society feels difference in this respect and the result is evident. Today, the sales of apartments have increased”, Rostomashvili noted.

Tornike Abuladze, director general for ARCI development company and representative of Association of Developers of Georgia, says that, currently, the real estate market genuinely registers upturn in demand.

“The year of 2014 was one of the most important periods in terms of sales. Even the year of 2007 cannot be compared to it. Apartments of 1 billion USD were sold in 2014. It is also interesting that in the midst of 2015, amid the GEL depreciation period, the sales indicators declined by only 13%. After this, in November-December 2015 sales indicators considerably increased”, Abuladze noted.

Several factors have increased sales and the GEL exchange rate stabilization is main factor, he said and refused considerations as if the GEL exchange rate has not been stabilized. The national currency has found a new stabilization point. As a result, our citizens have acquire the sense of stability, he said.

Another factor that has grown sales is related to the initiative of Association of Developers that calls for lowering revenues from rental by 5%, Abuladze said.

The third reason is related to considerable deposits volume at commercial banks. Interest rates have declined and the population prefers to invest money in real estate.

It is also important that a half part of sold apartments were bought by mortgage loans and another half – by cash. This signifies our citizens have money, Abuladze noted.

“Moreover, the GEL depreciation has considerably cheapened building and apartments. Construction process has cheapened by about 70-100 USD. Therefore, development companies lower prices. There is another important detail – people think that investing in real estate is a more  favorable and stable deal”, Abuladze noted.

Economic expert Eka Gegeshidze explains that the development business is an only sector today, where investments may be made simply to easily receive dividends from there. This is business that cannot be lost easily and that does not require special mental requirements  to make money, she added.

“That’s why this field is in demand. There are no alternative means. There are no stock companies and organized market systems in our country, where people would easily place their savings and buy shares. Today, regretfully, our citizens lack for due ideas to launch business activities and develop new innovative products, because only 90% of our citizens hold  entrepreneurial skills and creative mind”, Gegeshidze noted.

Meanwhile, expert Niko Kakhetelidze does not agree that real estate sales have increased. I do not know on what information these statements are based, as if the demand for real estate had increased in the country.

“I think similar statements are part of marketing campaigns. I have heard this information, but I think these statements are ungrounded”, Kakhetelidze noted.