Azerbaijan's real estate market suffers from global financial crisis

According to the state service of real estate registration, volumes of flats sales in the country are declining significantly from quarter to quarter,

Thus, last year, for this reason, according to head of the service Arif Garashev, the whole immovable property in the country has dropped in price by 10-15%. Chairman of the National Bank of Azerbaijan Elman Rustamov noted that this decline is a matter of concerns along with the reduction in volumes of sales of cars and decline of production in the sphere of steel industry.

At the same time, some economic experts state that in reality against the quite significant drop in prices on building materials, the prices on flats do not fall on the markets of the country. Commenting on this topic while speaking to Echo, chief executive of the public association "Participants of the real estate market" Nusret Ibrahimov noted that prices are gradually changing through unnoticeably.

"Thus, within December, real estate prices have dropped by 4.1% in average, while the cost of building materials has dropped 4.2%. These are average figures, which take into account the prices on all used building materials and the flats on the secondary real estate market". Is it possible to say that these price  processes proceed in two directions on par and the reduction in cost is observed equally on both positions?

"It is undoubtedly clear that prices on building materials are declining faster and this is how it usually occurs", says Ibrahimov. Drop in price in real estate sector starts in 3-4 months. It occurs because the terms of production of building materials are much shorter than the terms of construction of a seuqre residential meter. Therefore, the drop in prices on building materials occurs faster than on residential fund.

It is interesting to learn whether the construction sector of Azerbaijani industry has such an event as a negotiation between large companies for artificial curbing of prices for a square meter of a new residence?

"I have not observed any definite examples and signs of such illegal agreements between the construction companies", said Ibrahimov. "But it is clear that every producer, businessman attempts to curb prices on this level in order to have high revenues in the result. Therefore, in our country the construction companies also try to curb prices on a square meter at least on a level of an average indicator our of maximally possible. Time will show how long they will manage to do it. But, I think the market dictates its rules anyway, therefore, sooner or later they will have to adhere to these realities. And today we are starting to observe this".

Yet, it is unclear how vulnerable will the drop in price on houses and flats be for those consumers, who need to purchase a residence. This is an issue which raises greatest concerned of the majority of the population. Under the expert forecasts of Nusret Ibrahimov "No sharp decline in prices on residences is expected in Azerbaijan, though this decline will proceed slowly. It is possible to predict that it will continue for the next 3-4 months and perhaps until mid 2009. Yet, we will not see the significant drop in prices in the residential sector, as on our real estate market prices are mainly dictated by the primary market that is the construction companies. New buildings make about 70% of proposals in real estate. If secondary flats would make the basis of the sold residence, then possible sharp decline in prices on this market could be predicted. But primary market lesser than other depends on the drop in prices, therefore, the companies owning the new buildings will continue to maintain the high cost of their goods".

"Echo"