13.5% Growth in Real Estate Prices, 40.9% Decline in Transactions*

2023 Study of the Yerevan Real Estate Market

In Yerevan, apartment sales prices in the actual secondary market have decreased. However, when examining the Cadastre Committee’s data, the final figures for 2023 indicate significant growth. The average price per square meter of multi-apartment residential buildings in the center of Yerevan was 837,700 drams in 2023, compared to 737,800 drams in 2022. Prices grew by 13.5 percent, while in 2022 the growth had been 16.6 percent. It is notable that the average price per square meter of multi-apartment buildings in Kentron (the center) grew by 13.5% in 2023, yet the number of sales transactions for this type of building in Kentron decreased by 40.9%.

Chart 1. Distribution of buying and selling transactions in Armenia

It is necessary to understand what has driven the growth of buying and selling prices in Yerevan recorded over the last 2 years, so that we can also assess future price changes.

Primarily, 2 factors have influenced the growth in the quantity of apartment construction and the increase in price: the significant inflow of capital into Armenia due to sanctions against Russia and the entry of a large number of relocants from Russia.

In 2022, inflows made by individuals through the banking system registered an unprecedented 2.5 times growth. In 2021, 2.1 billion dollars entered the banking system through legal entities, and in 2023 it was already 5.2 billion. Most of these funds were directed to construction, because when buying firsthand, the income tax return from purchasing multi-apartment buildings serves as a primary stimulus for making investments mainly in that sector.

In 2023 there was a 9.7 percent growth in inflows made by individuals compared to the significant 2.5 times growth in 2022. However, a sharp decline in bank transfers is observed from mid-2023. Let me also note that in 2023, 55 percent more money exited Armenia through the banking system compared to 2022. This is negative especially from the perspective of residential construction, since banking system revenues are primarily invested in this sector.

We note that the income tax return law has been operating since 2015, and the goal was the activation of construction in the country. Under this law, the interest on mortgage loans for apartment buyers is returned in the amount of the buyer’s income tax. In September 2021, the government decided to gradually phase out the possibility of acquiring apartments with income tax return in Yerevan. Specifically, since 2022 the program has been stopped in Kentron and Arabkir, and from 2025 it will be stopped in all of Yerevan.**

The entry of relocants in 2022 significantly raised the price of rental apartments, as a result of which the rental price of a 1-room apartment in the center of Yerevan until the fall of 2023 was more expensive than even in the center of Moscow.

Also read: 💲🏙️ Yerevan is More Expensive than Moscow.

In 2022, the influx of Russian Federation citizens significantly raised the prices of rental apartments. Until the fall of 2023, the value of a 1-room apartment in the center of Yerevan exceeded the value of the same type of apartment even in Moscow. Let me note that in 2021 the rental cost of a 45 sq.m. apartment in the center of Yerevan was about 700 dollars, and from September 2022 to September 2023 it was already 1000 dollars. However, the rental price for a similar apartment has now dropped to 750 dollars. It is likely that this has a seasonal nature, as demand is lower during the winter season and rental prices tend to rise in the summer. But in the winter of 2022-23, a seasonal drop in apartment prices was not observed because there was a large influx of RF citizens. The flow of RF citizens has a medium-term nature, and it is possible that rental prices in 2024 will be lower compared to 2023.

The reduction of these two factors, namely the inflow of bank capital and the inflow of relocants, could have a negative impact on our real estate market.

It is notable that the prices of multi-apartment buildings in Yerevan continue to rise. However, the number of real estate alienation transactions in Yerevan decreased by 14.2% in 2023 (falling from 25,644 to 22,012), and buying and selling transactions decreased by 23.8% (from 17,734 to 13,513). Overall, 8,073 apartment buying and selling transactions in multi-apartment buildings were recorded in Yerevan in 2023 compared to 11,466 transactions in 2022. Moreover, the number of buying and selling transactions for multi-apartment buildings decreased by 29.6% in 2023.

Table 2. Distribution of buying and selling transactions in Yerevan city by administrative districts

The most significant decrease in buying and selling transactions in Yerevan was recorded in Davtashen by 46.9 percent, almost 2 times. The only growth in transactions in 2023 was recorded in Kanaker-Zeytun with a 5.5% growth, while declines were recorded in other parts of the city. Legal entities sold 2,829 real estate properties in Yerevan in 2023 compared to 3,078 in 2022, which means an 8.1% decline was recorded. Across the entire republic, legal entities sold 1,777 apartments in 2023 compared to 2,364 in 2022, a 24.8 percent decline. Transactions carried out by foreign citizens also decreased; 738 apartments were acquired in 2023 compared to 991 in 2022, which is a 25.5% reduction.

Below is the quantity of apartment buying and selling transactions in Yerevan’s administrative districts. Each point on the chart represents the sum of the previous 12 months. The chart is interactive, and you can work with it by visiting our website.

Chart 3. Distribution of buying and selling transactions in Yerevan city by administrative districts

It is notable that in 2020, when the COVID-19 pandemic was recorded and the 44-day war took place, 8,172 multi-apartment properties were sold. In fact, fewer multi-apartment properties were sold in 2023 than even in 2020. However, the average price per square meter continued to grow in 2023; prices grew by 13.5% in Kentron, 12.6% in Komitas, and although Davtashen registered the largest decrease in the sale of multi-apartment buildings (almost 2 times), a price growth of 11.9% was recorded there as well.

Fewer apartments were sold in Yerevan in 2023 than even in 2020.

Let us note that we have scraped more than 400 market analyses presented by the State Committee of Real Estate Cadastre. As a result of this operation I have obtained a unique database that includes real estate transactions and price changes for 1 sq.m. of surface area. The 1 sq.m. price database includes price changes for 58 administrative districts and zones in Yerevan, as well as for 48 cities in the republic starting from 2002. The database also includes the quantity of transactions by various criteria. We also note that forecasts were carried out with an overall 4 models for 84 areas of real estate prices in Armenia (28 price zones of Yerevan’s 11 administrative districts, 45 cities of RA regions).*

If there is demand, it is possible to create an interactive tool for all forecasts, which will allow professionals dealing with real estate to make informed decisions. The dashboard will include additional analysis and model reliability estimates for each location. A similar dashboard created by us already exists for Armenia’s export forecasts. More than a thousand forecasts are included in the latter dashboard.

You may also be interested in the following material: 🏠💰 📉 Households Have Become Poorer.

The Yerevan real estate market exhibited negative trends during 2023. Although the average prices per square meter of multi-apartment buildings recorded noticeable growth, especially in the center of Yerevan, the total number of transactions experienced a significant decline in 2023. The obvious contradiction between the growth in real estate prices and the decrease in transaction volumes raises concern regarding the sustainability of long-term growth in this sector. The negative growth of both bank capital inflows and relocant inflows could create challenges for the real estate market in the coming period.

* The indicators presented in the title refer to buying and selling data for multi-apartment buildings located in the center of Yerevan. All data in this analysis are taken from official sources, specifically from the reports of the Cadastre Committee for 2022 and 2023.