Armenia’s Economy Based on “Pledge”
Official indices for real estate are from the range of most unreliable statistical data. It’s worth understanding what official statistics tells us. Thus, according to information of the State Committee of Real Property Cadastre of RA Government 14 658 deals have been recorded towards real estate in the country throughout May 2016.
This index is provided by National Statistical Service (NSS) making reference to the very Cadastre. NSS doesn’t provide comparative data to be more clear what dynamics we have in real estate market. The source—Cadastre, is a bit more sincere. It states that as compared to May of the previous year, number of closed deals decreased by 4.8% (or by 720). Comparative data aren’t introduced based on types of deals.
However, making individual calculations is not a difficult job. Thus, pursuant Cadastre data out of 14 658 deals towards real estate in May 2016, 10.5% are primary registrations, 24.5%—alienations deals, 4.3% renting deals, 13.4%—pledging, 10.7%—heritage, 36.6%—other state registrations.
We turned percentages into absolute numbers to understand how many deals have been concluded throughout May 2016 on each type. We did the same regarding indices for May 2015.
Thus, it may be observed how many deals on each type have been concluded, and to which extent they recorded increase or decrease.
However, to have a more clear view of what’s going on in real estate market, we turned changes in percentage as well.
Thus, primary registrations have recorded the least index—16.2%. Primary deal is the one, when a person or an organization constructs a building, a house or a facility from the very start and registers it.
Alienation deals decreased by about 10%. Credits granted by pledge of real estate increased by about 45%: 1964 such deals have been concluded in May. Deals on renting have increased by about 5%.
This dynamics speaks of inconsolable condition of real estate market (and not only of that market).
Decrease in the number of primary registrations speaks of the fact that physical persons and organizations are constructing less real estate and exploiting it. Reduction of alienation (selling) deals edify of decrease in demand for real estate.
Growth of pledging means that deal on granting loans and credits by pledge of real estate have considerably increased. Moreover, it doesn’t refer only banking or loan organizations. Recently the practice of “borrowing money by interest rates” by pledge of real estate has become widely spread, when it’s provided by individuals with rather high interest rates, which are even higher than those provided by the bank. Moreover, one shouldn’t consider that increase in deals on granting credits by pledge of real estate indirectly edify of activation of mortgage loans. As in that case alienation deal is concluded as well (purchase and sale is being formulated and the house is being pledged in the bank).
Thus, in case of sharp activation of mortgage market alienation deals couldn’t have recorded such a decrease.
How increase in renting deals may be explained? Against the background of general fall, this growth, at first glance seems strange. However, specialists, no matter how strange it may seem, explain this by this very stagnant condition and reduction in purchase and sale. In particular, many young families, which couldn’t afford purchasing an apartment by cash or through a mortgage loan, prefer renting an apartment. Thus, it’s explained by this very factor, that prices for real estate aren’t falling, but rising to some extent.
And those, who consider that renting deals refer commercial real estate, may walk about the city and register facilities, which are closed or provided for rent.
Finally, it should be noted that there another eternal contrasting point in real estate statistics: real estate prices. Against the background of double digit drop of alienation deals and primary registrations, real estate prices won’t drop. Average price for 1sq. m in Kentron administrative district, upon official statistics, comprises AMD 428 thousand. This price hasn’t changed at least for 1 dram since 2013.
By Babken Tunyan
