What is Happening in the Real Estate Market, and What to Expect in the Future

The newspaper "Pats" writes: "According to official data, the number of apartment purchase and sale transactions in Yerevan has decreased by about 24% in 2023. Interestingly, the figures for real estate bought and sold by foreign citizens have also declined. Specifically, transactions for real estate purchased by foreigners have decreased by 15.6%, while sales transactions have fallen by 6%.

However, it turns out that prices, particularly in the capital, continue to rise. What does this phenomenon indicate? Summarizing our conversations with various experts, it can be noted that we are primarily dealing with artificial overvaluation, with estimates ranging from 20% to 25%.

According to economists, this artificially created inflation has been stimulated by the government and the Central Bank through income tax returns. It is noteworthy that under the mortgage interest rate tax return program, around 36 billion drams were paid from the state budget in 2021, 52 billion in 2022, and about 80 billion drams in 2023.

As for the passivity in the real estate market, several factors are at play here as well. Firstly, experts suggest that the disproportionate growth of individual incomes has played a significant role, along with the structure of economic growth, which is largely disconnected from the real developments in the economy, security issues, and increased uncertainty within the public regarding the future.

At the same time, experts express concern that the real estate market could collapse, as supply may decrease further, and prices could drop sharply, especially after the income tax return factor is removed. The fact is that this program has mainly benefited and continues to benefit those with middle and high incomes, although it was intended for socially disadvantaged groups and those in real need of housing. However, by 'closing' the income tax return program, the state has not addressed the issues of the latter and has offered nothing in return. Thus, 'reserve' homebuyers, who are typically those with middle and high incomes, will naturally refrain from making purchases without the income tax return, meaning this market could genuinely collapse."