The Georgia Real Estate Index (GREI) being created by Real Estate Market Laboratory (REM lab) will soon be available to the public. REM lab is a joint project of TBC Bank and ISET (International School of Economy) and it is being implemented with the support of JumpStart Georgia. The goal of the project is to study the real estate market on a regular basis and calculate the real estate market index, in addition to other indicators.
The project is based on an agreement that ISET, with help from TBC Bank, will ensure collection, processing and analysis of the data necessary to study the real estate market. Vladimer Maghnadze, the head of TBC Bank’s collateral management and evaluation department, provides more details about the project.
Why did TBC Bank become interested in studying real estate market?
Real estate index and other indicators that reflect the trends of the real estate market are not regularly calculated in the country. The banks do not possess detailed statistics about this segment and order research on different segments of real estate markets from various companies from time to time. Without a doubt, it is necessary to feel the pulse of the market in order to make fast and efficient business decisions. However, this should be done regularly, instead of an occasional study. REM lab serves this purpose.
It plans on researching real estate market indicators (real estate index and etc.) and publishing regular reports.
What is a Real estate index and what information does it provide?
In general, a real estate index measures how prices change in real estate and shows price dynamics in the market. When researching the real estate market, if we observe an average price of 1 sq. m. for residential property, the indicator may increase when more expensive apartments (prestigious area, in best condition and etc.) are sold in one month compared to the previous month. However, this does not mean that the prices for residential property have increased. A real estate market index is necessary to determine the real change in prices. With GREI we will learn whether the fixed price on real estate has increased or decreased in any given month, and it will also show the real dynamics of real estate prices.
What research methodology was used in the project and does it reflect international experience?
International practice rely on Laspeyres, Paasches and Fisher methodology to observe real estate prices. In our project, we use international practice to calculate the real estate index. In addition, we use different sources to calculate different indicators. For example, data (online published announcements) for the real estate index will be collected from one of the largest real estate web-pages used in the country and processed monthly.
At this stage, on average 5000 announcements will be processed monthly for the Tbilisi market.
How frequently will the Real Estate Index be published and when will be the results of the first study be available?
Real estate index will be published once a month, and the first results will be available to the public in the nearest future. In the beginning, the index will cover districts in Tbilisi, as well as residential and commercial properties. The study will be conducted not only on sale of real estate but also the leasing and renting of property. REM lab will calculate not only the real estate market index, but also other indicators for Tbilisi and the country.
How important is the regular study of the real estate market for business and the country’s economic development in general?
One of the goals of our project is to increase the effectiveness of banking, and strengthen the function of research and analysis. However, regular research of the real estate market also serves broader goals. Local businesses or foreign investors (developers and others) need a realistic picture of the Georgian real estate market in order to make business decisions. Investing in a market, for which data is not available or is limited, poses significant risks and investors can avoid the market for this reason. Regular studies and accessible and reliable statistical data serve as a foundation and encouragement for the development of various businesses, as well as the economy as a whole.
It should be noted that REM lab is a project that supports the development of the real estate market, and will bring significant benefits – not only to the private sector but also the state and any interested citizen.