Real Estate Market Review: FIABCI-Georgia
Lika Kardava President of FIABCI-Georgia, Managing partner of PropertyGeorgia.ge and Kate Tabatadze - CEO and former President of FIABCI Georgia; Managing partner of PropertyGeorgia.ge review the year 2021 in the Real Estate market.
Lika Kardava – President of FIABCI-Georgia
How would you describe the real estate market in Georgia today in terms of trends and challenges?
As our country continues to deal with both the short and long-term impact of the pandemic, we are seeing a tremendous transformation in consumer behaviors - how people work, live, and interact. More and more people want to change their environment and live outside the city, in a quiet and ecologically clean place where they will have more space for their family. This trend became particularly evident in 2020-2021. According to the study published by Colliers Georgia this month, the number of registered transactions for residential land in Tbilisi and surrounding areas in the first half of 2021 was 822, which represents a 56% increase year-on-year.
In 2021 the market is still recovering and the transaction activity remains stable. Property prices continue to rebound above the pre-pandemic level, reflecting a generally recovered demand. The average residential real estate price, in October 2021, is 5% higher compared to 2019 (source: TBC Capital, Tbilisi residential market – monthly watch).
It is remarkable to witness how swiftly the real estate market has adapted to the dynamic needs of all those who interact with technology from the first-time buyer of a single-family home to an asset manager with a portfolio encompassing millions of units across the globe. Technologies are currently serving nearly every type of transaction, asset type, and investor segment.
How do you think the market will change in 2022 compared to last year?
It is obvious - the real estate sector roars back to life. The expectations for 2022 are primarily related to economic recovery. When the economy grows rapidly, real estate sales grow rapidly as well.
The pandemic demonstrated the incredible adaptability of the property sector to meet rapidly evolving space needs. People recover from the pandemic and revert to some form of “new normal” encompassing new ways of working, shopping, and living. These changes in how people conduct their everyday lives will require properties to adapt, along with their users, to better align with how they will be used.
As you look ahead, what predictions can you make on the long-term impact of COVID on residential real estate?
In new normality, people have gotten a new taste of how important “home” actually is.
As a response to the Covid-19 pandemic, developers are rapidly rethinking their visions for the future of the built environment. Projects under construction are being re-thought and re-designed on the fly. Floor plans are being redrawn.
The home-buying experience will advance with its digital transformation as the real industry continue to embrace technology. Electronic options for closings and sales opportunities will become a must-have tool for everyday use.
People will prefer a 15-minute lifestyle if they can get it. They want walkable, well-developed infrastructure, real places that allow them to live fuller lives without having to get into a car and transition from one segment of their life to another.
How do big data and machine learning affect the real estate market?
. A successful data-driven approach can yield powerful insights in real estate sector. To face this challenge head-on, companies might begin by employing analytics in executing their most critical strategic goals; Finally, data analytics should have its own strategic direction with long-term roles and goals beyond just a few pilot projects and use cases.
Kate Tabatadze - CEO and former President of FIABCI Georgia
In what way and to what extent do international buyers influence the market?
The role of international buyers in the real estate market development is quite important in several ways: First, it’s international recognition of the country as a favorable destination for investments. Second, it’s quality demand. Mostly, foreign real estate investors look for high-standard properties to invest in. This, on its part, makes developers raise the bar and get more competitive. Last, but not least, real estate investments drive tourism in Georgia. Today we do not have big institutional investors in the country, majority of the properties are bought by small and medium size investors. One of the most popular options to invest in, are vacation properties. Around 80% of the hotel type apartments that are built in Georgia’s seaside resorts are bought by foreign citizens. This, of course, directly translates into a growth number of tourists locally. Seeing this prospect, developers in Batumi are continuing to build large-scale multifunctional projects with apartments, hotels and business centers in one space. In a couple of years, the city will also have a big conventional and exhibition center of regional importance.
What do you think will be the biggest challenges for the future real estate market in Georgia?
For Georgia, as for the rest of the world, the global pandemic remains the top challenge. The real estate market appeared to be to a great extent resilient versus the covid reality, especially when it comes to residential properties. We even see rising prices in some cases, like villa-type houses in the suburbs of Tbilisi. With vaccination accessible already in our country and countries that potential investors come from, tourism-related properties, like investment apartments are also back on the market. It’s important to highlight that large-scale projects have not paused or stopped despite the pandemic. Moreover, some developers have even started new projects. This shows that big players of the real estate market see the bigger picture and they have the resources to stay in the game, adapt to the new reality and move on.
Challenges are always present there where is active development. In Georgia, we dare say, the real estate sector is developing rapidly. Along with pandemics, local players, especially big ones, should prioritize a long-term vision and concentrate on topics like energy efficiency in buildings, renewable energy, green and healthy infrastructure, smart buildings, and also-blockchains. When the private sector talks to the government on these issues, challenges are overcome. Positioning Georgia as an attractive market for foreign real estate investments is a challenge that needs a collaborative approach. In such cases role of professional associations is significant. In Georgia we have a national chapter of the international real estate federation, FIABCI, which works on these topics actively, both in cooperation with local and foreign professionals and the government.
What are currently the big demand drivers in the Georgian real estate market?
The key factor may be considered Georgia’s liberal investment environment. As for real estate market itself, there are several factors that are demand drivers in this field:
- High Return on Investment: 10-13% and even higher in some cases;
- No property tax;
- Rental income tax-as low as 5%;
- Ownership Registration-15 minutes;
- Residence Permit for foreigners while purchasing an apartment at a price starting from $100 000.
To summarize Georgia’s real estate market trends and expectations, the sector is in the transition phase to a Sustainable and resilient, green, and eco-friendly future and this, as we said in the beginning, is to a great extent driven by foreign investments. Environment-friendly and smart cities are most attractive for investors. This is the future!
As for the present situation, given its adequate response to the pandemic, we can say that Georgia’s real estate sector positions itself among the safe markets to invest in.