Both apartments and rent have increased significantly in price this year in Armenia. In general, this year has become a record year for the number of housing rental transactions. And in Yerevan, housing prices have doubled. One of the reasons for this excitement is the influx of migrants due to the Russian-Ukrainian war.

Armenia is a mountainous country, spread over 30 thousand square meters, home to about 3 million people. It has no access to the sea, but there are neighboring countries: Georgia, Azerbaijan (as well as the Nakhichevan Autonomous Republic , which is part of it), Iran and Turkey. In recent years, the country has been developing as a tourist destination, acquiring new infrastructure. New projects are emerging in the field of ski tourism, mountaineering, and ecotourism. Armenia is becoming more and more promising for real estate investment. What do you need to know about the Armenian real estate market and why has it grown so much in 2022?

Is it worth buying real estate in Armenia?

The Armenian real estate market showed rapid growth in 2002–2008, when prices increased by almost 600%. However, in 2009, the country’s economy was hit by the global financial crisis, causing housing and commercial property prices to fall in value in subsequent years. The next increase occurred only in 2017: prices rose by 15-20%. 2020 saw a decline, with prices falling by 8%, mainly due to the devaluation of the local currency. But real estate has played its part in 2021.

The main thing you need to understand when planning to buy real estate in Armenia is that investors are interested in only one city: Yerevan. There are about 50 cities in the country, but as a rule they are small. Almost half of the cities have a population of less than 10 thousand people, and the area of ​​the cities themselves is small: less than 10 square kilometers. 

• The only large city in the country is Yerevan, the capital of Armenia, home to more than a million people. The population density is quite high and almost equal to Moscow. A lively city with developed infrastructure, perhaps the only one in Armenia that is interesting from an investment point of view. The entire life of the country is concentrated in Yerevan: the main production, trading and financial facilities are located. The central part of the city is its historical heritage, designed and built according to the design of the outstanding Armenian architect Tamanyan. The center contains the main attractions, cafes, bars, and nightlife is in full swing. It is in greatest demand among investors. But development in the city center is limited due to a shortage of available plots. 
• Gyumri. The second largest in the country, one of the industrial centers. Located two hours from Yerevan, it has the international airport “Shirak”. However, it is 5 times smaller than Yerevan in area and 10 times smaller in population. The city is located on the Shirak plateau, crossing several mountain gorges. In the 80s of the last century it was a major industrial center. However, due to the earthquake, many productions were suspended for a long time.
• Vagharshapat is the third largest city in Armenia, which is called the spiritual capital of the country. The center of the Armenian Apostolic Church is located in the city. During the Soviet era, Vagharshapat was an industrial center, some of the production facilities are still operating.

Also among the relatively large cities of Armenia can be named: Kapan, Vanadzor, Hrazdan, Alaverdi, Stepanavan, Dilijan (a tourist city with unique waters), Vanadzor. It is worth paying attention to the suburbs of Yerevan, from there you can get to the capital in half an hour: Echmiadzin, Artashat, Ashtarak, Abovyan.

Advantages of buying real estate in Armenia

• he economy is growing, with GDP increasing by 6.1% in 2021.
• 100% ownership of real estate. Foreigners can dispose of property in the same way as citizens of Armenia: acquire, hold, lease, sell, bequeath.
• Loyal tax policy. There are no taxes on gifts, inheritance or capital gains in Armenia. In general, property taxes are not high: up to 1% of the cadastral value, which is usually much lower than the market value.
• Ease of registration of ownership documents. Purchasing real estate in this country can take just a few days. Armenia ranks 13th in the World Bank’s Property Registration Index for the ease of registering property rights. Therefore, all purchase and sale transactions here are quick and easy, regardless of whether it is a residential or commercial property. And to purchase both commercial and residential real estate, you do not need to obtain a residence permit in Armenia. You can even purchase housing remotely, without coming to Armenia. The only exception to the rule is the purchase of agricultural land. Such transactions are permitted only for residents. 
• Low mortgage interest rates. Since 2009, they have been reduced by almost 8% to 10.5%, with plans to reduce them to 7%. Bank lending conditions facilitate the purchase of real estate: residents actively use this tool.
• Visa availability. For citizens of more than 60 countries, including the CIS countries, almost all of Europe, Australia, USA, South Korea, UAE, there is a visa-free regime with Armenia. Citizens of these countries can stay in Armenia for 180 days throughout the year. And citizens of the Russian Federation can enter Armenia using an internal passport.
• All Covid restrictions have been lifted: neither a negative PCR test for COVID-19 nor a vaccination certificate is required.

Real estate prices in Armenia

The real estate market is experiencing great activity: the most in the last decade. Prices for the sale and rental of apartments have increased significantly.

The market was especially active in Yerevan: in the first quarter of this year, compared to the same period last year, the number of real estate transactions in the capital increased by 23%. 

• According to the Cadastre Committee, in the first half of 2022, the cost of housing in Yerevan increased by 14.6% compared to the same period in 2021. And in average annual terms, the increase in housing prices in the capital amounted to 16.7%, although realtors estimate at least 20%. 

The prices for apartments increased the most in Davitashen and Kentron. The cost of a square meter in Yerevan in the second quarter was 386.2 thousand drams: $950. In the center – 737.9 thousand drams ($1820), Arabkir community – 522 thousand drams ($1288), Kanaker-Zeytun – 383.7 thousand drams ($946). The lowest housing prices in the capital are in the administrative district of Nubarashen – 202.4 thousand ($500).

• In regional cities in the first half of 2022, average market prices per square meter increased by 18.6% . In the regions, apartment prices increased the most in Vanadzor (30.1%), Spitak (30.1%), Gyumri (23.8%), and Gavar (23.3%).
• May was a record month. Conducted the largest number of transactions since 2010. Both sales and rentals increased. In just one month, almost 18 thousand transactions were registered , which is 7.1% more than in April and 10.8% more than in May of last year. Of these, more than 5 thousand purchase and sale transactions, which is 13.4% more than in May last year and 13.1% compared to April of this year. 
• Over the past six months, the number of transactions for registering rights to real estate has increased significantly. Most often, real estate was purchased in Yerevan: it accounts for more than a third of all contracts. Particularly popular areas are Davitashen, Kentron and Malatya. Next come the regions of Kotayk, Ararat and Armavir. The least popular regions are Aragatsotn, Lori, Shirak and Vayots Dzor. 
• The number of transactions carried out by foreigners has increased. They increased by a third. In the first quarter of 2022, more than 1,000 real estate transactions were completed. Among the buyers, the majority are citizens of Russia, the USA, and Iran. Basically, they are united by Armenian nationality. 

Why are prices going up?

There are several reasons for this recovery in the real estate market. The Armenian market is small, and any external change has a significant impact: either growth or decline. Among the main factors that affected the real estate market this year are: 

• War in Ukraine, mobilization in Russia. Transactions began to intensify from late February to early March, when an influx of tourists came to Armenia due to the Russian-Ukrainian war. There are many tenants and potential buyers in Armenia. Apartments, private houses, and commercial premises are in active demand. In the first wave, companies that worked in Russia and were subject to sanctions moved to Armenia. Therefore, the demand for commercial real estate has increased . Also, mobilization in Russia became another impetus for the revival of the market. After the news of partial mobilization, an influx of money into Armenia began.
• Rising cost of rent. The increased demand for rentals also had an impact on rental prices. As prices rose, the owners who were planning to sell their homes decided to make extra money by renting. The owners saw that they could make a significant income, so there were fewer offers. But the number of people wishing to purchase real estate has increased. These are both foreigners who want to purchase apartments for subsequent rental. As a result, demand began to exceed supply, which was reflected in real estate prices.
• Currency depreciation. At the beginning of the year, the dollar was worth about 480 drams, now it is 405 drams. The depreciation of the exchange rate encouraged those who had previously thought about buying a home or decided to invest their savings in real estate to avoid their devaluation. Also, due to the growth of the dollar, real estate prices in drams went up: sellers are forced to increase prices for apartments. 
• Simplification of the procedure for obtaining a mortgage. The number of documents required to obtain a bank mortgage for the purchase of housing has been reduced. This reduced bureaucratic delays. 
• Income tax. The income tax refund program, which has been in effect since 2015, is gradually going to be phased out. From 2022, it will no longer apply to new facilities in Yerevan, in particular in Kentron and Arabkir. After 2025, the program will apply only to the regions. The essence of the program is that citizens who pay income taxes can receive funds back and use them to pay off mortgage interest. 
• Since July, Armenia has switched to non-cash payments when purchasing real estate. It is no longer possible to purchase real estate for cash: all payments for transactions between individuals, if the transaction amount exceeds 500 thousand drams, must go through bank accounts. From July 2023, this threshold is reduced to 300 thousand drams. This innovation also led to an increase in transactions in the spring.

Rental housing “goes into space”: prices in 2022

The rental market in Armenia is experiencing a surge – since the beginning of the year, housing prices in Yerevan have almost doubled. Against the backdrop of the war in Ukraine, sanctions and announced mobilization in Russia, many foreigners, mostly Russians, came to Armenia. As of April, 75 thousand are citizens of the Russian Federation and 2 thousand Ukrainians. 1,300 companies are registered, 90% of which are in the IT sector, because the Armenian authorities encourage the relocation of foreign specialists.

Due to increased demand, by the end of March the cost of renting apartments in Yerevan increased by an average of 20–25%, and then prices increased two to three times. If a year ago in Yerevan an apartment with decent conditions could be rented for $500, now you will need $1000-1300 for a similar apartment. Although many housing are far from modern standards, they require repairs and replacement of furniture.

Many owners break contracts with previous tenants in order to rent out housing to new clients at a higher price.

Compared to May 2021, the number of apartment rental transactions increased by 52.5%, amounting to 183. Compared to April 2022, the increase was 7.6%. A significant part of the tenants are foreign citizens.

However, it is difficult to talk about real figures for the number of rental transactions. Most of them are shady: owners prefer to rent out housing without a formal contract, so as not to pay taxes on the profits received. And failure to register a lease agreement does not entail any consequences. 

Despite high prices, it has become difficult to find housing in Yerevan, where a flow of visitors has flocked. The shortage is especially felt in the center of the capital. The Armenian authorities are looking for ways to solve this problem. 

One of the options is to rent out empty housing . We are talking about several tens of thousands of uninhabited apartments. In particular, this applies to new housing being built: property owners who do not plan to live in newly built properties in the near future are offered to transfer the property to management.

If the owner agrees, the premises are renovated. This approach will not satisfy demand, but will stop the rapid rise in prices, says the country’s Minister of Economy Vahan Kerobyan.

New construction in Yerevan

Due to the resulting deficit, a construction boom is predicted for Armenia. This is especially true for Yerevan. In the capital, about three hundred apartment buildings are being built in residential areas and suburbs. The construction sector recorded growth of 6.2% in the first quarter of 2022 compared to the same period in 2021. Private investment increased by 32.7%. But at the same time, there is a decrease in the volume of construction by foreign investors – by 74.2%. 

However, the construction of new housing will not lead to lower prices. It is impossible in the center of Yerevan, where the main infrastructure is located, since it is already completely built up. 

Prospects for the real estate market in Armenia

Further market behavior will largely depend on the situation with mobilization in Russia and the further course of the Russian-Ukrainian war. Everything will depend on the scale of the influx of people into Armenia and the length of stay of foreigners. However, in any scenario, the value of real estate will not collapse overnight and will not return to its previous positions in the foreseeable future.

Managing a real estate portfolio is a complex process that requires constant monitoring. Both residential and commercial real estate require repairs, preventive maintenance, team coordination, and competent financial management. Only in this case can a real estate portfolio bring constant high profits to the owner. However, most often the investor carries out remote control of the property, and his portfolio includes real estate from different countries. This allows you to diversify your business and avoid financial risks. But, at the same time, it brings additional inconvenience in management, because you have to spend significant efforts to monitor managers and the work of the team at all facilities.

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