Market in Depth

Tbilisi's house price rises continue, buoyed by strong demand and limited supply

Lalaine C. Delmendo | November 03, 2019

Georgia's housing market remains robust, buoyed by the country's strong economic growth and booming tourism.

During the year to Q1 2019, the average sales price of apartments in Tbilisi, Georgia's capital, rose by 7.1% to GEL 2,351 (US$881), following y-o-y rises of 12.4% in Q4 2018, 16.6% in Q3 and 6.6% in Q2, according to the ISET Policy Institute. When adjusted for inflation, prices in the capital city rose by 3.9% y-o-y in Q1 2019.

All districts registered positive y-o-y price growth. Samgori saw the biggest price increase of 24% during the year to Q1 2019, followed by Krtsanisi (16%), Chughureti (15.1%), Gldani (14.1%), Didube (13.4%), and Isani (12.1%). Strong price rises were also recorded in Nadzaladevi (10.1%), Saburtalo (10%), Mtatsminda (7.5%), and Vake (6.7%).

Mtatsminda remains the most expensive district in Tbilisi, with an average price of GEL 2,880 (US$ 1,079) per sq. m. in Q1 2019, followed by Vake (GEL2,646 or US$992 per sq. m.), Krtsanisi (GEL2,392 or US$897 per sq. m.) and Saburtalo (GEL2,390 or US$896 per sq. m.), according to ISET Policy Institute. In contrast, Gldani has the cheapest housing, with an average sq. m. price of GEL 1,560 (US$585).

Overall, TBC Capital expects real estate prices to continue rising in the coming years, amidst strong demand and declining construction activity.

“I would also like to mention the undeniable increase in consumer purchase power, which is expected to have a very positive effect on both real estate and the banking sector,” said Giorgi Tkhelidze of TBC Bank.

Georgia average sales price
In 2018, Georgia's economy expanded by a robust 4.7%, following growth of 4.8% in 2017, 2.8% in 2016, 2.9% in 2015, 4.6% in 2014 and 3.4% in 2013, according to the International Monetary Fund (IMF). NBG Governor Koba Gvenetadze expects the economy to expand by 4.5% this year, lower than the earlier growth forecast of at least 5%, mainly due to the dispute with neighboring Russia and political volatility caused by several public protests both in 2018 and 2019.

Foreigners can buy both residential and commercial real estate in Georgia, but cannot own agricultural land.


Analysis of Georgia Residential Property Market »

Taxes and Costs

Georgia’s new tax code is in effect since January 2011

Rental Income: Nonresidents leasing out residential property may be taxed at a flat rate of 5% on the gross rent.

Capital Gains: Capital gains realized from the sale of a residential apartment or house with attached land plot is taxed at a flat rate of 5%.

Inheritance: First and second degree relatives are fully exempt from inheritance taxes.

Residents: Resident individuals are taxed on their Georgian-sourced income at a flat rate of 18% for 2013. The income tax rate will be reduced to to 20%.

Read Taxes and Costs »

ECONOMIC GROWTH

Strong economic growth, falling unemployment

In 2018, Georgia’s economy expanded by a robust 4.7%, following growth of 4.8% in 2017, 2.8% in 2016, 2.9% in 2015, 4.6% in 2014 and 3.4% in 2013, according to the IMF. Then in the first eight months of 2019, the economy grew further by 5%, slightly up from a 4.8% expansion in the same period last year.

Despite this, NBG Governor Koba Gvenetadze expects the economy to actually expand by 4.5% this year, lower than the earlier growth forecast of at least 5%, mainly due to the dispute with neighboring Russia and several anti-government protests since last year.

Georgia gdp inflation
Standard & Poor’s upgraded Georgia’s long-term foreign and local currency sovereign credit ratings from “BB-” to “BB” in October 2019, with a stable economic outlook, following a similar upgrade by Fitch Ratings in February 2019.

According to the ratings agency, Georgia still managed to grow strongly in recent months despite volatile external and internal political environment. “This resilience partly reflects the economy’s success in attracting funds from abroad to finance its investment needs and its external deficits,” said S&P.

Nationwide unemployment fell to 12.7% in 2018, down from 13.9% in 2017 and the lowest level in 15 years, based on figures from the National Statistics Office of Georgia (Geostat). The jobless rate declined further to 12% in the first half of 2019.

The total number of unemployed also dropped 11.1% y-o-y to 245,700 people last year.