Georgia

Georgia’s house price growth continues to accelerate

Lalaine C. Delmendo

Georgia’s housing market remains fundamentally healthy, supported by strong economic growth and gradually falling interest rates. House prices continue to accelerate, amidst stabilizing but still robust property demand.

During 2023, the overall residential property price index soared by 12.78%, following year-on-year increases of 14.29% in 2022 and 1.17% in 2021, based on figures released by the National Statistics Office of Georgia (Geostat). The inflation-adjusted price increase was not significantly different, at 12.34% over the same period.

Quarterly, nationwide residential property prices rose by 2.88% (2.41% inflation-adjusted) in Q4 2023.

By property type:

  • For flats, prices rose strongly by 14.2% (13.8% inflation-adjusted) in 2023 from a year earlier, following a y-o-y increase of 12.5% in 2022.
  • For detached houses, prices were up 8.6% (8.2% inflation-adjusted) y-o-y in 2023, after experiencing a price surge of 18% in 2022

Georgia’s house price annual change

In Tbilisi, Georgia’s capital, residential property price movements vary considerably per district and property type. For flats, Isani saw the biggest y-o-y price growth in 2023, at 22.6%, followed by Gldani (20%), Nadzaladevi (19%), Didube (17.2%), Vake (16.6%), and Samgori (16.5%). Strong price increases were also seen in Krtsanisi (14.7%), Saburtalo (13%), Mtatsminda (11.9%), and Chughureti (8.3%).

For detached houses, on the other hand, Mtatsminda registered the biggest annual price increase of 35.8% y-o-y in 2023, followed by Chughureti (27.5%), Gldani (20.5%), and Samgori (11.4%). More modest house price growth was experienced in Vake (6.1%), Nadzaladevi (5.6%), Saburtalo (4.4%), and Krtsanisi (3.1%). In contrast, house prices fell in Didube (-6%) and Isani (-0.1%) last year.

Georgia Residential Property Price Index graph

Mtatsminda remains the most expensive district in Tbilisi, with the average price of flats and detached houses at GEL 5,528 (US$2,063) per sq. m. and GEL 4,424 (US$1,651) per sq. m, respectively, in 2023, according to Geostat. It was followed by Vake, with an average flat price of GEL 4,900 (US$1,829) per sq. m and a detached house price of GEL 3,301 (US$1,232) per sq. m.

RESIDENTIAL PROPERTY PRICES IN TBILISI PER DISTRICT, 2023
District Flats Detached houses
GEL/sqm USD/sqm y-o-y change GEL/sqm USD/sqm y-o-y change
Gldani 3,238 1,208 20.0% 2,107 786 20.5%
Didube 3,375 1,259 17.2% 2,966 1,107 -6.0%
Vake 4,900 1,829 16.6% 3,301 1,232 6.1%
Isani 3,273 1,221 22.6% 2,525 942 -0.1%
Krtsanisi 3,577 1,335 14.7% 2,723 1,016 3.1%
Mtatsminda 5,528 2,063 11.9% 4,424 1,651 35.8%
Nadzaladevi 3,361 1,254 19.0% 2,122 792 5.6%
Saburtalo 3,767 1,406 13.0% 2,982 1,113 4.4%
Samgori 3,065 1,144 16.5% 2,117 790 11.4%
Chughureti 3,480 1,299 8.3% 2,814 1,050 27.5%
Sources: National Statistics Office of Georgia, Global Property Guide

 Overall, the residential real estate market is expected to remain healthy this year, supported by continued economic growth.

“Fundamental demand drivers for residential real estate will remain positive in 2024. Price and sales in 2024 will stabilize after a significant boost in 2022. Significant increase of construction permits that took start in 2023 may impact key market parameters in 2024,” said TBC Capital.

The overall economy is fundamentally strong. In 2023, Georgia’s economy grew robustly by 7.5% from a year earlier, following annual expansions of 10.1% in 2022 and 10.5% in 2021, primarily buoyed by strong tourism, coupled with growth in trade, financial services, and investments, according to the International Monetary Fund (IMF).

The IMF expects the Georgian economy to grow by 5.7% this year and by another 5.2% in 2025. However, the Asian Development Bank (ADB)’s forecast is more conservative, projecting a real GDP growth of around 5% this year.

Property demand stabilizing

During 2023, apartment sales transactions in Tbilisi totaled 38,700 units, down by 8.5% from the record-high of 42,300 units sold a year earlier, based on figures released by TBC Capital. Despite this, it remains the second-highest level seen in recent years. Sales for old and new apartments fell by 8.8% and 7.3%, respectively.

“2023 can be considered a stabilizing year for the residential real estate market, after a “boom” from the second half of 2022. Migration, GEL appreciation, and an increase in construction costs have pushed sales prices up since February 2022, the sales growth was supported by the direct and indirect impact of migration as well. As these impacts have mostly faded out, the market has started to stabilize since the second half of the year,” said TBC Capital.

The sales trend continued this year. In February 2024, the total number of sales transactions was 3,358 units, down slightly by 1% as compared to the same period last year, according to TBC Capital’s Residential Market Monthly Watch report.

By property type:

  • Old apartments: 2,633 units sold in February 2024, at par with the previous year
  • New apartments: 725 units sold, down by 3% from a year earlier

“In February 2024, Didi Dighomi (24% share in total sales) took the top as the district with the highest number of sold residential properties in Tbilisi, followed by Saburtalo (18% share),” said TBC Capital.

“In terms of new apartment sales, Krtsanisi, Samgori, and Didi Dighomi showed significant annual growth. The highest number of new apartments were sold in Didi Dighomi. In the case of old apartment sales, Nadzaladevi and Didi Dighomi posted the highest growths,” TBC added.

Aside from domestic demand, foreign homebuyers are gradually returning to the market. Foreigners can buy both residential and commercial real estate in Georgia, but cannot own agricultural land.

Georgia Number of Apartments Sold in Tbilisi graph

Tourism continues to recover

In 2023, there were about 7.07 million international non-resident travelers in Georgia, a surge of more than 30% from a year earlier, its third consecutive year of growth since the Covid-19 pandemic, according to figures from the Georgian National Tourism Administration (GNTA).

However, it remains far below the pre-pandemic peak of 9.36 million visitor arrivals seen in 2019.

The largest number of visitors last year came from Russia, which accounted for about 20% of total arrivals. It was followed by Turkey and Armenia, with 19.7% and 13.6% shares, respectively.

International travel receipts rose by 17.3% to reach US$4.13 billion in 2023 from a year earlier, following strong increases of 182.5% in 2022 and 129.8% in 2021, according to GNTA. It is now also higher by 26.2% from the pre-pandemic record of US$3.27 billion receipts recorded in 2019.

Georgian Prime Minister Irakli Kobakhidze expects that revenues from international tourism will reach US$4.5 billion this year, with Georgian airports serving 6.8 million passengers, up from 6.2 million in 2023.

“In 2023, the tourism and airline industries in Georgia achieved record-breaking figures,” said Kobakhidze. “We have reasonable expectations that 2024 will be even more successful.”

Georgia International Travel Receipts graph

Georgia’s tourism sector has been growing by almost 13% annually in the past decade, before the Covid-19 pandemic. After plunging by 81.3% in 2020, international travelers increased to 7.7% in 2021 and another 188.5% in 2022, as travel restrictions were gradually lifted and economic activity returned to normal.

Tourism accounts for around 72% of service exports in the country’s balance of payments. In recent years, tourism revenues represent about 36% of total exports.

Georgia Visitor Arrivals graph

Residential construction activity mixed

Construction activity in Georgia showed mixed results, with residential building permits falling slightly while completions continue to rise strongly.

During 2023, the total number of permits issued for residential buildings dropped slightly by 1.8% y-o-y to 7,942, in contrast to annual increases of 10.5% in 2022 and 8.4% in 2021, based on figures released by the National Statistics Office of Georgia. Yet in terms of volume, permissions granted for the construction of residential buildings increased strongly by 22.8% to 7.2 million sq. m. over the same period.

Tbilisi accounted for more than 56% of the total residential construction permits last year. It was followed by the Mtskheta-Mtianeti region, with a 10.7% share; Kvemo Kartli region, with a 9.2% share; and Adjara administrative region, with a 6.4% share.

Georgia Permits Granted for Construction of Residential Buildings graph

On the other hand, the number of residential buildings completed surged by 19.8% to 1,991 in 2023 as compared to the prior year, following annual growth of 24.8% in 2022 and 18.5% in 2021. Likewise, the total volume of residential completions was up sharply by 23.6% y-o-y to 2.54 million sq. m. last year.

By regions, Tbilisi accounted for the largest share of 43.6% of the total residential building completions in 2023. It was followed by Mtskheta-Mtianeti (18.1% share), Kvemo Kartli (7.5% share), Kakheti (6.3%), and Shida Kartli (5.1%).

In Tbilisi, the total apartment stock stood at more than 300,000 units. However, the city’s housing stock is already relatively old, with around 81% of the total built before 1991.

Georgia Completed Residential Buildings graph

Mortgage interest rates gradually falling, following key rate cuts

In February 2024, the average interest rate on GEL-denominated mortgage loans was 11.49%, down from 13.15% a year earlier and 12.24% two years ago, according to the National Bank of Georgia (NBG).

By maturity, in February 2024:

  • Up to 1 year: 11.28%, sharply down from 14.76% a year earlier and still slightly lower than the 11.99% two years ago
  • 1-2 years: 12.35%, as compared to 13.52% a year ago and 12.53% two years earlier
  • 2-5 years: 12.35%, slightly down from 13.31% in February 2023 and 12.47% in February 2022
  • 5-10 years: 11.48%, down from 13.12% a year earlier and 12.42% two years ago
  • More than 10 years: 11.31%, down from 13.12% a year earlier and 12.12% two years ago

Georgia Mortgage Interest Rates graph

Interest rates for foreign-currency-denominated loans are more erratic. In February 2024, the average interest rate for foreign currency-denominated mortgage loans stood at 6.91%, slightly down from 6.98% a year earlier but up from 4.72% two years ago, based on figures from the central bank.

By maturity, in February 2024:

  • Up to 1 year: 11.38%, sharply up from 6% two years earlier
  • 1-2 years: 8.76%, up from 8.25% in the previous year and from 5.29% two years ago
  • 2-5 years: 7.31%, down from 7.86% in February 2023 but up from 4.92% in February 2022
  • 5-10 years: 6.95%, down from 7.58% a year earlier but up from 4.6% two years ago
  • More than 10 years: 6.83%, up from 6.74% a year earlier and 4.75% two years ago

The NBG lowered its policy interest rate by 75 basis points to 8.25% in March 2024, marking its sixth consecutive rate cut since April 2023 amidst rapidly slowing inflation.  

In March 2024, the overall inflation stood at 0.5% - well below the central bank’s target of 3%.

Amidst a low inflation environment, “the National Bank of Georgia continues to exit from its tight monetary policy stance, reducing the policy rate by 0.75 percentage points to 8.25 percent,” said the central bank. “Nevertheless, should factors amplifying inflation expectations and external sector risks become apparent, other things equal, maintaining the current tight stance for a longer period of further policy tightening may become necessary.”

Georgia Policy Rate graph

The mortgage market continues to grow, albeit at a slower pace

From 2016 to 2020, the total amount of mortgage loans outstanding surged by an annual average of 27%. However, market growth decelerated sharply since. The mortgage market expanded by 9% in 2021, 4% in 2022, and 10% in 2023.

The recent deceleration in mortgage growth can be partly attributed to the introduction of new regulations effective January 2019, before the Covid-19 pandemic, that restrict banks from issuing mortgage loans based on the borrower’s income and that the maximum term period should not exceed 15 years. The income group categories based on the new bank regulation:

  • Up to GEL 1,000 (US$373) income per month: loan with monthly payments that do not exceed 35% of income or GEL 350 (US$131)
  • GEL 1,000 (US$373) to GEL 2,000 (US$746) income per month: monthly payments do not exceed 45% of income or GEL 900 (US$336)
  • GEL 2,000 (US$746) to GEL 4,000 (US$1,493) income per month: monthly payments do not exceed 55% of income or GEL 2,200 (US$821)
  • More than GEL 4,000 (US$1,493) income per month: loan with monthly payments which do not exceed 60% of income

As a percent of GDP, the size of the market grew from 7.6% in 2015 to nearly 20% in 2023, based on Global Property Guide estimates.

In February 2024, the total amount of mortgage loans outstanding rose by 10.1% y-o-y to GEL 10.5 billion (US$3.92 billion), buoyed by strong growth in mortgage loans denominated in domestic currency. Over the same period:

  • GEL-denominated mortgage loans outstanding surged 19% y-o-y to GEL 6.48 billion (US$2.42 billion), according to the National Bank of Georgia.
  • Foreign-currency-denominated mortgage loans outstanding fell slightly by 0.8% y-o-y to GEL 4.06 billion (US$ 1.51 billion).

Georgia Mortgage Loans Outstanding graph

Falling rents, decreasing rental yields

Rents are declining. In February 2024, the monthly average asking rent in Tbilisi was US$12 per sq. m., down by 5% from the same period last year, according to a report published by TBC Capital.

Gross rental yields in Georgia, remain relatively good. In Q3, 2023 the average yield was 9.01%, since then it has fallen slightly, to 7.85% in Q1 2024, based on research conducted by the Global Property Guide in January 2024.

This was supported by the February 2024 report released by TBC Capital, which showed that rental yields in Tbilisi dropped to 10.5% in February 2024, down from 11.7% in the same period last year.

In Tbilisi, the Global Property Guide’s research revealed that gross rental yields ranged from 6% to 12.48% in Q1 2024, with a city average of 8.77%.

In the capital city’s major areas:

  • In Saburtalo, apartments offer gross rental yields ranging from 7.42% to 8.47% in Q1 2024
  • In Vake, gross rental yields ranged from 6.16% to 9.16%.
  • In Didi Digomi, apartments have high rental returns of around 7.32% to 12.48%.
  • Gldani offers rental yields from 8.18% to 11.26%
  • In Varketili, apartment rental yields ranged from 6.59% to 9.21%
  • In Isani, gross rental yields ranged from 6% to 9.65% in Q1 2024
  • Didube apartments offer rental yields ranging from 6.72% to 9.17%
  • In Nadzaladevi, apartments have rental yields between 6.5% and 8.82%.

Outside the city center, in Batumi, gross rental yields of apartments ranged from 5.08% to 9.49%, with a city average of 7.47%.

Georgia Rental Yields for 2-Bedroom Apartments in Tbilisi graph

High homeownership rate

Georgia has currently a homeownership rate of about 92%, one of the highest in the Commonwealth of Independent States (CIS).

Gori, the regional capital of Shida Kartli, has the highest homeownership rate in the country at 94.9%, followed by Telavi (93.8%), Poti (93%), Zugdidi (93%), Kutaisi (92.7%), Batumi (92.6%), Kobuleti (92.6%), and Rustavi (89%). Tbilisi had the lowest homeownership rate among Georgia’s major cities, at 84.5%.

Georgia Homeownership Rate by Cities graph

Robust economic growth, slowing inflation

In 2023, Georgia’s economy grew robustly by 7.5% from a year earlier, following annual expansions of 10.1% in 2022 and 10.5% in 2021, primarily buoyed by strong tourism, coupled with growth in trade, financial services, and investments, according to the International Monetary Fund (IMF).

“Georgia has weathered well multiple shocks since the Covid-19 pandemic, supported by increased tourism, transit trade, and financial inflows linked to Russia’s war in Ukraine and swift policy responses,” said the IMF.

“Growth remained above trend at 7.5 percent in 2023, driven largely by tourism, trade, construction, and financial services as well as continued strong investments. Growth is expected to ease to 5.7 percent in 2024, with consumption playing a larger role supported by strong real wage growth and employment,” added the IMF.

The IMF expects the Georgian economy to grow by 5.7% this year and by another 5.2% in 2025. However, the Asian Development Bank (ADB)’s forecast is more conservative, projecting a real GDP growth of around 5% this year.

Georgia GDP Growth and Inflation graph

The economy has been expanding by an annual average of 4.9% from 2010 to 2019 before suffering a contraction of 6.8% due to the Covid-19 pandemic.

The fiscal deficit was estimated at 2.4% of GDP in 2023, down from 3.1% in 2022, but far lower than the pandemic-induced deficits of 6% in 2021 and 9.3% in 2020. Likewise, the country recorded a government debt equivalent to 39.8% of GDP in 2023, according to the National Bank of Georgia, down from 41.3% in 2022, 52% in 2021 and 62.6% in 2020.

“The 2024 budget targets a deficit of 2.5 percent of GDP, with increased revenues from CIT for banks and new gambling taxes financing increased expenditures, including on higher wages, social benefits, and capital investments. Public debt is expected to remain below 40 percent of GDP in 2024 and over the medium term,” said the IMF.

In March 2024, the overall inflation stood at 0.5%, slightly up from 0.3% in the previous month but sharply down from 5.3% in the same period last year, according to the National Statistics Office of Georgia. From an annual average of just 2.9% in 2012-20, inflation surged to 9.6% in 2021 and to 11.9% in 2022, amidst a sharp increase in transport costs, and food and commodity prices. Inflation eased again to an average of 2.4% in 2023.

Nationwide unemployment fell to 15.3% in Q4 2023, from 15.6% in the previous quarter and 16.1%a year ago, based on figures from the National Statistics Office of Georgia (Geostat). The overall jobless rate averaged more than 22% in the past decade.

The total number of unemployed declined slightly by 0.4% y-o-y to 248,600 people in Q4 2023.

Georgia Unemployment Percentage graph

Sources:

Georgia - More data and information