Georgia’s house price growth continues to accelerate

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.

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.

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’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.

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.

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.

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