Georgia’s housing market remains robust, buoyed by strong demand and limited supply.
During the year to Q3 2022, the overall residential property price index rose strongly by 10.7%, up from year-on-year increases of 4.5% in Q2 and 3.4% in Q1, based on figures released by the National Statistics Office of Georgia (Geostat). However, when adjusted for inflation, prices actually declined slightly by 0.8% over the same period.
Georgia’s house price annual change
On a quarterly basis, nationwide residential property prices increased by 3.2% (2% inflation-adjusted) in Q3 2022.
By property type:
- For flats, prices rose by 10.9% (-0.6% inflation-adjusted) in Q3 2022 from a year earlier, following y-o-y increases of 8.2% in Q2 and 4.5% in Q1.
- For detached houses, prices were up 10% (-1.3% inflation-adjusted) y-o-y in Q3 2022, after falling by 3.5% in Q2 and increasing slightly by 1% in Q1.
In Tbilisi, Georgia’s capital, residential property price movements vary considerably per district and property type. For flats, Mtatsminda saw the biggest y-o-y price growth in Q3 2022, at 20.6%, followed by Vake (14.3%) and Nadzaladevi (6.9%). Modest to minimal price increases were seen in Saburtalo (4.8%), Samgori (3.2%), and Isani (0.2%). In contrast, prices of flats declined in Gldani (-10%), Krtsanisi (-9.9%), Didube (-3.9%), and Chughureti (-3.2%).
For detached houses, on the other hand, Didube registered a huge price increase of 40.4% y-o-y in Q3 2022, followed by Samgori (26.1%), Krtsanisi (22.9%), Isani (13.3%), Gldani (11.1%). Single-digit price rises were recorded in Saburtalo (8.2%), Nadzaladevi (4.2%), and Mtatsminda (1.6%). House prices fell in Vake (-8.6%) and Chughureti (-1.5%).
Mtatsminda remains the most expensive district in Tbilisi, with the average price of flats and detached houses at GEL 4,931 (US$1,798) per sq. m. in Q3 2022, according to Geostat. It was followed by Vake, with an average flat price of GEL 4,129 (US$1,506) per sq. m. and a detached house price of GEL 3,208 (US$1,170) per sq. m.
RESIDENTIAL PROPERTY PRICES IN TBILISI PER DISTRICT, Q3 2022
|GEL/ sq.m||USD/ sq. m||y-o-y change||GEL/ sq. m||USD/ sq. m||y-o-y change|
|Sources: National Statistics Office of Georgia, Global Property Guide|
Overall, the residential real estate market is expected to continue growing robustly during the full year of 2022, despite the Russia-Ukraine war. Residential property prices will rise by 11% while transactions will increase by 14% this year, said Irina Kvakhadze, Head of Research at TBC Capital.
“The Russian-Ukrainian war changed our predictions. According to our current scenario, Russia is not completely sanctioned and it still manages to generate revenue, makes energy exports. Against this background, according to the research forecast, in 2022 we will have an 11% increase in prices on the real estate market. As for transactions, a 14% increase will be observed in these directions. All this will increase the real estate market by 26%,” said Kvakhadze.
During 2021, Georgia’s economy grew strongly by 10.4%, fully offsetting the 6.8% contraction seen in 2020 due to the Covid-19 pandemic. The country’s economic recovery continued this year, registering an annual real GDP growth rate of 14.9% in Q1 and 7.1% in Q2 2022. As such, the Asian Development Bank (ADB) recently upgraded its 2022 growth forecast for Georgia to 7%, from its earlier estimate of 3.5%. It also raised its 2023 growth projections from 5% to 6%.
The International Monetary Fund (IMF) is even more optimistic, projecting a 9% growth in Georgia this year.
Sales transactions surging
In September 2022, there were 663 new apartments sold in Tbilisi, up by 18% from a year earlier, according to TBC Capital. Likewise, sales for existing apartments also increased 33.4% y-o-y to about 3,100 units. In the first nine months of 2022, sales of both new and old apartments in the capital city rose by 5.5% and 25.5% y-o-y, respectively.
“In September 2022, the number of transactions was higher relative to September 2021 in all districts. The top 3 districts with the largest YoY growth of transactions were Krtsanisi (+94%), Mtatsminda (+67%), and Didi Dighomi (+44%),” said TBC Capital.
Subartalo accounted for the largest share of the total residential property transactions in Tbilisi, at 19%, followed by Didi Dighomi, with an 18.4% share.
Demand started to recover last year, with the total number of apartments sold in Tbilisi surging by 35% y-o-y to about 38,700 units. This was in sharp contrast to the 22% decline seen in 2020. Likewise, the total area of apartments sold also increased by 33.6% to 2.6 million sq. m. in 2021 from the prior year.
Aside from strong domestic demand, foreign homebuyers are expected to return to the market, amidst the easing of pandemic-related travel restrictions.
Foreigners can buy both residential and commercial real estate in Georgia, but cannot own agricultural land.
Tourism continues to recover
In the first nine months of 2022, there were about 3.89 million visitor arrivals in Georgia, almost three times the figures in the same period last year and up by 144% from two years ago, according to the Georgian National Tourism Administration (GNTA).
However, it remains far below its pre-pandemic levels. In Jan-Sept 2019, visitor arrivals reached 7.24 million people.
The largest number of visitors in the first nine months of 2022 came from Russia, which accounted for about 20% of total arrivals. It was followed by Turkey and Armenia, with 14% and 13.4% shares, respectively.
International travel receipts reached US$2.52 billion (US$917.03 million) in the first three quarters of 2022, up by 191% from last year and by 404% two years ago, based on figures from the National Bank of Georgia. It is also at par with the same period in 2019 before the pandemic.
“In September 2022, the growth of international travel receipts overtook the 2019 level by 18%,” said TBC Capital in its September 2022 Tourism Monthly Watch report. “The share of neighboring countries in international travel receipts reached the pre-pandemic level of 42% in September 2022. The significant increase in the share of Russia is the main reason for such a marginal difference as Turkey, Armenia, and Azerbaijan are still behind their pre-pandemic level. The share of Ukraine in international travel receipts surpassed the pre-pandemic level.”
Georgia’s tourism sector has been growing by almost 13% annually in the past decade, before the Covid-19 pandemic.
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.
Construction activity improving
Construction activity in Georgia is increasing, with the total number of building permits rising by 5.6% to 10,095 in 2021 as compared to the prior year, based on figures released by the National Statistics Office of Georgia. In terms of volume, permissions granted for the construction of buildings were up sharply by 42.8% y-o-y to 7.43 million sq. m. last year.
Tbilisi accounted for almost half of the total construction permits last year. It was followed by the Mtskheta-Mtianeti region, with a 9.2% share; Kvemo Kartli region, with an 8.5% share; and the Imereti region, with a 7.9% share.
“It should be noted that in 2021, permissions were issued for the construction of multifunctional residential complexes, hotels, trade facilities, industrial enterprises, agricultural objects and other buildings. The relatively large share of the permissions granted hold the multifunctional residential complexes,” said the national statistics agency.
During 2021, there were 2,347 buildings completed, up by 10% from a year earlier. Likewise, the volume of completions also increased by 3.9% y-o-y to 1.76 million sq. m. over the same period.
By regions, Tbilisi accounted for the largest share - 29.5% of the total completions. It was followed by Kakheti (12.3% share), Mtskheta-Mtianeti (11.7% share), and Kvemo Kartli (9.5% share).
In Tbilisi, the total apartment stock stood at around 300,000 units last year. However, the city’s housing stock is already relatively old, with around 81% of the total built before 1991.
High homeownership rate
Georgia has currently a homeownership rate of about 92%, one of the highest in the Commonwealth of Independent States (CIS) and the European Union. The EU-27 average was 69.7%.
Gori, the regional capital of Shida Kartli, has the highest homeownership rate in the country at 94.9% last year, 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%.
Mortgage interest rates gradually increasing
In September 2022, the average interest rate on GEL-denominated mortgage loans was 12.29%, up from 12.27% a year earlier and 10.98% two years ago, according to the National Bank of Georgia (NBG).
By maturity, in September 2022:
- Up to 1 year: 15.29%, sharply from 12.55% a year earlier and 11.72% two years ago
- 1-2 years: 12.88%, up from 12.67% a year ago and 11.27% two years earlier
- 2-5 years: 12.57%, up from 12.48% in September 2021 and 11.31% in September 2020
- 5-10 years: 12.44%, down from 12.52% a year earlier but still up from 11.24% two years ago
- More than 10 years: 12.11%, almost at par with 12.13% a year earlier but higher than the 10.79% two years ago
Likewise, the average interest rate for foreign currency-denominated mortgage loans stood at 5.85% in September 2022, up from 4.55% in September 2021 and 5.79% in September 2020, based on figures from the central bank.
Foreign currency-denominated loans, September 2022:
- 1-2 years: 6.64%, up from 4.85% a year ago and 6.71% two years earlier
- 2-5 years: 6.36%, up from 5.15% in the previous year but slightly down from 6.43% two years ago
- 5-10 years: 5.78%, from 4.77% a year earlier and 5.81% two years ago
- More than 10 years: 5.83%, up from 4.46% a year earlier and 5.77% two years ago
The NBG kept its policy interest rate unchanged at 11% in October 2022, following four consecutive rate hikes of a cumulative of 300 basis points since March 2021, in an effort to tame inflation. Nationwide inflation eased to 10.6% in October 202, down from 11.5% in the previous month and the softest rate since June 2021, as price increases for transport, food, and other commodities slow.
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, in 2021, the mortgage market continued to expand, albeit at a much slower pace of just 6%.
As a percent of GDP, the size of the market continuously expanded from 7.6% in 2015 to 17.2% in 2020, based on Global Property Guide estimates. Then it shrunk to about 14.9% of GDP in 2021.
In October 2022, the total amount of mortgage loans outstanding rose by a modest 5.8% y-o-y to GEL 9.32 billion (US$3.39 billion), buoyed by strong growth in mortgage loans denominated in domestic currency. Over the same period:
- GEL-denominated mortgage loans outstanding surged 24.4% y-o-y to GEL 5.09 billion (US$1.85 billion), according to the National Bank of Georgia.
- Foreign-currency-denominated mortgage loans outstanding fell by 10.4% y-o-y to GEL 4.23 billion (US$ 1.54 billion).
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 to issue 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$364) income per month: loan with monthly payments that do not exceed 35% of income or GEL 350 (US$128)
- GEL 1,000 (US$364) to GEL 2,000 (US$729) income per month: monthly payments do not exceed 45% of income or GEL 900 (US$328)
- GEL 2,000 (US$729) to GEL 4,000 (US$1,458) income per month: monthly payments do not exceed 55% of income or GEL 2,200 (US$802)
- More than GEL 4,000 (US$1,458) income per month: loan with monthly payments which do not exceed 60% of income
High rental yields, rising rents
In September 2022, rental yields in Tbilisi stood at an average of 11.1%, up from 10.7% in the previous month and 7.2% a year earlier, according to TBC Capital.
“The rental yield increased slightly in September 2022 relative to the previous month (+0.4 pp), since rent prices showed higher growth than sale prices,” said TBC Capital.
By district, Didi Dighomi recorded the highest rental yields of 14.5% in September 2022, followed by Isani (13.4%) and Gldani (12.3%). Rental yields were also high in Didube (11.9%), Nadzaladevi (11.8%), Krtsanisi (11.4%), Samgori (11.4%), Chughureti (11.2%), Saburtalo (10.5%), Vake (9.8%), and Mtatsminda (8.5%).
Rents are accelerating. In September 2022, the monthly average asking rent in Tbilisi reached US$9 per sq. m., up by a whopping 73.5% from the same period last year, based on figures released by TBC Capital.
“Asking rent price reached new highs in September 2022,” said TBC Capital.
“Rent prices stayed considerably higher relative to the same period of 2021. The data does not suggest that migration impact on rents is concentrated in any specific district. YoY growth exceeded 70% in almost all districts. In MoM terms, Chughureti showed the highest growth in rent prices (+7.1%),” TBC Capital noted.
In September 2022, the number of active listings in Tbilisi’s Airbnb market rose by 8.9% from the previous month but was still 24% below the pre-pandemic level.
With recovering tourism, Tbilisi’s housing rental market, particularly the short-term segment, is expected to continue growing in the medium term. The large influx of migrants fleeing war is also adding more pressure to rental prices in the country, especially in Tbilisi.
The Georgian economy bounced back quickly
In 2021, Georgia’s economy grew strongly by 10.4% from a year earlier, fully offsetting the 6.8% contraction seen in 2020 due to the Covid-19 pandemic. The country’s economic recovery continued this year, registering an annual real GDP growth rate of 14.9% in Q1 and 7.1% in Q2 2022. The slowdown in Q2 was mainly attributed to the fallout from the Russia-Ukraine war since Georgia has close economic ties with both countries.
“Georgia has seen significant growth in tourism and exports which indicates that the country is overcoming the adverse effects of the pandemic,” said ADB Country Director for Georgia Shane Rosenthal. “ADB supports Georgia’s infrastructure and social development to lower market access costs and improve economic opportunities. Georgia could also benefit from ensuring a conducive business environment to attract sustained investments, and promoting technology and innovation in the business and agriculture sectors.”
Recently, the Asian Development Bank (ADB) upgraded its 2022 growth forecast for Georgia to 7%, from its earlier estimate of 3.5%. It also raised its 2023 growth projections to 6%, from 5%. The International Monetary Fund (IMF) is even more optimistic, projecting a 9% growth in Georgia this year.
Before the pandemic, the economy has been expanding by an annual average of 4.9% from 2010 to 2018.
The fiscal deficit is projected to fall to below 4% of GDP this year, down from 6.1% in 2021, thanks to solid economic growth and the easing of pandemic-related measures. Likewise, public debt has declined from about 49.5% of GDP to 47%, indicating partly reduced public borrowing, according to the ADB.
Inflationary pressures are now decelerating. In October 2022, overall inflation stood at 10.6%, down from 11.5% in the previous month and 12.8% a year earlier, according to the National Statistics Office of Georgia. From an annual average of just 2.9% in 2011-20, inflation surged to 13.9% in 2021, amidst a sharp increase in transport costs, and food and commodity prices.
Nationwide unemployment fell to 18.1% in Q2 2022, from 19.4% in the previous quarter and 22.1% 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 also dropped by a huge 18.3% y-o-y to 281,600 people in Q2 2022.
- Residential Property Price Index (National Statistics Office of Georgia): https://www.geostat.ge/en/modules/categories/698/residential-property-price-index
- Residential Real Estate in Tbilisi, September 2022 Monthly Watch (TBC Capital): https://tbccapital.ge/static/file/202210211213-tbilisi-residential-market-monthly-watch-10.2022.pdf
- Tbilisi Residential Real Estate Monthly Watch December 2021 (TBC Capital): https://tbccapital.ge/static/reports/uploads/files/TbilisiResidentialMarketMonthlyWatch-31.01.2022.pdf
- How much will the real estate market grow in Tbilisi in 2022 – TBC Capital (Business Media): https://bm.ge/en/article/how-much-will-real-estate-market-grow-in-tbilisi-in-2022---tbc-capital/105974
- Information about Permissions Granted for Construction and Completed Objects (National Statistics Office of Georgia): https://www.geostat.ge/media/42929/Inf-about-Permissions-Granted-for-Construction-and-Completed-Objects_2021.pdf
- Tourism Statistics (National Statistics Office of Georgia): https://www.geostat.ge/en/modules/categories/100/tourism-statistics
- International Visitor Survey (Georgian National Tourism Administration): https://gnta.ge/statistics/
- Residential Real Estate https://tbccapital.ge/static/file/202210311626-tbilisi-residential-market-monthly-watch-update-31.10.2022.pdf
- Georgian Economy to Grow 7% in 2022 — ADB (Asian Development Bank): https://www.adb.org/news/georgian-economy-grow-7-2022-adb
- Georgia GDP Annual Growth Rate (Trading Economics): https://tradingeconomics.com/georgia/gdp-growth-annual
- Employment and Unemployment (National Statistics Office of Georgia): https://www.geostat.ge/en/modules/categories/683/Employment-Unemployment
- Consumer Price Index (Inflation) (National Statistics Office of Georgia): https://www.geostat.ge/en/modules/categories/26/cpi-inflation
- Statistics Data (National Bank of Georgia): https://nbg.gov.ge/en/statistics/statistics-data
- Tourism: Monthly Watch, September 2022 (TBC Capital): https://tbccapital.ge/en/publications/all-publications/singleview/30004699-tourism-monthly-watch
- 10,095 building permissions granted in Georgia in 2021 (Agenda.ge): https://agenda.ge/en/news/2022/221
- Georgia At a Glance (International Monetary Fund): https://www.imf.org/en/Countries/GEO