Number of transactions
2,705 apartments were sold in Tbilisi in Apr-23 down by 23.4% y/y (-24.9% m/m). Sales were down in all types of apartments (primary, secondary market new projects, secondary market old projects), reflecting last year high base effect as well as reduced demand. In Apr-23, the key characteristics of the market were as follows:
We expect moderate real estate price growth as:
• input costs growth eased and
• currently there is no evidence that migrants switched to buying apartments
In 2023 we expect real estate price growth at 5% y/y in GEL and at 8% in USD terms.
After extraordinary growth in 2022, we anticipate stabilization in rent market - close to zero growth of rents in both GEL and dollar terms in 2023.
In 2023, we expect 100% recovery in tourist trips compared to 2019, while tourism revenues to grow 15% y/y to US$ 4bn.
Executive summary
We estimate market size of construction materials and home improvement sector at US$ 3.4bn in 2021, posting CAGR of 5.2% over 2017-21 (+12.0% in GEL). Out of this, construction materials market size is US$1.3bn and home improvement sector size is US$ 2.1bn.
Tbilisi real estate market drastically improved in September 2020 along with strengthening economic recovery. Key takeaways from the report include
In 2Q20, real estate fundamentals were negatively affected by Covid-19 with double digit contraction in GDP in April-May, weakening GEL and inflationary pressures. Apartment sales contracted sharply in April and May, however with lockdown measures being lifted reduction slowed in June, highlighting first signs of recovery. Importantly, drop in sales was more pronounced in new apartment category as market was waiting for government’s mortgage interest rate subsidy program, which became effective from July 2020.
The demand for housing accelerated in Jan-Feb 2020 helped by last year’s low base and record low FX mortgage rates, before plummeting again in March due to Covid-19. Notably, apartment sales continued solid growth in 1st half of March 2020, before state emergency and lockdown was announced. In March 2020, real estate fundamentals were sharply affected by Covid-19 outbreak, putting real estate sales under pressure.
Despite strong development in recent years, Tbilisi’s real estate stock is outdated and still dominated by old buildings. Less than 25% of existing residential, retail and office real estate is built according to modern standards, demonstrating the sector’s strong growth potential.
Residential – Promising fundamentals
Office – Price-to-quality set to rise
Retail – Fuelled by consumer behavior
Hotels – Need to attract high-spending tourists
Development land – Prices are rising
Georgia is the 8th most attractive developing country for retail expansion in 2013, according to AT Kearney. The rising number of active businesses and higher purchasing power in recent years are correlated with the development of retail real estate in Georgia. Currently, open-air markets and bazaars hold the largest share of Tbilisi retail space at 47% (c.386,000m2), but based on the experience of other developing markets, the popularity of shopping centers will begin weeding them out.
