Expansion of housing construction stimulates activity in many related industries.
Housing construction is going to become an important industry in the coming years, which will allow the Azerbaijani government to solve many social and economic issues.
As is known, each manat invested in the construction sector generates another four manats in related industries. Therefore, the construction sector can become an important industry in terms of creating new jobs, which is crucial against the backdrop of layoffs in the financial system and sales network.
Here we are talking primarily about housing. Despite a building boom in recent years, the need for housing still remains a priority for many families.
Thus, at the end of 2014, the amount of housing stock in Azerbaijan was 166m sq. m, or 18 sq. m per capita. In this respect, Azerbaijan’s indicators correspond to average figures of the CIS countries, where Kazakhstan (with 21 sq. m per person) and Russia (23 sq. m) are leaders, but are noticeably inferior to those of Europe (49.7 sq. m) and the USA (65 sq. m).
However, the volume of housing construction has been falling steadily over the past couple of years.
According to data of the Azerbaijani State Statistics Committee, the volume of housing built in 2015 amounted to 1.927m sq. m. This is less than in 2014, when builders commissioned 1.978m sq. m, and in 2013 (2.138m sq. m).
Meanwhile, by 1 December 2015, the population increased by 103,800 people, or by 1.1 per cent, compared with the beginning of 2015, to reach 9.699 million people.
It means that the demand for housing will remain relatively high in the coming years.
At the same time, housing construction should also be stimulated by the demolition of dilapidated houses in the country. Launched in 2014, the process of redevelopment in the Sovetskaya Street area in Baku’s Yasamal District is far from being completed.
In addition, the Cabinet of Ministers adopted a decision on the demolition and reconstruction of housing in the capital’s Binagadi and Qaradag districts within five years. In this case, it is intended that the residents of demolished houses be returned to their area of dwelling.
That is, development companies will be assigned appropriate plots, in the place of demolished houses, for building comfortable high-rise blocks, which will later accommodate residents of the demolished houses. Un-doubtedly, executive authorities will have to perform oversight of the quality of housing to be constructed.
Taking into account the location of the demolished houses, new housing can be categorized as economy class, which will enable many people needing to solve their housing problem to buy an apartment.
The Azerbaijani government’s decision to demolish old buildings and construct new housing points to the fact that this segment of the economy is becoming one of the most important for the socio-economic development of the country.
In this case, new jobs will be created not only in the construction sector, but also in other sectors, as the new tenants will be fitting their homes with furniture and other household items.
Thus, everything is clear with those who will receive new apartments in connection with the demolition. Now the question is, how will our other fellow citizens buy apartments in a cheap segment?
Currently, there is a slump in demand in the real estate market. The devaluation of the manat and the ensuing dollar hype have played a role in this. And we cannot expect a radical improvement in demand in any given period. This slump in demand has triggered off a decline in housing prices in local currency to the tune of 20 per cent, despite the devaluation. However, experts expect a rise in prices in manats taking into account the increasing cost of construction materials, most of which are imported into the country.
On the whole, experts predict that by the end of this year, prices in manats will stay the same, while the average price in dollars is likely to fall to 800-900 dollars per sq. m, compared to December 2015 prices. Thus, prices in dollars may drop almost twofold within one year. However, the impact of the exchange rate of the manat is still large in this segment.
It should be noted that the construction of new housing in the settlements of Bilacari, Lokbatan, Sahil and Puta under the dilapidated house demolition programme will also relieve the load on the central districts of Baku.
As a result of the construction boom in the centre of the capital, the operation of housing and communal services is made difficult here, and traffic jams on the roads occur periodically.
In general, the reduced demand in the property market can be revived by intensifying programmes on dilapidated house demolition and amending the rules of mortgage lending by the Azerbaijan Mortgage Fund (AMF). It has long been expected that the amount of mortgage loans provided by the AMF will be increased, while interest rates on them will be reduced, because 50,000 manats, which is the maximum amount that can be lent, does not correspond to market needs.
By the way, the beginning of mass construction on the periphery of the capital city can finally give an impetus to the building of new metro stations. However, it is a different aspect of the upcoming construction work to be dealt with by the country’s leadership.
BY: Fuad ALIYEV