Armenia: The Challenges of Growth
Armenia: The Challenges of Growth


by Julia Hakobyan

If, as in other societies, real estate prices are an indicator, Armenia has entered a Golden Age in home buying. Or in home selling, rather, as the years of double-digit Gross Domestic Product have paralleled a dramatic rise in the cost of home-buying.

Over the past decade, real estate prices—starting from a low point of the post-Soviet collapse—have increased tenfold, reaching amounts comparable to some European countries.

This summer, the average price for one square meter of real estate in the center of Yerevan increased by $237 over 2006, reaching an all-time high of $1,337. The depreciation of the dollar (down by 15 percent in the past year) is to be considered, but for comparison's sake: The international standard determining survival—the "consumer basket"—is set at $1,357 in Armenia. In other words: One square meter of prime real estate is only $20 less than the minimal annual income for living. (In neighboring Tbilisi, Georgia—also experiencing a wave of new construction—a square meter averages about $1000.)

Contrary to estimated value in Soviet times, ground floors are now a sought-after location for speculative buying, as the free market has brought a demand for easily accessible retail space. In the center of Yerevan, first-floor space can cost up to $3,000 per square meter.

"There is a great demand in the city for commercial spaces and the prices for the ground floor are unpredictable," says Vruyr Penesian, director of VVP real estate agency. "In fact, only few such places remain in the center and are now valued at remarkable prices, reaching $1 million for a 300 square-meter space."

And while the center of the city demands the highest sums, the pattern of increase is rippling outward. In the Arabkir district on the north-northwest border of the center, prices rose (on average) by $222 per square meter to $1,090.

Citywide, the average price for real estate is about $770 per square meter. But "bargain" prices, previously standard for prime locations, are to be found now only in the distant suburbs, such as Erebuni or Malatia-Sebastia districts where one square meter is offered for $360.

Despite some predictions that high prices for real estate will freeze the market, the number of property deals has been steadily growing along with the prices.

In 2000, 33,233 property transactions were registered in Armenia. This year, 10,000 have been registered monthly. This July, for example, 18 percent more transactions took place than in the same month last year. Sixty-six percent of all transactions took place in Yerevan.

At least 550 deals for private homes were concluded in June, an increase of 11 percent over the previous month, and up 25 percent over the same month in 2006.

In a country where the average salary is $177 per month, a surge in real estate transactions might seem unlikely. Real estate agents, though, say there are several reasons which pushed the market into an industry niche that is inconsistent with living standards for the general population.

The first noticeable stir in the real estate market in Armenia was registered in 1995 when men who had left for Russia came back with money and made investments in property.

Most often in those days, shopping for an apartment started on Victory Bridge (crossing Hrazdan Gorge in front of Ararat Brandy factory). There, sellers would gather on the weekend and line the bridge, with details of their property scribbled onto cardboard strapped around their necks. (A similar sort of "tun shuka"—home market—still exists today where shoppers pay 300 drams, about $1, to match-make with private sellers, bypassing the middleman and his commission.) Owners also pasted notices on metro-station walls or along popular walkways.

Now, 243 real estate agencies registered in Yerevan have changed the old process. And even though ex-migrants from Russia are no longer in the major group of buyers, real estate agents say that the market has advanced largely due to money originating in Russia.

According to realtors, one of the main stimuli for the price increase is the continuous investment from abroad. Non-Armenians, Diasporan Armenians and Armenians who earn money abroad, see an attractive market in Armenia, regardless of whether they ever plan to live in the country. Prices that are unaffordable to 90 percent of the local population still are inexpensive by many European and North American standards.

Penesian says that although most locals cannot afford to buy at market prices, they nonetheless benefit from the boom. Many, he says, sell their homes at premium prices, buy less expensive property, and pocket the profit.

It is worth noting, too, that most if not all properties now being sold were "given" to the owners by the Soviet state. During Soviet times, sale of government-issued property was forbidden. Trading of property was allowed, and a black market existed whereby money was unofficially exchanged for upgrades, but the current situation remains a new phenomenon 16 years after independence.


With the law on privatization in 1991, citizens became full-fledged owners of their property. But events following independence—including war in Karabakh, energy crisis, political uncertainty, unemployment—caused an exodus that contributed to Armenia's first real estate "market."

During the early-to-mid 1990s, there was a saying in Armenia: "Apartment for sale: One-way ticket to America."

Now, the realtor says that the middle class of society, a small but still growing segment of the Armenian population, has heightened expectations for living standards, compared to the previous generation, and has changed the buying demographic. Even those without excessive wealth are willing to pay top dram, understanding the value of investment.

Banks are helping make the investments a reality.

Armenians, previously a society suspicious of lending or borrowing except from friends or relatives, have embraced the concept of mortgages. Generally, banks offer 10-year loans based on a 25-percent down payment and interest rates ranging from 12-15 percent. At least one bank has a modified plan, offering loans for only 15-percent down payment and a 20-year mortgage. The offer only applies, however, to newlywed couples, or to the purchase of newly built property.

Penesian's agency deals mostly with "elite" apartments and luxury homes and works now with some 20 developers. His clients are largely from Russia, the United States, the European Union and the Middle East. Foreigners typically are more interested in the newly constructed luxury buildings.

The oft-used term "elite" has become so entrenched in Yerevan real-estate lingo that it has nearly lost its meaning. "Elite" has replaced "VIP" as a mark of prestige. (Indeed, it is the new catch-phrase of Yerevan—"elite" restaurants, "elite" taxi service, "elite" schools, and a magazine called "Elite Life.") Penesian and other brokers have found it necessary to create a Yerevan-specific real-estate vocabulary to simplify the selection process for clients who may not even be in Armenia.

Before there was a need for real estate agencies, property was defined according to its era. And, according to the era, all were identical.

"Stalin" houses, built before 1960, were the most desired during Soviet times. Made of stone, durable, spacious and comfortable "Stalin" apartments are the more expensive properties, following the "elite." Mostly located in the communities of Kentron and Arabkir, such units are characterized by high ceilings. A studio apartment with French balcony is priced between $50-80,000, depending on location.

"Khrushchev" buildings, from the reign of Nikita, reflect the period when Yerevan became a Soviet warehouse of humanity, when buildings were put up with practicality rather than aesthetics in mind.

Sometimes referred to as boxes, the 1950-70 era apartment complexes infamously were among the first casualties of the Spitak earthquake, a testament to their shoddy construction. Half as big as the "Stalin" units, they are also half the price.

While prices for property reflect the desirability for living in the center of Yerevan, there is a growing trend among the well-off to build or buy outside the city. Areas such as Arinj and Jrvezh—traditionally sites for summer homes—are now becoming suburbs of sorts for those with the means to create their own conveniences.

Real estate agent Vladimir Khachatrian conjectures than, in a few years, the town of Abovian—some 15 kilometers from the edge of the capital—will become a Yerevan bedroom community.

Khachatrian, a 22-year-old marketing manager, opened "Lav Arajark" (Good Offer) last year in Abovian. The young realtor says it is perfectly situated to be a commuter town.

"Abovian is the nearest town to Yerevan with developed urban infrastructure and yet low prices," he says. "Life is much cheaper here compared to Yerevan—from food to real estate."

He expects, too, that as Yerevan becomes more congested, more polluted and more snarled in traffic, young Yerevan families will come to appreciate the cleaner air and less hectic pace of the nearby town (currently with about 30,000 residents).

"Public buses go from Yerevan to Abovian every five minutes," says Khachatrian. "Reaching Abovian by highway is much easier and faster than reaching some districts within Yerevan."

Prices for real estate seem to indicate that others share Khachatrian's vision.

From 2006-7, the price for one square meter of property in Abovian increased 60 percent, from $250 to $400.

Khachatrian says that about 70 percent of his buyers are from Yerevan. People make good deals by selling their apartments in Yerevan and moving into less expensive properties in Abovian so that they can live on the money they have made from the sale.

Now there are fewer "one-way ticket" clients for professionals such as Penesian and Khachatrian. Now, too, a one-way ticket to America is worth about one square meter of Yerevan real estate.

Originally published in the November 2007 ​issue of AGBU Magazine. Archived content may appear distorted on your screen. end character

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