Georgia | Residential Market Report 2014 ARCHI TOWER, TBILISI
Contents
Executive Summary 3
Georgia - Country Profile 4
Georgia Socio-Economic Overview 6
Georgia Residential Market Fundamentals 7
Tbilisi Residential Market Overview 8
Batumi Residential Market Overview 16
Mtskheta Residential Market Overview 19
Rustavi Residential Market Overview 22
Conclusions & Outlook 23
Appendix 1 24
Typical Lease Terms, Registration of Property, Construction Permits
Appendix 2 27
Primary Information Sources, Data Used for the Study, Definition and Assumptions
Disclaimer 29
Project Team 30
About Colliers International 31
Contact Information 32
2 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Executive Summary
GDP and money transfers from foreign countries. Ongoing and pipeline residential project in Tbilisi amounts almost 2.9 In recent years, Georgia has observed a significant increase of GDP. In million sqm under construction. During next two years supply will rise by 2013 the growth rate of GDP stood at 3.3% and reached USD 16.14 billion. 16,000 dwelling units and amount 360,000 dwelling units. In the last two years, strong demand has resulted in stalled projects being resumed. In 2013 money transfers from foreign countries grew by 11% and amounted to USD 1.48 billion. In the first half of 2014 the growth rate stood There are 112 residential real estate projects under construction in Batumi, at 2% compared with the same figure of 2013. The biggest proportion of which amounts 1.2 million square metres construction area and around money transfers is held by Russia, with 50%, after which comes Greece – 12,000 dwelling units. Suspended construction activity in Batumi stands at 14% and Italy with 8%. a significantly lower level than in Tbilisi.
Positive trend in mortgage lending. Growing demand in Tbilisi. During 2010 – 2011, the growth rate of mortgage lending amounted 39% Registered purchase transactions are following a positive trend in Tbilisi. and the volume of issued loans reached USD 314 million. In 2012 a 34% The average growth rate of selling transactions during last three years was decrease was observed in comparison with the previous year. In 2013, 8% in Tbilisi. The volume of registered transactions in 2013 amounted USD due to the marketing campaigns of commercial banks and reduced interest 829 million. In 2014 transaction volume increased by 6% in Tbilisi (USD rates the volume amounted USD 416 million. In 2014 growth rate of issued 882 million). mortgages amounted 30% comparing with the same figure in 2013, and reached USD 541 million. Selling price indices are increasing slightly. The average residential real estate selling price in Tbilisi grew from USD High tenure structure and average household size. 826 per sqm in Q1 2012 to USD 830 per sqm in Q4 2014. Home ownership in Georgia currently stands at 93%. Compared with other European countries it stands second only to Romania, with 96%. This is an Batumi has seen 6% price increase during last three years from USD 646 indication that the rental market development is very low. Although it can per sqm in Q1 2012 to USD 686 per sqm in Q4 2014. not be discounted that some of the population has not officially registered lease agreements. In Tbilisi the proportion of home ownership is 86%. The average selling price in Mtskheta is more volatile. Despite that by the end of 2014 the average price has increased by 49% comparing with Q1 Average household size in Georgia is still very high and has been around 2011, equaling to USD 418. Comparing to the same figure of Q3 2014 the 3.6 for the last few years. In the EU, the average household size is around average selling price increased by 14%. 2.4. The long-term forecast is that this figure will decrease as economic prosperity improves. Rustavi observed the 64% increase of average selling price during 2011- 2014. By the end of 2014 the mentioned index amounted to USD 386 per Tbilisi and Batumi are the main flows of new supply. sqm. Residential real estate development in Georgia is dominated by Tbilisi and Batumi. In the rest of country the future pipeline is very poor and current stock is mainly represented by Soviet Union period buildings.
3 GEORGIA | RESIDENTIAL MARKET REPORT 2014 G & A Logistics, Georgia – Country Profile Tbilisi
Introduction • Profit Tax (corporate tax 20% has been reduced to 15%) Georgia is located between Asia and Europe and occupies a land area of 69,700 sq. • Excise km. It neighbours Turkey to the southwest, Azerbaijan to the east, Russia to the north • Property Tax (1%) and Armenia to the south. • Customs Tax (0%, 5% or 12%) Georgia declared independence on 9 April 1991, following the dissolution of the Soviet These improvements have made Georgia one of the most attractive tax regimes Union. globally. In 2009, Forbes Magazine designated Georgia as the “4th Least Tax- Burdened Country”. Economy Since 2008 Georgia has initiated and concluded Avoidance of Double Taxation Georgia achieved robust economic growth between 2003-2014, averaging 6.3 percent Agreements with its major trade partners. Currently, Georgia has 46 active agreements. annually, following structural reforms that stimulated capital inflows and investment. The Additional reforms are projected to decrease tax rates even further in the next few reforms helped to improve the business environment, strengthened public finances, years. upgraded infrastructure facilities and liberalized trade. Growth was also supported by increased foreign direct investments (FDI) and was driven by capital accumulation and Population sound use of excess capacity rather than by net job creation, with productivity gains The Georgian population is approximately 4.49 million. This figure has grown since concentrated mainly in the non-tradable sectors. GDP per capita increased from $919 2006 by 2%. About 54% of the total population lives in urban areas and the in 2003 to $3,763 in 2014 (in current prices, 2014 - preliminary data). GDP growth rate urbanization rate has been increasing since 2006. amounted to 4.7% in 2014. According to IMF, Georgia has one of the highest 83.8% of the Georgian population are Georgians by ethnic origin. The second largest forecasted GDP growth rates among Eastern European countries and its neighbors share - 6.5% are Azeri, followed by Armenians – 5.7% and Russians – 1.5%. during 2014-2015. Major foreign investors in Georgia include: BP, Socar, Heidelberg Cement, RAKIA Group and MAF. GDP growth forecasts, 2014-2015 6% Government Georgia is a democratic, Presidential-Parliamentary republic whereby the President is 4% the Head of State and the Prime Minister is the Head of Government. As a result of the presidential elections held on October 27, 2013, Giorgi Margvelashvili was elected as the president from the coalition "Georgian Dream”. The new cabinet of 2% ministers was established in November, headed by Irakli Gharibashvili. According to the declared strategy, joining the EU and NATO are among the country's 0% top foreign policy objectives.
Tax system -2% To enhance Georgia’s Investment & Business Climate, the Government has 2014 2015 dramatically overhauled its tax system since 2004. By implementing a liberal reform Source: www.imf.org (World Economic Outlook-October 2014) agenda, Georgia has simplified its processes and has reduced the number of taxes from 21 in 2004 to only 6 today. Key Socio-Economic • Value Added Tax (from 20% has been reduced to 18%) Indicators 2010 2011 2012 2013 2014F • Income Tax (20%) Area 69 700 sq. km Population 2014 4.49 mln Capital Tbilisi Currency (code) Lari (GEL) GDP at current prices, mil. 11,636 14,438 15,846 16,140 16,890* USD GDP - Real Growth Rate 6.2% 7.2% 6.4% 3.3% 4.7%* GDP - Per Capita 2013 $2,623 $3,231 $3,523 $3,600 $3,763* Inflation rate (12 months 7.1% 8.5% -0.9% -0.5% 3.1% average) Unemployment rate 16.3% 15.1% 15% 14.6% N/A Total exports (mln. USD)- $1,677 $2,189 $2,375 $2,908 $2,861* FOB Total imports (mln. USD)- $5,257 $7,058 $7,902 $7,885 $8,596* CIF Trade surplus/deficit 2013 (3,580) (4,869) (5,527) (4,977) (5,735)* (mln. USD) FOB-CIF Exchange rate - USD/GEL 1.7826 1.6860 1.6513 1.6634 1.7659 Exchange rate - EUR/GEL 2.3644 2.3473 2.1232 2.2094 2.3462 *Preliminary data Source: www.geostat.ge www.nbg.ge www.imf.org
4 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Georgia – Country Profile Recent Developments Georgia. Iceberg Poti In June of 2014, the Association Agreement between Georgia and the European Union As an alternative to litigation, Georgia allows for third party arbitration. Georgian law was signed. This agreement aims to expand political and economic relations between also allows foreign companies to include provisions in their contracts (including those Georgia and the European Union and to gradually integrate Georgia into the European with Georgian entities) that allow for arbitration by international arbitration institutions. Union’s internal market. Georgia’s international ratings has been revised In 2014: Infrastructure & Transport • Standard & Poor’s: BB- Stable (Affirmed in May 2014) Located on the shortest route between Europe and Asia, Georgia’s transport system is • Moody’s: Ba3 Positive (Affirmed in August 2014) a key link in the historic “Silk Road.” • Fitch Rating: BB- Positive (Affirmed in October 2014) It is believed that long-term growth will stem from Georgia’s role as a transit state for The Heritage Foundation ranked Georgia the 22nd among 178 countries in Economic pipelines. Three pipelines currently exist: • The Baku-Supsa pipeline (GPC-Georgian Pipeline Company) runs 814 km from Freedom Ranking. Baku to Supsa (444 km in Azerbaijan and 370 km in Georgia) and transports "early In the World Bank’s “Ease of Doing Business Index 2014”, Georgia ranks 15th out of the oil" from the Caspian Sea region. surveyed 189 economies. In the same ranking in 2006 Georgia held the 100th position. • The Baku-Tbilisi-Ceyhan (BTC) oil pipeline extends 1,750 km across Azerbaijan, According to the Global Peace Index (GPI) issued by Institute for Economics and Georgia and Turkey and is designed to transport up to one million barrels of Azeri Peace (IEP) in 2015, Georgia is fourth safest country in the World. oil per day. The oil is transported via Georgia to the Turkish port of Ceyhan. • The South Caucasus Pipeline (SCP) System project was completed in late 2006. Business and Investment Environment The initial capacity of the pipeline is 8.8 billion cubic meters (bcm) of gas per year Georgian government efforts to reduce corruption in public and private sectors have and, after 2017, its capacity could be expanded to 20 bcm per year. As part of the significantly improved Georgia’s ranking in the World Bank’s Doing Business Survey. transit payment, Georgia will receive 5% of the volume of natural gas transited from By the latest survey it stands on 15th position among 189 countries. Georgia ranks as Azerbaijan to Turkey. One of the main partner and operator of the project is BP. 1st in property registration, 3rd in dealing with construction permits, 5th in starting a Four airports with a total capacity of 3,100 passengers per hour, serve the country in business and 7th in getting the credit. Tbilisi, Batumi, Kutaisi and Mestia. The total length of railway amounts 1,612 km, with Among transitional economies, Georgia has improved its ranking in the Corruption capacity of 3.3 million passengers per year and the length of roadways amounts 19,109 Perception Index from 85 to 50 in the years 2002-2005. The Georgian tax system was km. Completion of the Baku-Tbilisi-Kars (BTK) railway in 2015 will also stimulate simplified, customs duties were reduced and procedures for granting licenses and advancement of Georgian Railway. permits were simplified. According to Forbes, Georgia was ranked as 4th least tax Major sea ports are located in Poti and Batumi. The Government of Georgia strives to burden country in 2008. enhance port infrastructure. For this purpose, particular importance is attached to the At present Georgia enjoys free trade agreement with Turkey and nearly all CIS construction of the new Deep Sea port in Anaklia. Construction of the new port is countries. Georgia is eligible for Most Favored Nation (MFN) treatment from all the strategically important and shall result in significant increase in cargo turnover through WTO member states and is the member of WTO since 2000. Georgia has been granted Georgia. a Generalized Scheme of Preferences (GSP) treatment by the following countries: the EU, the USA, Japan, Canada, Switzerland and Norway. Energy The Association Agreement between Georgia and the European Union, signed in June Georgia has a developed, stable and reliable energy sector but efforts are required to 2014, includes the setting up of a Deep and Comprehensive Free Trade Area improve the efficiency in domestic energy use. The most promising source of additional (DCFTA). The DCFTA has been enacted since September 2014, therefore products or energy generation is hydropower and the Government is focused on securing private services produced in Georgia can freely access to the EU market with more than 500 investments for the construction of new hydropower stations. million consumers. DCFTA will contribute to economic growth, integration with world In 2012 9.694 billion kWh was produced in Georgia and consumption amounted 9.379 markets and global supply chains, and will open new prospects for Georgia and for billion kWh. entrepreneurs doing business in our country. With a large number of planned investments in energy sector it is expected that Georgia In 2015, the Government of Georgia began negotiations on signing the Free trade will be fully energy self-sufficient by the year 2020. Agreement with the European Free Trade Association (EFTA) that unities Switzerland, Norway, Island and Lichtenstein. After the signing an agreement with the EFTA, market Rankings on the ease of doing business of high purchasing value will open for the Georgian products and services that unities 4 70 62 63 countries and more that 13 million customers. 55 60 51 45 48 50 38 Legal System 32 40 27 The Constitution, adopted in 1995, sets out the structure of the national government as 30 21 14 15 17 well as its powers and functions. The powers of government are divided into three 20 7 1 branches – legislative, executive and judicial. 10 0 The court system in Georgia has three branches: Courts of First Instance (District or City Courts), Appellate Courts and the Supreme Court. First Instance Courts have jurisdiction over all civil, criminal and administrative cases. Decisions from First Instance Courts may be appealed to the Appellate Courts and, from there, to the Supreme Court. The Constitutional Court of Georgia is the sole organ of constitutional jurisdiction of Source: www.doingbusiness.org
5 GEORGIA | RESIDENTIAL MARKET REPORT 2014 GDP/Remittances (USD) Georgia Socio-Economic Overview 2009 - 2014 F 20 2.0 Economic 1.3 1.5 1.5 15 1.3 1.5 1.1
During the past two years Georgia has experienced a significant Billions 0.8 Billions increase of GDP and remittances. 10 1.0 16.1 16.9 14.4 15.8 11.6 In 2014, GDP is expected to reach USD 16.9 billion. According to the 5 10.8 0.5 IMF, Georgia has one of the highest forecasted growth rates of GDP among Eastern European countries and its neighbors during 2014- - 0.0 2015. 2009 2010 2011 2012 2013 2014 F
GDP (LHS) Remittances (RHS) The largest proportion of remittances are held by Russia with 50%, after which stands Greece with 14% and Italy with 8%. Source: National Statistics Office of Georgia, www.nbg.ge Population Remittances in Georgia 2014
The Georgian population stands at 4.49 million. This figure has grown since 2006 by 2%. About 54% of the total population lives in urban Other 18% areas and the urbanization rate has been increasing since 2006. Turkey Compared to other European countries, by population, Georgia 4% Usa Russia stands between Slovakia and Croatia. 6% 50%
Italy Average household income 8% Greece The average household income in Georgia is characterized by a 14% growing trend, but still remains low. In comparison to 2009, the average household income has increased by 57%. During 2009-2013 the average growth rate was around 10-12% annually. Source: National Bank of Georgia
The current average household monthly income stands at USD 533. Population in Georgia 2009-2014 Even though a growth trend is observed, Georgia is still classified by the World Bank as a Lower Middle Income country. 5
4 4.39 4.44 4.47 4.50 4.48 4.49
Millions 3
2 2.31 2.35 2.37 2.39 2.41 2.41
1
0 2009 2010 2011 2012 2013 2014
Total population Urban population
Source: National Statistics Office of Georgia Average household income (USD) Benchmarking Population in Georgia 2009 - 2013 10.0 600 25% 9.9 9.7 533 20% 8.0 450 477
15% 6.0 6.9 Millions 300 341 365 419 10% 5.4 4.0 150 4.5 4.5 5% 3.5 2.0 3.1 - 0% 2.2 2.0 2009 2010 2011 2012 2013 1.3 0.0 Average monthly income per household (LHS) Household income growth rate (RHS)
Source: National Statistics Office of Georgia Source: National Statistics Office of Georgia, CIA
6 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Benchmarking of average household size Georgia Residential Market 4.0
Fundamentals 3.6 3.0 3.0 2.8 2.7 2.6 2.6 Average household size 2.0 2.4 2.3 2.2 2.2 The average household size in Georgia is still very high and stands at 1.0 around 3.6 for the last few years. In the EU, the average household size is around 2.4. 0.0 In long-term this figure will move towards the European standard, which will generate increasing demand for residential real estate.
Tenure structure (home ownership) Source: National Statistics Office of Georgia, Eurostat
Home ownership is very high in Georgia. The current level stands at Tenure structure in Georgia 93% and is second only after Romania compared with other Eastern European countries. 3% 4% Mortgage lending Private ownership
During 2013, the volume of issued mortgage loans amounted to USD Rent 691 million, which is the double the level of 2012 and 31% higher than Free occupation 2011. The largest proportion of mortgages in 2013 was issued in December (around USD 149 million), due to the marketing campaigns of commercial banks and reduced interest rates. In 2014 the growth rate stands at 30% and issued mortgages amounted to USD 541 93% million.
Currently the average interest rate is 10%, which is still high when Source: National Statistics Office of Georgia compared internationally. Benchmarking of tenure structure (home ownership)
100% 96% 93% 92% 91% 90% 80% 89% 86% 87% 81% 81% 77% 60%
40%
20%
0%
Source: National Statistics Office of Georgia, Eurostat
Mortgage lending (USD) 2010 - 2014 1,000 893
800 686
560 600 523 Millions 416 541 400 416
200 314 225 208 0 2010 2011 2012 2013 2014
Issued mortgages Total outstanding
Source: National Bank of Georgia, Colliers International
7 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Tbilisi Residential Overview Population in Tbilisi 1.20 Market Fundamentals 1.15 1.16 1.17 1.17 1.17
0.80 Population Millions
The total population of Tbilisi is 1,175,200. The mentioned figure has increased by 2% since 2009. 0.40
Compared with the other cities in Eastern Europe, it is of a similar size to Prague and Sofia. Over the next ten years we expect a 10% growth 0.00 in population of Tbilisi. 2009 2010 2011 2012 2013
Tenure structure (home ownership) Source: National Statistics Office of Georgia
Home ownership in Tbilisi is high, as it is in Georgia. In the current Benchmarking Population Tbilisi period it stands at 86%. Compared with Eastern European cities the Tbilisi figure is second only to Bucharest. Such a high rate is an 2.5 indication that development of the rental market is very low. However, it 2.0 can not be discounted that part of the population has not officially 2.12 1.89 registered lease agreements. 1.5 1.74 1.58 Millions 1.44 1.0 1.30 1.25 Living area per capita 1.18 1.12 0.5 0.81 The average living area in Tbilisi stands at 23 sqm per capita. The largest properties are located in Vake and Saburtalo district. The 0.0 smallest living area per capita is represented in Chughureti (5.4 sqm) and Nadzaladevi (6.7 sqm).
According to the average living area per capita, Tbilisi stands between Source: National Statistics Office of Georgia, CIA Vilnius and Budapest in comparison with the Eastern European cities. Benchmarking of tenure structure (home ownership) 100%
80% 89% 86% 85% 84% 84% 83% 83% 80% 77% 60% 61% 40%
20%
0%
Source: National Statistics Office of Georgia, Eurostat Benchmarking of average living area sqm/per capita 30 29 29 27 27 25 24 20 23 21
16 16 10
0
Source: National Statistics Office of Georgia, Eurostat
8 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Tbilisi Residential Market Overview - Number of dwelling units supplied in Tbilisi Supply 150
Stock 123 100
The total housing stock in Tbilisi equals to 344,000 dwelling units, of which Thousands 88 the largest share was built during 1960-1990, so called “Soviet-type” 50 residential buildings, of which significant proportion is deteriorated or 57 damaged. After this period, in 1991-2000 there was a significant decrease 33 35 4 21 in development, but after this decade residential construction picked up - significantly. During 2013-2016, 21,000 dwelling units will be delivered.
Main market suppliers
The Georgian residential market is dominated by local developers. Source: IPM, Colliers International Participation of foreign investors is limited to a handful of larger schemes such as Dirsi (Azerbaijan), Hualing (China) and Dona Group (Israel). Upcoming supply by years and Developers fall into the following categories: large-sized developers, classes in Tbilisi (dwelling units) middle-sized developers, small-sized developers and passive developers. 6.0 Large-sized developers includes companies that have large scale 2.0 construction projects (over 50,000 sqm) and also are involved renovation, 4.5 refurbishment and fit-out.
Thousands 3.0 1.7 The middle-sized developers are actively implementing middle scaled 3.1 projects (from 10,000-50,000 sqm). 1.5 1.4 1.1 Small-sized developers are represented by developers of condominiums, 0.5 1.1 0.9 0.0 limited liability companies and houses etc., whose total construction area is 2014 2015 2016 under 10,000 sqm. Premium Middle Low
Passive developers are those companies, who have encountered problems Source: Colliers International during development and have consequently suspended construction. Development company categories in Tbilisi Ongoing and future projects
19 units Currently there are 233 residential development projects in Tbilisi, covering 853,554 sqm Large-sized developers 1,013,000 sqm land area and a total of 2,900,000 sqm construction area. 19 units 29% 539,478 sqm Middle-sized developers 19% Ongoing projects have been divided into several categories by selling price, 1 such as premium, middle and low segments . 45% of total supply is the Small-sized developers middle and low segments, only 10% is represented by the premium 55 units segment. 140 units 758,791 sqm Passive developers 748,177 sqm 26% Currently, from observed development projects around 19 units2 have 26% suspended status, with a total area of 539,478 sqm it holds 19% of the total supply. Source: Colliers International Issued construction permits Ongoing projects by type of class in According to the information provided by National Statistics Office of Tbilisi Georgia, during 2003-2013 over 10,000 construction permits were issued in 219,470 sqm Tbilisi, which totally amount 12 million sqm3 construction space. In 10% accordance to this period only 2,000 units were completed with 2.3 million 796,061 sqm Low segment sqm. Despite such a negative interdependence of these indicators, it should 45% be noted that the quantity of completed constructions are characterized by Medium segment a growing trend. 880,320 sqm Premium segment 1 The segmentation was based on selling prices reported from developers. Premium segment 45% – USD 1,200 and higher, Middle segment between USD 800-1,200 and Low segment from USD 400 to USD 800.
2 Suspended constructions include large-sized projects and/or small-sized suspended projects of the development companies, managing more than one project. Source: Colliers International 3 Permits for I-IV class buildings, new constructions and renewals.
9 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Main Development Projects in Tbilisi Key
Airport
Metro Station Akhmeteli Theatre Main streets of the city
Sarajishvili” Main development projects
Guramishvili”
Grmagele”
Didube
Gotsiridze
Delisi Medical 4 University 3
Vazha-Pshavela Technical Station Square University6 8 5 7 Marjanishvili
Rustaveli 2
Liberty Square Avlabari
Varketili
300 Aragveli Isani
Samgori
Construction Completion # Developer Project/Location District Area (sqm) Date Cholokashvili 1 1 Dirsi/AS Georgia Isani 236,603 2015/2016 Street Hualing Special Varketili 2 Samgori 144,122 2015 Economic Zone Economy Palace 1, 3 Axis Saburtalo 114,218 2015 Saburtalo Street
4 MaQro Construction Green Budapest Saburtalo 48,832 2016 70 Abashidze 5 GDG Vake 40,708 2015 Street Domus 13 Tamarashvili 6 Saburtalo 37,633 2016 Development Street Metra Park 7 Metra Development Vake 37,558 2015 Bagebi 8 Archi Group Archi Towers Vake 35,456 2016
Source: Developers, Operators/Property Managers, Colliers International
10 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Map of Tbilisi Districts
DIDI DIGHOMI 3,422
9,677 GLDANI 86,000 sqm 10,354
53,096
NADZALADEVI 94,000 sqm 7,512
SABURTALO 15,209 3,794 129,000 sqm 38,709
939,000 sqm DIDUBE 10,129
30,659
182,000 sqm
CHUGHURETI 5,379 VAKE 10,809 SAMGORI 3,286 12,000 sqm 2,752 46,349 60,026 ISANI 549,000 sqm 7,799 230,000 sqm
45,310
409,000 sqm
KRTSANISI
2,484 MTATSMINDA 12,284 5,817 75,000 sqm 16,978
78,000 sqm
Key Density (inh/km²) Stock (unit) Pipeline (ongoing and pipeline projects)
Note: Didi Dighomi is a part of Saburtalo district. Source: National Agency of Public Registry, Colliers International
11 GEORGIA ! RESIDENTIAL MARKET REPORT 2014 Tbilisi Residential Market Overview - Transactions of residential units in Tbilisi 2009 - 2014 Demand 25,000
20,000 The number of transactions in Tbilisi has been growing steadily. 20,088 18,641 19,187 15,000 Since 2009 the average annual growth rate has been 5%. Only in 16,534 16,176 14,574 2011 was there a slight 2% decrease comparing with the previous 10,000 year. In 2014 the growth rate amounted 5%. 5,000 Transaction volume - 2009 2010 2011 2012 2013 2014
In 2012, the residential real estate transaction volume was USD 774 Source: National Agency of Public Registry, Colliers International million. In 2013 it grew by 7%. In 2014 transaction volume increased Transaction volume in Tbilisi (USD) by 6% and reached USD 882 million. 2012 - 2014 1,000 Transaction distribution by districts 800 The largest share of transactions is represented is Saburtalo district Millions 600 with 20%. Then comes Samgori, Gldani and Nadzaladevi, even 882 though these parts of the city do not have the largest shares of 400 774 829 supply, the high volumes are caused by low prices, as these districts represent city suburbs. Vake and Mtatsminda together, account only 200 10% of total transactions. 0 2012 2013 2014 Transaction distribution by size of dwelling unit4 Source: National Agency of Public Registry, Colliers International Transaction distribution by districts The largest share of transactions is for small flats (< 50 sqm) in most in Tbilisi 2014 districts. This difference is more pronounced in suburban parts of the Krtsanisi Mtatsminda 4% city – Chughureti, Gldani, Nadzaladevi, and Samgori. Vake district 4% Chughureti holds the biggest portion of 150-250 sqm units in registered 5% transactions. Most of these transactions occurred in newly built Didi Dighomi (Saburtalo residential buildings, of a type with very low numbers in the suburbs, Saburtalo District) 20% which is why the proportion of large apartment transactions is much 6% lower in suburbs. Vake 6% Samgori Didube 15% 8% 4 The figures are calculated using 0-250 sqm residential property transactions Isani from the database of the National Agency of Public Registry. 9% Gldani Nadzaladevi 13% 10%
Source: National Agency of Public Registry, Colliers International Note: Didi Dighomi is a part of Saburtalo district Distribution of transactions in Tbilisi districts by size 2014
60% 0-50 51-70 71-100 101-150 151-250 57% 50% 50% 49% 48% 46% 40% 44% 40% 39% 35% 30% 33% 30% 28% 28% 28% 26% 26% 25% 26% 20% 24%24% 24% 21% 22% 21% 21% 21% 20% 20% 19% 20% 19% 18%17% 14% 10% 13% 13% 11% 11% 11% 10% 9% 7% 5% 0% 5%4% 3% 1% 4% 0% 6%1% 2%0% 0% Vake Mtatsminda Saburtalo Didi Dighomi Krtsanisi Didube Chughureti Gldani Nadzaladevi Isani Samgori
Source: Colliers International Note: Didi Dighomi is a part of Saburtalo district
12 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Transaction Distribution in Tbilisi Districts
GLDANI DIDI DIGHOMI 2,202 1,037 119,261 sqm 66,966 sqm USD 577 USD 584 54 sqm 65 sqm NADZALADEVI 1,589 90,523 sqm USD 651 SABURTALO 57 sqm 4,575 344,012 sqm USD 915 DIDUBE 75 sqm 1,684 116,776 sqm USD 753 69 sqm
CHUGHURETI 614 VAKE 34,459 sqm SAMGORI 1,200 USD 871 2,670 125,238 sqm 56 sqm ISANI 136,868 sqm USD 923 1,622 USD 600 104 sqm 97,171 51 sqm USD 738 60 sqm
MTATSMINDA KRTSANISI 672 720 43,506 sqm 63,890 sqm USD 801 USD 1,115 65 sqm 89 sqm
Key
Transaction unit Transaction volume Selling price (average transaction price in district) Average size of apartment
Note: Didi Dighomi is a part of Saburtalo district. Source: National Agency of Public Registry, Colliers International
13 GEORGIA ! RESIDENTIAL MARKET REPORT 2014 Tbilisi Residential Market Overview - Average selling price of transactions (USD) 2012 - 2014 Price Indices 900
Selling price by type 850 835 834 835 830 826 823 827 815 817 815 819 Selling prices by type can be divided into three segments: premium, 810 medium and low. Housing price by type varies from $630 to $1,680 800 per sqm depending on the location and condition of property.
The premium segment includes premium class projects with additional 750 facilities such as renovation and fit-out. Selling prices starts from USD Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1,200. The medium segment includes middle class projects where no 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 additional facilities are provided. Selling price ranges from USD 800 to USD 1,200. This segment represents 45% of the development Source: National Agency of Public Registry, Colliers International pipeline stock. Low segment residential units are mostly extended in suburbs of the city.
Selling price by district
The most prestigious and expensive flats are represented in Vake, Mtatsminda and some parts of Saburtalo. In these districts the price per sqm is 40%-50% higher than the average price of other districts. Middle class supply occurs mainly in following districts: Ortachala and part of Avlabari. In this class, prices vary from $700 to $1,000 per sqm. Other districts are considered to be less prestigious and prices are comparatively low.
Selling price of transactions
The average selling price is very stable due to new supply matching increased demand. In 2014 the market average selling price stands at USD 832.
Average selling prices on primary market by type in Tbilisi (USD/sqm) 2012 - Q3 2014
2,000
1,653 1,665 1,648 1,677 1,617 1,611 1,633 1,644 1,564 1,508 1,518 1,500
967 974 971 951 953 932 966 958 958 937 940 1,000
672 634 645 638 646 631 643 653 648 656 663
500 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Premium segment Medium segment Low segment
Note: Primary market represents listed supply by development companies. Average selling price in about 95% of the researched development projects are indicated for white frame condition. Source: Colliers International
14 GEORGIA | RESIDENTIAL MARKET REPORT 2014 1 room 2 rooms 3 rooms Tbilisi Residential Market Overview – Rent Prices USD/month Rent Prices & Yields min max min max min max Central districts $270 $330 $360 $450 $490 $600
Rent rate by district Middle class districts $220 $270 $290 $350 $370 $460
Suburbs $170 $210 $250 $310 $320 $400 The average rent prices for an apartment in the suburbs are characterized more volatile than in the middle class and central Average $245 $335 $450 districts. This is caused by an insufficient supply of apartments in the suburbs. The current situation, compared with the first quarter of Note: min & max rent prices are calculated +/- 10% of the average rent rate. 2010, shows that the rental rate in central districts and middle class Source: Colliers International districts decreased by 21% and 3% respectively. In suburbs rent price grew by 34%. Yield for individual dwelling unit Rent rate by type 2011 - Q3 2014 12% In the third quarter of 2014 the rent price by types of apartment in Tbilisi send no significant changes. In one and three-room apartments, the rent price increased by 2% with 1% growth in two- 10% room apartments. In one-room apartments the average rent stands at USD 245, in two-room apartments - USD 335 and in three-room 8% apartments - USD 450.
Yield for individual dwellings 6%
Until the end of 2011 the highest yield segments were characterized by flats in the middle class districts, but in the beginning of 2012, due Central districts Middle class districts to the reduction of rent prices and the increase of selling prices the Suburbs Average yield fell to 9.08%. Within the last four years, the highest income was observed in the third quarter of 2010, when the average yield Source: Colliers International reached 10.1%. Yield VS annual interest rate on long-term Generally, real estate and bank deposits are considered as the deposit Q3 2014 alternative investments. Therefore, the yield for individual dwellings 10% should be compared with long-term deposit interest rates. In 2013, 9.44% 9.51% the yield for all three types of districts became more profitable than 9.12% bank deposits. 7.60% 5%
0% Central Districts Middle Class Suburbs Annual interest Districts rate on long-term deposit (USD) Source: National Bank of Georgia, Colliers International
Average rent prices by districts 2011 - Q3 2014
600 498 480 458 462 473 500 437 453 452 448 455 448 417 395 413 410 400 365 354 334 358 351 351 328 333 324 325 322 320 339 334 340 353 300 321 350 347 328 333 325 332 328 322 327 305 303 307 297 273 273 277 277 200 253 268 270 243 235 227 197 208 210 207 212 100
0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2012 2013 2014 Central districts Middle districts Suburbs Average
Source: Colliers International
15 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Batumi Residential Market Overview Upcoming supply by segments in Batumi
Supply 2,228 The housing stock in Batumi will increase by 12,000 dwelling units Premium during 2014-2017, of which the largest share is in the low segment category, almost 55%. In comparison with Tbilisi, there is a high Medium share in the premium category. 6,520 Low 3,115 Ongoing & future projects
Currently there are 112 residential development projects in Batumi, with a total of 1,245,000 square metres construction area. In the Batumi residential market there are few passive developments Source: Colliers International compared with Tbilisi. There are no suspended construction Upcoming supply dwelling units by years in buildings in the city. The highest portion of stock is held by middle- Batumi sized developers with 52%, after which large-sized developers own 30% of total projects and 18% is occupied by small-sized 4,000 developers. 3,000
In Batumi, 45% of development activity is in the low segment. A 2,527 1,876 remarkable feature of the Batumi residential market is the very high 2,000 1,068 share (34%) of the premium segment. A small portion is represented by the medium category, which stands at 21% of total ongoing 1,000 664 806 projects. 559 935 257 712 635 - 260 258 2014 2015 2016 2017
Premium Medium Low
Source: Colliers International
Development company categories
217,647 18% Middle sized developers
Large Developers 647,950 52% 379,317 Small sized 30% developers
Source: Colliers International
Development projects by segments in Batumi
257,080 21%
Premium 557,168 45% Medium
Low 430,666 34%
Source: Colliers International
16 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Residential Map of Batumi
Black Sea
3
1
2 6
4 3
Construction Completion # Developer Project/Location Area (sqm) Date
1 Tam Geo LLC Babillon Tower 69,444 2016
Key 2 Tourinvest LLC Hilton Residences 59,295 2014
3 Orbi Group Orbi Residence 53,701 2014 Airport 4 Orbi Group Porta Batumi 53,000 2016 Central Railway Station Yalcin Group 5 16 Pirosmani Street 49,600 2016 Main streets of the city Georgia
Main development projects 6 DS Group LLC 5a Chavchavadze Street 48,700 2016
Source: Developers, Operators/Property Managers, Colliers International
17 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Batumi Residential Market Overview - Transactions of residential units in Batumi 2011 - 2014 Demand 4,000
3,556 The total population of Batumi amounts to 161,200. The mentioned 3,000 3,406 3,507 figure has increased by 28% comparing with 2012 and only by 1% 2,917 higher than the previous year. 2,000
Transactions in Batumi have followed a fluctuated path. During 2011- 1,000 2012 transactions of dwelling units reached the highest point. In 2013 has been occurred 2% decrease. - 2011 2012 2013 2014 Transaction volume Source: National Agency of Public Registry, Colliers International
In 2011 the total transaction volume for the residential real estate Transaction volume in Batumi (USD) market in Batumi amounted to USD 97 million. In 2012 the growth 2011 - 2014 rate amounted 22% and peaked USD 119 million. In 2013 has 120 119 119 decreased by 2% in comparison with the previous year. In 2014 100 116 transaction volume grew by 2% and reached USD 119 million. 97
80 Millions Transaction distribution by size of dwellings 60 40
The biggest portion of total transactions is for small flats (under 50 20 sqm) in Batumi. This trend is common in every city of Georgia. Small- - sized dwelling units are more liquid in the market compared with the 2011 2012 2013 2014 larger options of apartments. Source: National Agency of Public Registry, Colliers International
Following this trend, construction and development companies are Transaction distribution in Batumi by focusing on small-sized apartments. However, interest for penthouse size of unit type apartments has been quite active in recent years. 50% 0-50 48% 51-70 40% 71-100 Selling price indices 101-150 30% 151-250 28% The average selling price by segments varies from USD 580 to USD 20% 2,300. The average price of premium segment in Batumi reaches USD 2,292 per sqm, which is higher than the equivalent figure in 10% 15% Tbilisi. Development of this segment in Batumi differs from the flows 8% 2% 0% in Tbilisi. Note: Mentioned figures are calculated using 0-250 sqm residential Although the average price by classes is characterized by fluctuating property transactions from database of National agency of public registry. trend, the selling price is fairly stable. By the end of 2014 it amounted Source: National Agency of Public Registry, Colliers International to USD 685 per sqm. Average selling price on primary market by segments in Batumi (USD per sqm) Rent rate by type 2,500
The rent price by types of apartment in Batumi is a bit higher than in 2,000 2,292 Tbilisi. In one-room apartments the average rent stands at USD 275, 1,500 in two-room apartments - USD 420 and in three-room apartments - USD 600. 1,000 1,010 500 578 0 Average selling price of transactions in Batumi (USD) Premium Medium Low 2012 - 2014 700 684 Source: Colliers International
680 667 663 664 1 room 2 rooms 3 rooms 660 659 659 Rent Prices 660 651 650 USD/month 646 649 min max min max min max 642
640 Batumi $250 $300 $380 $460 $540 $660
620 Average $275 $420 $600 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 Note: min & max rent prices are calculated +/- 10% of the average rent rate. Source: National Agency of Public Registry, Colliers International Source: Colliers International
18 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Mtskheta Residential Market Overview Average selling price on primary market by segments in Mtskheta (USD/sqm)
Supply 1,200
The housing stock in Mtskheta is mostly developed with residential 1,064 houses and so called “Soviet-type” residential buildings constructed 900 during 1960-1990. Despite the fact that it is located close to Tbilisi, the Mtskheta residential market is characterized by a very low level of new supply. During 2012-2014 only two projects were delivered. 600 Ongoing & future projects 550 300 Residential real estate development in Mtskheta is represented by two projects, one of which is partly completed. The “Riverside Mtskheta” project consists of 30 residential townhouses (of which 16 have been 0 delivered). The dwelling area varies from 217– 250 sqm. It is located Medium Low nearby the river Aragvi and has panoramic views over the ancient city and heritage monuments. The selling prices vary from USD 1,000 to Source: National Agency of Public Registry, Colliers International USD 1,127 per sqm.
The second project represents a six-storey residential building with a total area of 3,500 sqm. In total, 36 dwelling units will be delivered with an average size of 36 sqm. The average selling price in this project is USD 550 per sqm.
RIVERSIDE MTSKHETA
19 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Residential Map of Mtskheta
Key
Main streets of the city
Main development projects
2
Samtavro Monastery
1
Svetitskhovel i Cathedral
Jvari
Construction Completion # Developer Project/Location Area (sqm) Date Boneser Trading 1 Riverside Mtskheta 3,800 2014-2016 Limited 2 Glov Group LLC House nearby Teatroni 3,500 2014
Source: Developers, Operators/Property Managers, Colliers International
20 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Mtskheta Residential Market Overview - Transactions in Mtskheta (unit) 2011 - 2014 Demand 150
142 The total population of Mtskheta amounts to 57,400. The mentioned 120 figure has decreasing trend. Since 2004 it has reduced by 10%. 119 113 90 Mtskheta has relatively low and stable demand. Since 2011 it has 91 seen a slightly increasing trend. In 2014 transactions in Mtskheta 60 grew by 19% and amounted 142 units.
30 Transaction volume
0 In 2011 the Mtskheta market observed USD 2.94 million transaction 2011 2012 2013 2014 volume. Despite the slight decrease in 2012 by 11%, in 2013 it grew by 43%. In 2014 the growth rate amounted 36% and reached the highest point USD 5.11 million. Source: National Agency of Public Registry, Colliers International
Selling price of transactions Transactions volume in Mtskheta (USD) 2011 - 2014 The average selling price in Mtskheta is very low and characterized 6.00 by fluctuating trends, due to the low level of transactions. As the lack of development, old residential buildings are off the interest. 5.00 5.11 It should be noted that the average selling price stands at USD 48 4.00 per sqm, which is 49% higher than Q1 2011 figure. Millions 3.75 3.00 2.94 2.62 2.00
1.00
0.00 2011 2012 2013 2014
Source: National Agency of Public Registry, Colliers International
Average selling price of transactions in Mtskheta (USD/sqm) 2011 - 2014 450
418 400 389 379 372 362 361 367 350 337 332 326 319 322 308 300 289 280 284
250
200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2013 2014 Source: National Agency of Public Registry, Colliers International
21 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Rustavi Residential Market Overview Transactions of residential units in Rustavi 2011 - 2014
Supply 3,500
3,000 The majority of the stock in Rustavi was built during 1960-1990, so 3,049 called “Soviet-type” residential buildings. In recent years the 2,500 2,759 construction of residential building was not implemented. Even 2,423 2,455 2,000 though Rustavi is one of the industrial centers of the Kvemo Kartli Region, for housing purposes has been less attractive for 1,500 developers. 1,000 Demand 500 - The total population of Rustavi amounts to 122,900. The mentioned 2011 2012 2013 2014 figure has increasing trend since 2008. Source: National Agency of Public Registry, Colliers International
Analyzing demand in Rustavi, the level of registered transactions are Transactions volume in Rustavi (USD) characterized by a decreasing trend. Compared to 2011 it reduced 2011 - 2014 by 10% in 2012. This trend continued in 2013 with a 12% decrease. 45 In 2014 transactions will stabilize at around 2,455.
40 A lack of new residential development market can be a cause of weak demand for old building dwellings. 35 34 30 Millions 32 Transaction volume
In 2011 the Rustavi market observed USD 35 million transaction 15 volume. Despite the slight decrease in 2012 by 7%, in 2013 it grew by 6%. In 2014 the growth rate amounted 17% and reached the highest point USD 40 million. - 2011 2012 2013 2014 Selling price of transactions Source: National Agency of Public Registry, Colliers International The average selling price in Rustavi is very low. It may also be the major reason that investors are not interested by implementing development projects. Despite the fact that prices have risen by 64% compared with 2011, the average selling price stands at USD 386.
Average selling price of transactions 2011 - 2014 386 400 377 359 364 346 334 337 350 328 328
299 292 293 300 272 251 236 239 250
200
150 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Source: National Agency of Public Registry, Colliers International
22 GEORGIA | RESIDENTIAL MARKET REPORT 2014 LISI VERANDA, TBILISI
Batumi, Georgia
Conclusions and Outlook
The residential real estate market in Tbilisi has been housing. The developments are mainly represented nearby characterized by increased demand and supply in the last three recreational zones of Vake, Saburtalo, Krtsanisi and Didgori years. At the same time, selling prices did not change districts, which benefit from a quiet environment, ecologically significantly. Annual 2-3% increase of selling price is expected fresh air, green territory. Also the topography of the city during next three years. provides fascinating panoramic views from different locations Positive demographics, population growth and mortgage and districts over Tbilisi. In long-term forecast the growing trend lending activities from the banks are also creating the of demand will proceed on townhouse type constructions. improving demand prospects in the long-term. Residential development in Batumi is increasing, with a total of The average living area stands at 23 sqm per capita, also the 112 projects under construction, totaling 1.5 million sqm. Also, positive trend of demographics indicates that demand on newly it should be noted, that the average price of premium segment constructed apartments will remain growing trend and also the in Batumi has reached USD 2,292 per sqm, which is much Soviet-type refurbished buildings will be replaced gradually. higher, than the same category in Tbilisi. Residential real estate remains one of the attractive investment The residential market in Mtskheta is dominated by single tools for local population as well as non-resident Georgians. family houses. In recent years only two residential projects The mentioned fact is also caused by higher yield figures for were delivered, of which the most impressive was Riverside individual dwelling units, than long-term deposit rates in foreign Mtskheta, implemented by the foreign investor Boneser Trading currency. Limited. During recent years the most developed districts in Tbilisi is Saburtalo, where the largest share of development projects are Due to the increased popularity of country houses, a positive trend for out of town living and closeness to Tbilisi, Mtskheta implemented. It should be noted that the selling price per sqm may be considered as one of the possible development accords to medium segment, which is why the market activity is locations for single family house development community. high. Therefore, the density of district provides the opportunity for further development. Since 1990, construction of residential buildings has not been The majority of the development projects do not offer property implemented in Rustavi. Even though it is one of the industrial management and this may become a distinct selling point in the centres of the Kvemo Kartli Region, for housing purposes it is future. less attractive for developers. Analyzing the market, it can be concluded that Rustavi has the Recently, Tbilisi has seen an upward trend of townhouse type potential to absorb small-sized and low segment development constructions started due to positive demand for this type of projects.
23 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Appendix 1 Typical Lease Terms, Registration of Property, Construction Permits
24 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Typical Lease Terms
Office lease contracts for one year and more period in As usual international tenants have three years and Georgia should be registered in National Agency of longer term contracts and lease contract period for local Public Registry. companies varies between one to three years.
Typical lease terms in Georgia are based on fixed The average brokerage fee for renting the property amount per sqm. varies between 10%-15% of the first year’s rent, depending on the lease term.
Registration of Property
In Georgia, the National Agency of Public Registry is the and registration. In this case, the bilingual purchase state institution responsible for registration of property, document is to be drafted directly by both parties or registering both transfers between private entities and by their authorized representatives. The Agency’s state-owned properties. representative certifies the signatures and may provide recommendations if the document is not In case of private transfer, the purchaser has two accurately drafted, but does not carry any options: responsibility for the validity or its content.
• Via a notary – contract drafting and legalization by The National Agency of Public Registry is represented the notary and subsequent registration. The notary in: a) Public Services Halls (Tbilisi, Gori, Kutaisi, Batumi, assumes responsibility for the content of the draft Ozurgeti, Mestia, Zugdidi, Rustavi, Marneuli, Gurjaani, and its legalization. The presence of a translator and Telavi, Kvareli and Akhaltsikhe) and b) regional his signature on the bilingual purchase document is departments of the National Agency of Public Registry required and the translator assumes responsibility for (located in cities throughout the country). the authenticity of texts. Time for preparation of the bilingual document and its legalization varies In case the property is purchased from the depending on the notary state/municipality (privatization, auction or other form of purchase) the documents should be submitted directly to • Via the National Agency of Public Registry – direct the Agency. submission of the purchase contract for legalization
25 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Construction Permits
For the purposes of construction, buildings are divided into 5 Ordinary terms per each stage (working days): types: Stage I 1st class buildings – no construction permit is required; 12 days for II and III class buildings 2nd class buildings – buildings with low risk factors; 15 days for all IV class buildings, for Gudauri, 3rd class buildings - buildings with medium risk Bakuriani, Bakhmaro, Ureki recreation territories factors; and for special regulatory zones on the territory of Borjomi (excluding V class buildings), also for all th 4 class buildings - buildings with high risk factors, buildings that require ecological expertise th 5 class buildings – buildings with very high risk 30 days for V class buildings factors. Stage II The permit issuance process is divided into 3 stages: 18 days for II and III class buildings Stage I – Statement of urban construction terms 20 days for all IV class buildings, for Gudauri, Stage II – Approval of architectural-construction Bakuriani, Bakhmaro, Ureki recreation territories project and for special regulatory zones on the territory of Stage III – Issuance of Construction Permit Borjomi (excluding V class buildings), also for all buildings that require ecological expertise and for V State organs responsible for the issuance of permits: class buildings Local self-governmental (municipal) organs – for Stage III II, III class buildings within the municipal territory (at stages I and II) except from Gudauri, Bakuriani, 5 days for II, III and IV class buildings Bakhmaro, Ureki recreation territories and for special 10 days for V class buildings regulatory zones on the territory of Borjomi. Exceptions: Local self-governmental (municipal) organs – for IV class buildings (at stages I and II) with the The special terms for permission process: participation of corresponding state organs Construction permits concerning: Local self-governmental (municipal) organs – for II, III and IV class buildings (at III stage) III class buildings with an intensity coefficient up to independently (including Gudauri, Bakuriani, 1,500 sqm and for buildings with a height of up to Bakhmaro, Ureki recreation territories and for special the 14 meters that will be located on the territories regulatory zones on the territory of Borjomi) where urbanization regulatory plans do not exist and are organized according to land use or which Tbilisi City Hall - for II, III and IV class buildings in are organized according to the perspective Tbilisi Municipality (at all stages) independently development regulatory plans on the territory of Tbilisi – the permission process may involve II and Corresponding local organs of Adjara Autonomous III stages only Republic and Abkhazia Autonomous Republic - for II, III and IV class (at all stages) on the territory of The simplified permit procedure may involve just 2 stages the Autonomous Republics and the permit is issued in the second stage. Local self-governmental (municipal) organs – II, The terms for the simplified procedure are as follows: III and IV class buildings (at stages I and II) for Gudauri, Bakuriani, Bakhmaro, Ureki recreation Stage I – 12 days for II and III class buildings territories and for special regulatory zones on the 15 days for all IV class buildings, for Gudauri, territory of Borjomi – with the participation of the Bakuriani, Bakhmaro, Ureki recreation territories Ministry of Economy and Sustainable Development. and for special regulatory zones on the territory of Ministry of Economy and Sustainable Borjomi (including V class buildings), also for all Development – for V class buildings buildings that require ecological expertise. Stage II (issue of permit) – 20 days for all classes
26 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Appendix 2 Primary Information Sources, Data Used for the Study Definition and Assumptions
27 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Primary Information Sources, Data Used for The Study Definition and Assumptions
In the process of preparing the survey, we were guided by the Premium segment: The segmentation was based on selling information provided by hotel managers, governmental price, the average varies around USD 1,200 and higher. institutions/agencies (National Agency of Public Registry, Medium segment: The segmentation was based on selling price, National Statistics Office of Georgia, National Bank of Georgia, the average varies around USD 800 to USD 1,200. Ministry of Economy and Sustainable Development of Georgia, Low segment: The segmentation was based on selling price, the City Halls). Materials from various Georgian and foreign average varies around USD 400 to USD 800. publications have also been used, such as www.geostat.ge, Suspended Construction: Suspended constructions include www.eurostat.com, www.colliers.com. In addition, we developed large-sized projects and/or small-sized suspended projects of our conclusions and recommendations based upon our own the development companies, managing more than one project. local market knowledge and insight. Issued Construction Permits: Issued construction permits for I-IV Definition and Assumptions class buildings, includes new constructions and renewals. DCFTA: Deep and Comprehensive Free Trade Agreement Primary market: Listed supply by development companies and FDI: Foreign Direct Investment individuals. IMF: International Monetary Fund Central Districts: In this category are represented Vake, GDP: Gross Domestic Product Saburtalo, Mtatsminda, Vera and Sololaki. sqm: Square metre Middle Class Districts: Nutsubidze plateau, Avlabari, Ortachala, USD: The United States Dollar Krtsanisi, Chughureti, Didube, Dighomi Massive, Nadzaladevi VAT: Value added tax and Didi Dighomi. Large-sized developers: Large-sized developers includes Suburbs: Temka, Muxiani, Gldani, Avchala, Isani, Samgori, companies that have large scale construction projects (over Varketili, Vazisubani and Ponichala. 50,000 sqm) and also are involved renovation, refurbishment Ongoing & Future Projects: For the market study it was analyzed and fit-out. development projects above 1,000 sqm. Middle-sized developers: Middle-sized developers are actively Correctness of the information: The information used in the implementing middle scaled projects (from 10,000-50,000 sqm). survey is objective and Colliers believes that the report reflects Small-sized developers: Small-sized developers are represented current conditions in the Georgian residential real estate market. by developers of condominiums, limited liability companies and However, Colliers cannot guarantee the accuracy of third party houses etc., whose total construction area is under 10,000 sqm. data referenced in the report and cannot be held responsible for Passive developers: Passive developers are those companies, that element. “Colliers International Georgia” is not responsible who have encountered problems during development and have for possible consequences of any actions taken by the consequently suspended construction. consumer/reader of the given survey.
28 GEORGIA | RESIDENTIAL MARKET REPORT 2014 M2 @ KAZBEGI STREET
Disclaimer
This document has been prepared by Colliers International for general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2014. All rights reserved.
29 GEORGIA | RESIDENTIAL MARKET REPORT 2014 Project team
Mark Charlton Nikoloz Kevkhishvili MRICS Head of Research & Head of Valuation and Forecasting Advisory United Kingdom Georgia
Roger Hobkinson Ramaz Sharabidze Director Research Analyst Ireland Georgia
Bruno Berretta Mariam Benashvili Senior Research Analyst Junior Research Analyst EMEA Georgia
Zurab Kananashvili Nino Jashi Director of Professional Junior Research Analyst Services Georgia Georgia
30 GEORGIA | RESIDENTIAL MARKET REPORT 2014 485 offices in 64 countries on 6 continents
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About Colliers International
Colliers International is a global leader in commercial real estate services, with over 13,500 professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world. colliers.com
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32 GEORGIA | RESIDENTIAL MARKET REPORT 2014