Galt &Taggart published Tbilisi real estate market outlook. According to the report, despite strong development in recent years, Tbilisi’s real estate stock is outdated and still dominated by old buildings.
Apartment sales experienced record-high growth in 2018 before cooling in 2019 as sales accelerated prior to the mortgage regulatory changes.
“We expect a re-acceleration from 2021, after subdued sales in 2020, on the back of tighter financial conditions and the 2020 election related deterioration in sentiment. Prices have been stable in US$ in recent years and there are no signs of housing bubble in Tbilisi”, Galt &Taggart notes.
On the supply side, construction regulations are shifting active residential development from the city centre to suburbs. These regulations will also trigger price growth mostly in central districts.
“We expect a decline in supply in 2021- 2022 due to the temporary reduction of construction permits issued in 2018. On the demand side, we believe the fundamentals (growing urbanisation, declining household size, etc.) guarantee stable sales growth in the medium to long term. Yields are high and stable but are expected to gradually decline, converging to peer cities’ levels”, Galt &Taggart says.
Galt &Taggart notes that rent market is supported by Airbnb, stressing need of strong tourism growth.
Office – Price-to-quality set to rise Office rents in Tbilisi remain high compared to peer cities despite a gradual decrease over 2012-2019. Modern leasable offices only account for 22% of total office space in Tbilisi, the country’s business hub.
This gives bargaining power to landlords and results in high rents, driving many companies to own offices rather than lease. However, the office market will be re-shaped by large-scale supply growth by end-2020, which will redistribute tenants to better quality offices, with price-to-quality going up.
The new status-quo is expected to benefit tenants as rents are likely to go down in existing prime offices. There are also early signs of a Central Business District (CBD) forming around Vake Park, which is favourable for high street retail in the neighbourhood.
