Armenian real estate market grew exponentially between 2002 and 2008 with prices going up by 570%. In 2009 the country’s economy was hit by the global financial crisis and real estate prices went gradually down over the next few years. They remained generally unchanged during 2014-2017 and only a minor growth (2%) has been recorded this year.
As shown in the table, the pre-2008 growth in real estate prices matched the growth of the country’s GDP from $2.4B in 2003 to $11.7B in 2008. The economy has largely recovered since then and the GDP will reach $10.9B in 2017. This decrease of 6.6% in GDP compared to the numbers in 2008 contrasts with the 42% plunge in real estate prices.
Interest rates in Armenia are still relatively high. In September of 2017 banks paid on average 5.3% on deposits in USD and 11% on deposits in Armenian drams (AMD). High interest rates make bank deposits a sound alternative to investing in real estate. That being said, rental yields in Armenia are also quite high and can reach up to 10%. Interest rates, on the other hand, have been consistently decreasing.
Average rates for mortgage loans were 10.5% in USD as of September 2017. These rates are still relatively high and mortgage loans are out of reach for the majority of Armenia’s population. However, interest rates on mortgages have also been decreasing over time. For example, in 2015 they were closer to 13% while in 2009 they almost reached 18%. ]
The World Bank expects that Armenia’s GDP will grow by 3.2% in 2017 and the government expects a growth of 4.5% in 2018. The limited construction of new dwellings will also contribute to the rise in real estate prices.
Prices shown in the table reflect the average prices in the central district of Yerevan. The data is collected and published by the government of Armenia at www.cadastre.am.