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How will decision on rented and social apartments affect housing market?

How will decision on rented and social apartments affect housing market?
According to experts, these steps give a basis to predict price drops

Measures aimed at solving social, housing, education problems and effective leisure activities of low-income youth who need social protection will be carried out in Azerbaijan. In this regard, amendments are made to the Law on Youth Policy. The new project will be discussed at the plenary meeting of the Azerbaijani Parliament on February 12.

In recent years, various efforts have been made to ensure the housing affordability for low-income young families. An example of this is sale of social housing and new decision on houses for rent. So how will the steps taken affect prices in the housing market?

According to economic expert Rashad Hasanov, formation of new mechanisms in this area can be regarded as a positive step. "Housing affordability of low-income families is sufficiently low. Defined categories do not allow increasing the housing affordability of low-income families and ensuring the program activity. The main parameter in the issue of mortgage loans as well as discounted apartments is solvency. Defined categories provide more opportunities for public sector employees. In general, the sale of housing in recent years has been around 3-4,000. In the previous periods this figure was lower. In some cases it hardly reached up to a thousand apartments. About 30-40 thousand young families create in the country during the year. These families have a great need for housing. Under modern economic conditions, most of them can not solve housing problem in a preferential form for a long time. Considering these moments, I think that the existing mechanisms in this direction have not yet led to serious consequences,” he said.

The expert stressed that initial steps are being taken in social housing. "However, the activity of this body is still limited. According to the program, about 3,000 apartments are expected to be offered to the market throughout the year. But at present, only 400 apartments are offered to the market. Issues such as low speed and at the same time financial constraints do not create conditions for large-scale activities in this direction. Approval of new rules on apartments for rent is a very positive step. This decision is different from the others. The most important of these differences is that the initial required amount is low. According to the new rule, the issue of revenue confirmation is not a priority. It is envisaged to lease apartments without verification of income. I think that this step can lead to some more effective results. This decision will play an important role in addressing the housing problem of low-income families. However, the number of apartments to be offered to the market during the year is of great importance. We will see the results of this decision in the near future. In general, I think that the emerging conditions form certain challenges. The new mechanism is created on the background of these challenges,” he added.


Last year there was some stagnation in the real estate market,” said Hasanov. "In this sense, there is a need to restore activity. Most of the apartments are sold over existing mechanisms. Certain factors are essential for increasing activity and forming demand in the sector. The population's solvencyis not at the level of previous years. Therefore, there is a need to create alternative mechanisms. The steps taken have a certain impact on the prices in the housing market. If a discounted housing strategy achieves its target, i.e. 3,000 apartments are offered to the market during the year and at the same time the mortgage fund further broadens its activities, it will be possible to avoid certain price bubbles in the market. This can also make the prices more accessible. At present, the pressure on the prices is formed by decline of solvency level. In fact, the large number of apartments that are constructed and unsold in the sector give a basis to predict price drops."

Nusrat Ibrahimov, CEO of the MBA Group consulting company, said that the housing market in Azerbaijan has typical features. "In general, there are over one million houses in the country’s market. Stability in the market is often frustrated, which is not a good indicator. The smaller the housing market, the more frequent price hikes. Therefore, it is necessary to increase the market capacity. Stability in the housing market boosts economic development. It is the purpose of the policy pursued recently. Different steps are taken, decisions are made to address the problem of housing. In fact, the problem of housing for young families is topical in all countries of the world. I think that the housing problems will be gradually solved. For this purpose, projects should be implemented on a regular basis," he added.

Shabnam Mehdizade







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