Real Estate Prices Index

Details: Created: 09 December 2014

• Investments in real estate compensates for risk premiums (compared to money deposits) and more than covers its costs (Mortgage interest rate).
• Average rental price for residential property continues to fall and reaches its historical minimum since March 2013.
• Despite the lari depreciation, the average residential sale price did not decline and even increased by 0.3% compared to the same period in the previous year.

In December 2014, rental and sale prices of residential property continued to follow their long run trends. Average rental prices continued to decline in December, reaching a minimum of 8.3 USD per m2, while the residential rental price index decreased by 4.3% compared to the same period of last year. Regarding sale prices, the average slightly increased relative to November, reaching 934 USD per m2, while the sale price index increased only slightly by 0.9% in annual terms. Download the full report

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Details: Created: 12 November 2014

• The rental price index registered the sharpest annual decline in November 2014.

• Average rental and sale prices in Tbilisi continue to follow their long run trends.
• Average rental prices in Gldani-Nadzaladevi and Isani-Samgori have converged for two consecutive months.

The November rental price index registered the sharpest annual decline (-8.8%) since the data collection started in March 2013. The good news is that nothing unusual happened on the rental market in Tbilisi during this time. The rental prices were simply coming off the unusual peak experienced in October-November 2013. Meanwhile, the average rental prices followed their long run trend, declining slightly to 8.56 USD per m2. As for sale prices, the index increased by 0.3% in annual terms and average market prices increased slightly above their long run trend, reaching 933.8 USD per m2 (see Chart 1). Download the full report

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Details: Created: 14 October 2014

• In October, rental prices for residential properties in Tbilisi declined significantly in annual terms (-7.1%).

• Buyers tended to purchase cheaper, lower quality units in October relative to the previous month.
• Lower lending and deposit interest rates made real estate investments more attractive, driving rental prices for residential property downward.

The October rental price index fell sharply by 7.1% in annual terms (see Chart 1). However, the average rental price remained stable and even slightly increased in monthly terms from 8.56 to 8.59 USD per m2, reflecting seasonal price changes on this market. Download the full report

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Real Estate Methodology

According to the best global practices, residential and commercial real estate price indices are calculated using several measures, namely the Laspeyres index or the Paasche index. Another popular measure, the Fisher real estate index is a combination of the two. These indices heavily depend on the available sample and do not take into account sample volatility across time (for example, the quality of purchased units in the sample may increase over time, which will be reflected in higher prices). One way of remedying this issue is to construct a standardized real estate unit in each time period (using a hedonic regression technique) and to use this unit to obtain quality-adjusted indices. The latter indices are called the Laspeyres hedonic imputation index and the Paasche hedonic imputation index (Handbook on Residential Property Price Indices, Eurostat Methodologies and Working Papers, 2013). Read More