Housing costs in Yerevan are over inflated
In the last few weeks my wife and I decided to shop around for apartments in Yerevan to basically get an idea of what can be found at what price. Our findings were shocking to say the least.
We started by looking at places in Arabkir city district, which is more commonly known as Gomidas. Our broker, Torkom, who is a fabulous guy and who helped me four years ago find the apartment I still rent, took us to see three two-bedroom apartments selling for the whopping price of $50,000. We entered these flats located in mainly defective, no more than 30-year-old buildings that are already crumbling to realize that the entire apartments would have to be gutted then remodeled. Judging by the current prices for new flooring, plumbing, bathroom and kitchen fixtures, furniture, appliances and so forth, not to mention construction costs, remodeling would cost at least $20,000 to make the apartments modestly livable. Two out of the three apartments in that area had at one point endured water damage—one seemed to have a leak of some kind coming from the main water line in the bathroom. The apartments were reeking from mold, body odor, and other foul, indescribable smells that seemed to have seeped into the walls. The ceilings were pretty low, about ten feet high or lower. Despite their poor condition, these types of apartments nevertheless fetch that high of an amount. And unfortunately I will never be able to afford buying then completely remodeling one of them.
We saw another apartment located off of Tigran Mets Street, a stone’s throw away from the United Nations building and the Erebuni Hotel. The apartment was contained in a historical building dating supposedly as far back as the beginning of the 20th century. It is made from solid blocks of black tufa stone, thus making it extremely sturdy. The apartment itself, located on the second floor, has probably not been renovated in over 50 years. It has lofty ceilings, tall narrow dual-opening doors, and even the original stove heating system intact, but it was a two room apartment—meaning one bedroom. It has a huge balcony about 10 feet wide by 20 feet long or so, but totally unsafe and in complete disrepair. This apartment again would have to be extensively remodeled, but it has significantly more possibilities than the others we saw in Arabkir due to its layout and two water line hookups at opposite ends of the place. It also had once suffered from water damage, but the roof was repaired and there were no signs of mold. But there was no kitchen except for a large porcelain-coated iron sink. Above the tiny bathroom, which is not useable in the condition it is in, is a small reading room accessed by a ladder—the place is a true loft apartment. However, it also fetches $50,000 but is notably smaller than the others we saw. Although Torkom didn’t know for sure about the durability of the foundation, he claimed that the building was not slated for demolition.
But the main problem is how long the building will last. The current trend in central Yerevan is to tear down any building that is more than 60 years old, especially ones that have a significant, historic value. The stones of these buildings are numbered so that they will be reconstructed elsewhere in the future, but that will most likely never happen. Although this building is essentially a landmark and seems to be in excellent condition considering its age, there would be no way of securing any guarantee from the government that it would not be destroyed in the near future. Considering that people are being paid out $5,000 for their homes despite their high market value, I am in no position to loose $45,000 plus any additional money I would spend to renovate the place.
We also decided to look at a place located high up on the fringes of the city limits in an area known as Avan-Aringe, which is fairly close to the Kotayk region border. The area primarily contains high-rise apartment buildings. The apartment we saw was on the ninth floor, and we were told that it had been in excellent repair with two bedrooms. When we entered we realized that it had been maintained very well—all soviet furniture, fixtures, and even the electrical wiring was intact (it is not unusual to see wires hanging out of walls carelessly taped together in an effort to repair them). The small kitchen oven was about 10 years old and was “evro,” a term used to describe any home good supposedly made or designed in Europe. The apartment had two former open balconies, about 3 feet wide and 12 feet long, which were enclosed at one point for some pointless reason since they cannot serve as rooms because they are so narrow, and their walls were infested with mold. Dark curtains blocked all the light from coming in—something that can be noticed in many apartments here. A plus was an outdoor garage, which had electrical and water hookups for car washing. A barbeque was located on the roof, which was also loaded with junk and had a sagging low overhang, also installed for no good reason. A turn off was the building’s design—water drainage from the roof traveled through the middle of the building to the first floor, where it was leaking in the main entrance. The stairwell was also pitch dark as no windows or lighting made it possible to see. Although much of the apartment had indeed been well maintained, the bathroom and toilet—which are almost always divided by a wall in Soviet-era homes or are completely separated from one another—needed to be gutted then remodeled, as had to be done in nearly every apartment I have laid foot in to visit, rent, or buy. They wanted $40,000, but they would come down in price. Unfortunately, it just wasn’t worth it.
Thus there is a current trend in and around Yerevan to over inflate the costs of housing, keeping in mind that the average monthly salary is about $120, the average price for a used car is about $8,000, and the costs of living have significantly increased. (I bought a carton of 10 eggs yesterday which cost nearly $1.50—the same price you would see in supermarkets throughout the Boston area for a dozen. A kilo of lavash bread is just under $1.) And the cost for one square meter of land in central Yerevan is about $1,500.
There are several reasons for the substantial increases in prices for real estate. A few years ago wealthy foreign investors started buying up huge amounts property in Yerevan. Rumors were heard that people associated with the Cafesjian Foundation were supposedly purchasing apartments up to three times higher than their actual market value in the square adjacent to the Cascade steps, for which incidentally the foundation is sponsoring the actual completion of construction after being on hold for 15 or so years after the Soviet Union collapsed. I heard that apartments were being bought for over $80,000, which was a ludicrous amount in 2002. The same ones are now worth well over $100,000 even as high as $250,000. Apartments continue to be purchased at high offers just to secure them by diasporan Armenians, Iranians, and even Turks, which should come as no surprise by now.
Thus, the real estate market in Yerevan has artificially gone through the roof, literally. Many owners of expensive top-floor apartments have constructed—in many cases illegally—a second floor for their home thereby adding to their worth, despite the stress that may be added to the building’s frame. It is now virtually impossible to purchase a reasonably priced apartment in and around central Yerevan. Be expected to spend at minimum $50,000 for a one bedroom apartment, regardless of where it is located, the condition of the apartment, and how durable the building itself may be. Apartments in dozens of buildings that have not yet been completely constructed—especially the ones that barely have had a foundation laid along the “Northern Boulevard”—have supposedly been sold. This rapid acquisition of property may have to do with the fact that millions of dollars owed by prosperous businessmen floating in the “shadow economy” need to be invested into something solid, most notably real estate. Armenia’s wealthy are taking over the streets of Yerevan. There is no way of stopping government officials and members of parliament who are magically making undisclosed, yet lofty sums of money from doing whatever they want when it comes to business. The real estate mafia (nearly all business sectors in Armenia are controlled by one which is common knowledge) continues to increase housing costs with no government regulation cap on inflation to stop them. People who have the money do not seem to care that they are paying too much for housing. What is important is that they invest their cash in small businesses or housing so as to not expose their actual wealth, and they usually do so under the names of close family members. When obliged they don’t disclose it anyway. Even the Catholicos of All Armenians has gotten into the act, as he supposedly owns a few grocery stores in central Yerevan and is about to convert a playground for children into an undisclosed business venture in Ejmiadzin, where purportedly he owns much real estate.
The apartment in which I live was purchased by my landlord for about $16,000 in 2001. It is worth anywhere between $60,000 and $100,000 or more today, depending on how much someone wants it. In the last two years alone real estate prices have increased two fold—since 2001 about four times. The economy is booming the government and foreign analysts say, yet again the average monthly salary remains at $120. So how is a newly married couple supposed to purchase an apartment? Even in the farthest outskirts of the city, dilapidated apartments can fetch a minimum of $20,000. On paper, considering that Armenia has a long way to go economically speaking as about 40 percent of the population is considered poor, it doesn’t make sense. But I need to keep reminding myself over and over again that I am dealing with Armenian logic. I’m wondering when I will ever resign myself to the fact that I will never understand it.
We started by looking at places in Arabkir city district, which is more commonly known as Gomidas. Our broker, Torkom, who is a fabulous guy and who helped me four years ago find the apartment I still rent, took us to see three two-bedroom apartments selling for the whopping price of $50,000. We entered these flats located in mainly defective, no more than 30-year-old buildings that are already crumbling to realize that the entire apartments would have to be gutted then remodeled. Judging by the current prices for new flooring, plumbing, bathroom and kitchen fixtures, furniture, appliances and so forth, not to mention construction costs, remodeling would cost at least $20,000 to make the apartments modestly livable. Two out of the three apartments in that area had at one point endured water damage—one seemed to have a leak of some kind coming from the main water line in the bathroom. The apartments were reeking from mold, body odor, and other foul, indescribable smells that seemed to have seeped into the walls. The ceilings were pretty low, about ten feet high or lower. Despite their poor condition, these types of apartments nevertheless fetch that high of an amount. And unfortunately I will never be able to afford buying then completely remodeling one of them.
We saw another apartment located off of Tigran Mets Street, a stone’s throw away from the United Nations building and the Erebuni Hotel. The apartment was contained in a historical building dating supposedly as far back as the beginning of the 20th century. It is made from solid blocks of black tufa stone, thus making it extremely sturdy. The apartment itself, located on the second floor, has probably not been renovated in over 50 years. It has lofty ceilings, tall narrow dual-opening doors, and even the original stove heating system intact, but it was a two room apartment—meaning one bedroom. It has a huge balcony about 10 feet wide by 20 feet long or so, but totally unsafe and in complete disrepair. This apartment again would have to be extensively remodeled, but it has significantly more possibilities than the others we saw in Arabkir due to its layout and two water line hookups at opposite ends of the place. It also had once suffered from water damage, but the roof was repaired and there were no signs of mold. But there was no kitchen except for a large porcelain-coated iron sink. Above the tiny bathroom, which is not useable in the condition it is in, is a small reading room accessed by a ladder—the place is a true loft apartment. However, it also fetches $50,000 but is notably smaller than the others we saw. Although Torkom didn’t know for sure about the durability of the foundation, he claimed that the building was not slated for demolition.
But the main problem is how long the building will last. The current trend in central Yerevan is to tear down any building that is more than 60 years old, especially ones that have a significant, historic value. The stones of these buildings are numbered so that they will be reconstructed elsewhere in the future, but that will most likely never happen. Although this building is essentially a landmark and seems to be in excellent condition considering its age, there would be no way of securing any guarantee from the government that it would not be destroyed in the near future. Considering that people are being paid out $5,000 for their homes despite their high market value, I am in no position to loose $45,000 plus any additional money I would spend to renovate the place.
We also decided to look at a place located high up on the fringes of the city limits in an area known as Avan-Aringe, which is fairly close to the Kotayk region border. The area primarily contains high-rise apartment buildings. The apartment we saw was on the ninth floor, and we were told that it had been in excellent repair with two bedrooms. When we entered we realized that it had been maintained very well—all soviet furniture, fixtures, and even the electrical wiring was intact (it is not unusual to see wires hanging out of walls carelessly taped together in an effort to repair them). The small kitchen oven was about 10 years old and was “evro,” a term used to describe any home good supposedly made or designed in Europe. The apartment had two former open balconies, about 3 feet wide and 12 feet long, which were enclosed at one point for some pointless reason since they cannot serve as rooms because they are so narrow, and their walls were infested with mold. Dark curtains blocked all the light from coming in—something that can be noticed in many apartments here. A plus was an outdoor garage, which had electrical and water hookups for car washing. A barbeque was located on the roof, which was also loaded with junk and had a sagging low overhang, also installed for no good reason. A turn off was the building’s design—water drainage from the roof traveled through the middle of the building to the first floor, where it was leaking in the main entrance. The stairwell was also pitch dark as no windows or lighting made it possible to see. Although much of the apartment had indeed been well maintained, the bathroom and toilet—which are almost always divided by a wall in Soviet-era homes or are completely separated from one another—needed to be gutted then remodeled, as had to be done in nearly every apartment I have laid foot in to visit, rent, or buy. They wanted $40,000, but they would come down in price. Unfortunately, it just wasn’t worth it.
Thus there is a current trend in and around Yerevan to over inflate the costs of housing, keeping in mind that the average monthly salary is about $120, the average price for a used car is about $8,000, and the costs of living have significantly increased. (I bought a carton of 10 eggs yesterday which cost nearly $1.50—the same price you would see in supermarkets throughout the Boston area for a dozen. A kilo of lavash bread is just under $1.) And the cost for one square meter of land in central Yerevan is about $1,500.
There are several reasons for the substantial increases in prices for real estate. A few years ago wealthy foreign investors started buying up huge amounts property in Yerevan. Rumors were heard that people associated with the Cafesjian Foundation were supposedly purchasing apartments up to three times higher than their actual market value in the square adjacent to the Cascade steps, for which incidentally the foundation is sponsoring the actual completion of construction after being on hold for 15 or so years after the Soviet Union collapsed. I heard that apartments were being bought for over $80,000, which was a ludicrous amount in 2002. The same ones are now worth well over $100,000 even as high as $250,000. Apartments continue to be purchased at high offers just to secure them by diasporan Armenians, Iranians, and even Turks, which should come as no surprise by now.
Thus, the real estate market in Yerevan has artificially gone through the roof, literally. Many owners of expensive top-floor apartments have constructed—in many cases illegally—a second floor for their home thereby adding to their worth, despite the stress that may be added to the building’s frame. It is now virtually impossible to purchase a reasonably priced apartment in and around central Yerevan. Be expected to spend at minimum $50,000 for a one bedroom apartment, regardless of where it is located, the condition of the apartment, and how durable the building itself may be. Apartments in dozens of buildings that have not yet been completely constructed—especially the ones that barely have had a foundation laid along the “Northern Boulevard”—have supposedly been sold. This rapid acquisition of property may have to do with the fact that millions of dollars owed by prosperous businessmen floating in the “shadow economy” need to be invested into something solid, most notably real estate. Armenia’s wealthy are taking over the streets of Yerevan. There is no way of stopping government officials and members of parliament who are magically making undisclosed, yet lofty sums of money from doing whatever they want when it comes to business. The real estate mafia (nearly all business sectors in Armenia are controlled by one which is common knowledge) continues to increase housing costs with no government regulation cap on inflation to stop them. People who have the money do not seem to care that they are paying too much for housing. What is important is that they invest their cash in small businesses or housing so as to not expose their actual wealth, and they usually do so under the names of close family members. When obliged they don’t disclose it anyway. Even the Catholicos of All Armenians has gotten into the act, as he supposedly owns a few grocery stores in central Yerevan and is about to convert a playground for children into an undisclosed business venture in Ejmiadzin, where purportedly he owns much real estate.
The apartment in which I live was purchased by my landlord for about $16,000 in 2001. It is worth anywhere between $60,000 and $100,000 or more today, depending on how much someone wants it. In the last two years alone real estate prices have increased two fold—since 2001 about four times. The economy is booming the government and foreign analysts say, yet again the average monthly salary remains at $120. So how is a newly married couple supposed to purchase an apartment? Even in the farthest outskirts of the city, dilapidated apartments can fetch a minimum of $20,000. On paper, considering that Armenia has a long way to go economically speaking as about 40 percent of the population is considered poor, it doesn’t make sense. But I need to keep reminding myself over and over again that I am dealing with Armenian logic. I’m wondering when I will ever resign myself to the fact that I will never understand it.
Comments
And the layouts of these flats are horrible, too. I wonder what the architects were thinking. They are not very suitable to live in unless a major remodelling is to be done.
Your best bet is to buy a single family home somewhere outside Yerevan and commute. But again, this will require a major remodelling, or a complete rebuild since most of these houses are not well laid out either.
As far as prices go, yes it's a bubble, but it's gonna be there quite a while. It's not only Diasporan folks and Iranians. Now banks provide mortgage, so that changes the situation a lot. Interest rates are not so favorable, but for people who otherwise couldn't even dream about owning a place, it can be a solution. So, this is another addition to existing demand, which means prices will stay there for a while. One more thing, many new apartment buildings/construction belong to influential people. What they are doing is trying (dictating to real estate firms) to increase and make old building apartment price almost equal to that of new apartments, so that new apartments will start sell again with previous rate (I mean recently there was kind of slow down in the new apartments market).
best,
Hayk