# 18 years without rest: why Baku residents have to save for an apartment their entire life

Square meters in Baku are becoming more expensive faster than salaries are growing. Construction cranes don't fall silent, new buildings reach skyward, and along with them - prices. According to calculations by the Central Bank, to save up for an apartment in the capital, someone with an average salary will have to work for 18 years - an entire adult lifetime, writes the newspaper "Caspian".

The rise in housing prices has already become topic number one for city residents, and the Central Bank is trying to explain why square meters are becoming more expensive so rapidly. In its Financial Stability Report, the regulator directly states: the construction sector has revived, dozens of new projects have entered the market, and demand for apartments remains high. All of this adds fuel to the fire: prices continue to rise, giving buyers not the slightest respite.

What's heating up prices?

Over the past five years, housing has become more expensive by almost half. And this applies not only to new buildings, but also to the secondary market. The pandemic only temporarily froze the situation. As soon as restrictions were lifted, prices again surged upward. From this perspective, Central Bank specialists pay special attention to construction. Investment in this sector is now growing, and although overall investment sometimes fluctuates, it is specifically residential construction that persistently drives the statistics.

The share of investment in new buildings in the capital structure is also continuously increasing, which means there will be more construction cranes in the city. The more they build, the more actively the market works, but the cost per square meter also grows. An additional impulse to the market is provided by the legalization of housing without documents. By order of the head of state, many buildings received a chance to come out of the shadows, and this also sharply increased supply.

But paradoxically, instead of becoming cheaper, all of this only heated up buyer interest and spurred the increase in apartment prices. After all, now legal residential square meters have entered the white market. In short, there is demand in the market, according to the CBA report, and even despite increased supply, buyer interest is stimulating prices. The country's main bank is confident that the situation will not change for now: activity in the real estate sector is not going to decline, and prices will continue to rise.

Money is going into concrete

The outcome for ordinary home buyers looks difficult. To save up for an apartment in Baku with an average salary, one will have to work more than 18 years, or approximately 217 months. For comparison, in neighboring Georgia this takes about 13 years, and in Armenia - around 10 years. It turns out that for our citizens, the path to their own housing is the longest in the region. Why do apartments cost more here, although both salaries and GDP per capita are lower than our neighbors'?

At first glance, this seems illogical, as if the economy is playing against its own rules. But the reason is much simpler, says economist Eldeniz Amirov. According to him, the influx of money into Baku is noticeably higher than into the capitals of neighboring countries, and this inevitably heats up demand. But what's more important is that capital is not going into production or exports. The main portion of funds is directed precisely into real estate.

Moreover, taking large sums abroad today is much more difficult. Limited opportunities for currency outflow force owners to seek reliable ways to preserve their savings. Apartments become the most convenient option, and money settles in concrete.

"Quite often, purchased apartments are registered to relatives or acquaintances, and their real owners may not even live there, - shares the economist. - That's how new high-rises appear in which windows don't light up in the evening: apartments are bought but remain empty because they serve only as a safe for investments. In Georgia and Armenia, this is less common - there, housing is primarily purchased for living. Hence the price growth: they increase not because of rising incomes of the population, but because real estate has become the main way of saving".

Conditions to match the prices

Executive Director of the Realtors Association Elnur Azadov discusses the reasons for the price increase. According to him, starting from 2020, especially after the coronavirus pandemic, housing prices indeed jumped sharply:

"The increase in the residential real estate market has already reached 60%, and this trend continues, - he explains. - One of the main reasons was the decline in competition. Several years ago, the State Committee on Urban Planning and Architecture limited the issuance of construction permits, as a result supply decreased. Accordingly, prices on the market went up. Additional pressure on the cost per square meter was exerted by the increase in prices for reinforcement bars and a whole range of other construction materials. Stabilization of the situation is possible with the entry into the market of a large number of construction projects. I believe this will not happen earlier than in a year".

To support buyers, specialists propose softening mortgage conditions - making it more accessible and responsive to the market situation. Currently, the minimum rate of the Azerbaijan Mortgage and Credit Guarantee Fund is one of the lowest not only in the republic, but also among Commonwealth countries. Therefore, at the root of growing interest in long-term financing of subsidized and social housing are cheap loans and favorable terms from the fund. However, experts call for resolving the issue of mismatch between the state mortgage limit and the rising cost of housing.

According to deputy and expert Vugar Bayramov, the cost per square meter grows almost daily, so financial opportunities for buyers need to be expanded. As an option, the parliamentarian proposes raising the upper limit of preferential lending to 150 thousand manats.