Since 2007, when major renovation projects and new buildings began to appear in the city skyline, the Tbilisi real estate market has experienced consistent year-on-year growth. The global pandemic however had an impact on real estate development and sales in Georgia and around the world.
We spoke with the investor behind Tbilisi’s new business center, Vake Plaza, about the current state of affairs and what the future may hold for Tbilisi real estate. The project’s founder, David Kezerashvili, provides our readers with first-hand information on how the real estate sector is performing today and what to expect in the future.
Join us if you’re interested in real estate, prices, investment, or simply learning more about Tbilisi’s beautiful city and its newest buildings.
What are the Effects of the Pandemic on Tbilisi’s Real Estate Market?
As we all suspected, the pandemic and the global restrictions that accompanied it had an impact on all sectors in 2020. The consequences are still being felt today. However, we’ll start with 2020 to get a full picture of how things are progressing. The real estate sector was the hardest hit at the start of the pandemic in Europe and Georgia. Sales dropped 92.7 percent in April 2020 when compared to the same month in 2019. I don’t think I need to tell you what a huge percentage, 92.7 percent, is in any industry. However, this is especially dangerous in real estate, where investors rely on the success of one project to fund the next and continue expansion.
Georgia, particularly Tbilisi, demonstrated that its people are quick to adapt to new circumstances. The first months of 2021 saw a decrease as well, but it was only 74% lower than in 2019. Even though the drop is still significant, it’s a very good sign that investors have started to see the beginning of a recovery. Overall, when looking ahead to 2020, the year-on-year decline could be summed up to 15%, owing primarily to apartment sales. This indicator managed to maintain the same level as in 2019 and aided in softening the overall real estate decline.
How did the COVID-19 Measures Influence this Sector?
As previously stated, the lockdowns and travel restrictions had a significant impact on sales and, in particular, rental prices. Nonetheless, despite criticism that the restrictions were too severe and had a negative impact on the economy, particularly real estate and hospitality, it was later demonstrated that these measures helped the economy get back on track late in 2020 and early in 2021. Nobody can deny that the government was successful in dealing with the pandemic, and the numbers prove it. Annual inflation fell to around 3% at the start of 2020, and the National Bank cut rates twice this year, bringing it to 8.25 percent. Nonetheless, despite a 10.7 percent drop in rental prices, the real estate sector is far from saved. The lack of tourists caused a significant drop in prices on the Tbilisi real estate market, and only when things have returned to normal can we discuss a relaunch of this sector. That should happen this summer, or at the very least until the end of the year.
Which Tbilisi Neighborhoods are Best to Invest In?
Before I answer your question, I’d like to address an issue that has taken the authorities a long time to resolve: the old city. Anyone interested in real estate knows that building in the old center is prohibited, and even if a permit is obtained, there are strict rules that investors must follow. Unfortunately, this was not always the case, and new buildings have degraded the beauty of Tbilisi’s old heart. I can only hope that the government continues to pass laws that protect the old city and strictly regulate new construction in Tbilisi. Only through strong legislation and regulations will we be able to transform Tbilisi into the European capital it deserves to be.
Returning to your original question, the suburban Tbilisi neighborhoods are the best to invest in real estate, and the area called the “Green Budapest” is very trendy. This isn’t just one person’s opinion. First and foremost, consider how congested the city center is. Even though the prices are higher, most people who are looking for an apartment or a business location prefer the suburbs. Looking back at what happened in 2020, we can see that areas like Samgori, Gldani, and Isani were real estate sales leaders.
However, if you don’t want to go that far from the city’s heart, the best districts remain Vake, Mtatsminda, or Saburtalo. Vake has a special place in my heart due to the park where I used to enjoy the fresh air and nature when I was young. Therefore, it’s no surprise that I decided to build the stylish Vake Plaza in the neighborhood. An ultra-modern business center to cater to the needs of young entrepreneurs and business people from Tbilisi and all of Georgia. With an average cost of $896 per square meter, Vake is the second-most valued district in the capital and one with tons of potential.
There are numerous other real estate projects in development in the region, both residential and for business, and I’m confident this will attract many entrepreneurs and young families. Therefore, I encourage anyone who wants to get into the real estate industry to consider Vake one of the best areas to invest in.
David Kezerashvili; Real Estate Investor and Entrepreneur
Disclaimer: This content does not necessarily represent the views of IWB.