DON'T MISS THIS CHANCE

Perhaps spring is not just about the revival of nature and everything alive. Strange as it may seem, rising temperatures bring about the first signs of a relaxation of tensions in the world economy - the crisis storm seems to be "losing momentum". The opinion that the crisis has reached its "bottom" is gaining more and more supporters in the world's markets. The decline in industrial production is slowing down, the markets for raw materials are returning to life, the growth in levels of unemployment and deflation are slowing… Signs of recovery in the housing market have appeared in the USA, while the fall in personal consumption has come to a halt.

"A gleam of hope"

Quite recently, even US President Barack Obama spoke officially about this after his meeting with the head of the Federal Reserve System, Ben Bernanke, Treasury Secretary Timothy Geithner and other top financiers in the White House. "Signs of some progress can be seen in the US economy but, nevertheless, it is still under strong pressure," Reuters quotes him as saying. "The situation in the financing of small businesses gives some "gleams of hope", he thinks. Besides that, the US president noted a considerable growth in the volume of refinancing for the US real estate market. "We still have a lot to do, but some progress can already be seen," Obama said.

It must be noted that, even for analysts, the increased activity on the US real estate market over the last two months was unexpected. Ac-cording to statistical data, 583,000 flats were put into operation in the States in February, while one month earlier this figure hardly reached 477,000 - the lowest indicator in 50 years. Moreover, the number of applications for permission to build new houses increased by 3 per cent.

It is no secret that the world crisis has had an impact on the real estate market in Azerbaijan - some companies decided to adopt a stance of wait-and-see, putting a brake on the construction of new buildings. Realtors are looking for buyers, while potential clients are in no hurry, anticipating further falls in prices.

According to Elnur Azadov, marketing director of the Caspian Property Services appraisal firm, demand on the Azerbaijani real estate market had declined by 20 per cent by the fourth quarter of 2008.

At the same time, some recovery can be seen in the market for commercial buildings in Baku. For example, in February the dynamics of deals on the sale and purchase of commercial buildings increased by 2.3 per cent compared to January, although in the same period of 2008 it fell by 16.5 per cent. Rent for commercial buildings fell by 2.5 per cent. February saw a 3.6 per cent drop in the number of offers, due to low activity in the market for non-residential buildings. The number of deals fell by 1.6 per cent by January. The average price in the market for non-residential buildings fell by 0.3 per cent in February - to 3,440 dollars per square metre.

At the same time, housing prices in the capital have not changed for two months. "In this situation, it is difficult to predict the situation in the market by the end of the year," Azadov thinks. It should be noted that according to the public organization Participants in the Property Market, the price of one square metre of housing on the primary market in Baku fell by 2.5 per cent in February - to 1,078 dollars on average, against 1,106 dollars in January.

The lowest level?

What is going on? Are global trends affecting the local market, or is this a conspiracy by the building companies?

Of course, as we said above, the Azerbaijani real estate market is subject to the influence of foreign factors. However, there are also purely commercial explanations here. Companies have nowhere to go to lower their prices any further - they have reached the "bottom".

According to a representative of one of Azerbaijan's major construction companies engaged in the construction of expensive elite and middle class housing, housing prices in Baku are unlikely to fall in the near future. "In principle, we have not changed the prices of elite housing, because the buying capacity of our clients in this sector has not changed. Second, even if our flats in the best districts of the capital are not bought now, we will sell them for a good price in two or three years anyway. Elite housing always maintains its value, because it is distinguished by its high quality, it is situated in central parts of the city and, as a rule, has a good internal and external infrastructure," said the R+ interviewee.

The market for business class housing has been affected by the financial crisis more than elite housing. This is proven by the fall in demand for this type of property, and prices in this segment have been falling since the end of last year. This is happening in different ways - sometimes buyers are offered various bonus campaigns, receiving offers like "buy one flat and get one free", or being promised interest-free loans etc. All this inspires hope in potential buyers that the fall in prices will continue.

"The stability of prices over the last two months speaks for itself - construction companies have suspended their discount campaigns. The point is that property on offer today was built on the basis of the prices of building materials of two or three years ago. Companies have already reduced their profits considerably, but not a single businessman will agree to lose it completely," said the spokesman for the construction company.

At the same time, it is difficult today to forecast whether prices will remain low despite the softening of the global crisis and the expected revival of Azerbaijan's mortgage market, following the resumption of the state mortgage programme. This will boost the demand for middle class housing. Another incentive for the restoration of housing prices might be a hike in prices on the world's oil exchanges, which will directly affect the financial potential of the Azerbaijani economy.