INVESTING IN SQUARE METRES

In recent years, the global real estate market has undergone dramatic transformations: in many countries, the pace of price growth has slowed, transactions have decreased, and purchasing property has become more difficult.

For example, in the member states of the Organisation for Economic Co-operation and Development, the gap between household incomes and housing costs has widened, while high mortgage rates have restricted access to credit. If last year property prices fell in such traditionally expensive markets as Germany, France, the United Kingdom and Hong Kong, they continued to grow at double-digit rates in Türkiye, Russia and the UAE.

Against this backdrop, Azerbaijan’s real estate market stands out as one of the most promising and dynamically developing in the region. Forecasts suggest that its overall volume will reach $501.3 billion in 2025, the bulk of which — $403.4 billion — will be residential real estate. Residential property is expected to expand the fastest, with average annual growth of 7.4%, reaching $666.6 billion by 2029.

Macroeconomic drivers

One of the key factors behind this growth is shifting consumer preferences. Increasingly, buyers are interested in modern apartments and premium-class homes with well-developed infrastructure. At the same time, demand remains strong for properties that can be profitably rented out. This makes Azerbaijani real estate attractive not only for living, but also as an investment vehicle.

Active construction also plays a key role. Across the country, new residential complexes and business centres are being built, with both state and private investors participating. This draws in additional capital — domestic as well as foreign.

In parallel, the number of real estate agencies and online platforms is growing, making transactions simpler and more transparent.

Finally, Azerbaijan retains its strategic location as a significant advantage. Situated at the crossroads of Europe and Asia, the country holds natural appeal in the eyes of investors. Add to this a stable political environment, tax incentives, and simplified procedures for property purchases, and the market becomes even more attractive for foreign players.

Analysts from the International Statistical Committee also note that the growth of Azerbaijan’s real estate market rests on solid economic fundamentals. These include steady GDP expansion and overall macroeconomic stability, which strengthen investor confidence. Large-scale infrastructure projects — new roads, airports and transport hubs — further enhance the value of different regions of the country. In addition, the development of tourism is stimulating demand for rental housing and leisure properties.

As a result, forecasts indicate that Azerbaijan’s real estate market will continue to expand in the coming years. Its attractiveness will be supported by both domestic and foreign investors. Combined with macroeconomic stability, favourable geography and rising demand for premium housing, the sector will remain one of the pillars of the national economy.

A market on the rise

Turning to commercial property, the situation largely mirrors global trends. This segment is directly tied to economic activity and the performance of individual industries, while its development is shaped by investors, developers, brokers and management companies.

The COVID-19 pandemic marked an important turning point, altering business models and reshaping demand. Offices became less sought after as many companies switched to hybrid working models, while the boom in e-commerce fuelled demand for warehouses, logistics centres and industrial facilities.

These changes continue to resonate today. Experts note that office space remains relatively unattractive, whereas industrial and logistics properties rank among the leaders in demand. Technological innovations and sustainability considerations have also become integral parts of project evaluation.

To grasp the scale of this market, consider that in 2023 its global volume was estimated at around $37 trillion — nearly twice the size of China’s entire economy. North America remains the leader, accounting for about a third of all property value. Europe, by contrast, has faced difficulties: in 2023–2024, investment dropped sharply, especially in the office sector, where inflows fell by 21% compared with 2019.

By contrast, Azerbaijan stands out for its steady growth. Projections suggest that by 2025 the value of its commercial property will reach $97.9 billion, rising to $124.5 billion by 2029, with an average annual growth rate of 6.2%.

This is supported by a favourable domestic environment — active foreign investment backed by tax incentives and simple property-purchase rules, expansion of the non-oil sector driving demand for offices and retail premises, and the country’s strategic position, which makes it a key logistics hub between Europe and Asia.

Modern companies in Azerbaijan are increasingly opting for next-generation office spaces. Flexibility, advanced IT infrastructure, fast internet and convenient locations in business districts are prioritised. Mixed-use developments, combining housing, offices and retail within one complex, are gaining in popularity. Such projects help shape a dynamic urban environment that benefits both businesses and residents.

According to research, the growth of the commercial property sector in Azerbaijan is largely driven by major infrastructure and energy projects. At the same time, economic diversification and tourism development are creating fresh opportunities for investors.

Thus, Azerbaijan’s commercial property market is evolving under the influence of both global trends and local advantages. With government support and a steady inflow of foreign investment, it is well positioned to maintain sustainable growth and strengthen its role in the national economy.

A new stage of development

The next important step for the sector could be the creation of real estate funds. In global financial markets, these are a common instrument, helping not only to develop the property market itself but also to invigorate capital markets.

According to Oqtay Gasimov, Deputy Chairman of the Baku Stock Exchange, such funds would allow investment even in small amounts, make the market more transparent, and help reduce risks. Investors could earn income from rent or rising property values, making real estate investments accessible to a wider segment of the population.

Parvana Gasimova, a board member of the Association of Securities Market Participants of Azerbaijan, explained that these instruments are particularly useful for those who view property as a reliable asset but lack substantial resources.

In her view, the launch of such funds would not only expand investment opportunities but also revitalise the market, create new jobs and raise financial literacy.

A similar opinion is shared by Vugar Oruj, Chairman of the Azerbaijan Society of Appraisers. According to him, real estate funds would help establish more objective pricing and reduce the shadow sector. "Even people with modest savings will be able to participate in investments and earn income. This is a step towards free competition and equal opportunities," he emphasised.

In fact, the legislative framework for such funds already exists. The Law "On Investment Funds" was adopted back in 2010, yet no fund has been established to date.

According to the Baku Stock Exchange, by the end of 2025 the value of Azerbaijan’s real estate market could reach $500 billion — nearly six times the country’s GDP. For comparison: in Kazakhstan this figure is more than three times GDP, in Pakistan five times, and in Türkiye eleven times.

The BSE believes that trading real estate investments through flexible and liquid instruments would help narrow price gaps, accelerate capital turnover and broaden access to investment. Moreover, mandatory disclosure of reports would make the market more transparent, build investor trust and support more informed decision-making.

At the initial stage, tourist facilities, shopping centres and hotels are proposed as fund assets. This would enable centralised management, rent collection and dividend distribution to unit holders. Later, the range could be expanded to include residential and commercial property.

International practice demonstrates that such funds have long proven effective. In the US they first emerged in the 1960s. Today it is the largest market in the world, with asset values exceeding $136 trillion. Core investments are concentrated in office buildings, shopping centres, warehouses and hotels.

Türkiye currently has more than 40 real estate funds with assets worth billions of dollars. They have significantly boosted activity in the financial market and simplified access to property investment. Kazakhstan and Pakistan are introducing similar mechanisms, seeing them as a way to make capital markets more transparent and competitive.

The experience of other countries also shows that such funds help reduce the shadow economy, establish fairer pricing and increase tax revenues.

Meanwhile, property prices in Azerbaijan continue to climb. In July 2025, prices rose across all segments in Baku, particularly for land plots and private houses. On average, land plots appreciated by 15–20%, apartments by 5–10%, and non-residential premises and private houses by 6–12%.

Another factor putting pressure on the market is inflation. In January–July this year, consumer prices rose by 5.8% year-on-year (compared with 5.9% in the first half of the year). Forecasts indicate that average annual inflation in 2025 will reach 5.4%. In such conditions, real estate becomes one of the main means of preserving capital, further fuelling demand and driving prices upward.

This is why the launch of real estate investment funds could prove a turning point for Azerbaijan. They could serve not only as a tool for modernising the housing and commercial property market, but also transform real estate into a true engine of the country’s financial system, strengthening resilience and making Azerbaijan more competitive at the regional level.