How the war in Ukraine is affecting the real estate market in Georgia.

How much does an apartment in Tbilisi cost?

The Russian-Ukrainian war has dramatically changed the Georgian real estate market. The arrival of thousands of Russian and Belarusian citizens has significantly increased the cost of renting apartments, with rents up 210% compared to last year. Sale prices have also risen. REUTERS/David Mdzinarishvili

Dry Bridge

The Dry Bridge is a place in Tbilisi where realtors and their potential clients have traditionally gathered for decades. People meet here every day to rent or buy housing. Discussions about trends in the Georgian real estate market are usually in full swing here. However, most people now use popular real estate websites and contact companies to transact with''real estate, but bridge buyers aren't shrinking. "Prices are going up every day. Remember some immigrant selling an apartment on Shanidze? The price went up $10,000 in a month." "I called one of them, said I had a client who was willing to pay $25,000, and he yelled at me and asked for $52,000. I recently sold a condo of the same design in the same building for $38,000." "Crazy, too expensive, they want unrealistic amounts." "This woman is looking for an apartment for her college son and nephews for $300 and she can't find one, poor thing." "I don't even remember when I rented an apartment to Georgians, it's all Russians, Russians," realtors say among themselves.

A Russian-speaking couple approaches realtors on Dry Bridge. Since the beginning of the war in Ukraine in'1,45614 Russian citizens arrived in Georgia. In September alone, 222,274 Russians arrived in Georgia after Putin announced mobilization. "I rented an apartment in early October. In the evening, at about ten or eleven o'clock, I placed an ad, and already in the morning at nine it was rented, and for $200 more," says Nutsa, who owns an apartment on Politkovskaya Street in Tbilisi's Saburtalo neighborhood. Russians are mostly looking for apartments to rent, but realtors say some are interested in buying. The Batumelebi newspaper published data from the national state registration agency, according to which Russian citizens bought 2,964 apartments and 37.9 hectares of land in Georgia between March 1 and October 12, 2022.

Stories of young people

The locals can no longer''to pay the rent. A Russian-speaking couple approaches the dealership on Dry Bridge. Igor and Lisa arrived in Georgia in September. Lisa, 31, is an architect, and Igor is a communications specialist who now works online for Russian companies. As long as they have the opportunity to work remotely, they plan to stay in Georgia. In September, they rented a room in a private house in the central Vera neighborhood. It cost $1,000, though they don't have a separate kitchen, so the couple decided to find a new apartment. Igor says his friend from Moscow bought an apartment in Kobuleti and moved there. "A lot of people are already doing this. At first he was also renting, but if you calculate the monthly expenses, it is more profitable to buy, and the buying process is also simple. He saved up some money and bought because he plans to stay''in Georgia. We can't buy at this stage - we don't have money, and we can't make plans for the future. We are just trying to find the best apartment," he says. A young woman approaches the exchange: "Who has an apartment for rent?" - she asks, but the question goes unanswered. "No apartments," one of the dealers mumbles. "What, really no apartments for rent?" - I ask suspiciously. "There really aren't right now," one of the realtors replies. After a while, three more young men approach. Their story piqued my interest.

Trends of the real estate market

How much does an apartment in Tbilisi cost? Tatia Sesadze had a small private house in Tbilisi, which she sold at the beginning of the year. Her plan was to raise money and buy an apartment in a building under construction by summer. Tatia has her own small business - an online store. "Things have changed so much since then that I just can't find anything. I can't even keep saving money. It's impossible to buy, the prices are so inflated. There is no housing that costs less than a thousand dollars a square meter. Do you know why people go abroad? The first reason is that they want to buy a house and they can't afford it, they don't have enough income.''It has to do with rising prices and low wages here. A Georgian could never afford to buy a house with his salary. All the more so now,' says Tatia.

The trend of rising prices in the real estate market has been analyzed since the beginning of the pandemic. However, the price hike has not hindered sales; on the contrary, both demand and sales have increased. According to a study by brokerage research investment firm TBC Capital, the purchase price of real estate has increased 28% from last year, and the upward trend continues. According to the research of this company, the average sale price per square meter of real estate in Tbilisi in October increased by 7.2% compared to September and by 28% compared to the previous year and reached $1,037 per square meter. Rents''research and investment firm TBC Capital: "First, there's the rise in the cost of building materials. Since the beginning of the pandemic, the construction cost index has increased by 15-20%. The second factor is the strengthening of the lari against the dollar. Over the last six months, the Lari has appreciated by 10-15% and according to our research, the impact of the exchange rate is about 50%. It means that strengthening of lari increases the price in dollars, and devaluation of lari decreases the price in dollars, the price of apartments in our country is indicated in dollars, so it has an impact".

The real estate experts do not expect the prices of apartments on the market to decrease, says Giorgi Nizkharadze. "The price will depend to some extent on the development of the lari exchange rate. However, since the exchange rate is macro-robust and not''too much up or down, we don't expect prices to fall next year because of the exchange rate. As for rents, we expect that they should start to stabilize by the end of the year and should decline in 2023-2024." As for rental prices, they are linked to migration and how long Russians and Belarusians plan to stay.