Georgia National Bank says demand for residential real estate is on the rise.

According to the latest real estate sector survey published by the National Bank of Georgia on Tuesday, the demand for residential real estate in Georgia is increasing and the prices of houses and apartments are rising. The study predicts a significant increase in supply in the capital city of Tbilisi's market in the near future based on building permits issued between 2021 and 2022. However, it also notes that the number of permits issued in the Black Sea coast city of Batumi has decreased due to "significant risks" associated with tourism due to the Covid-19 pandemic.

Who are the buyers of real estate in Georgia? The share of transactions by foreign nationals in total real estate purchases in Tbilisi rose to 8.8 percent in September 2022, but the NBG noted that this number is still below the high of nine percent recorded in July 2019. The majority of buyers are citizens of Georgia. The study also showed that the increase in transactions by foreign nationals is mainly due to Russian citizens, with their share in transactions to buy houses or apartments in Tbilisi increasing from 0.9 percent in January to 5 percent in October, and in Batumi from 5 percent in January to 17.6 percent in November.

Why are real estate prices rising? The National Bank of Georgia said that the rise in residential real estate prices has "several underpinnings" related to both demand and supply. It noted that increased demand has allowed construction companies to raise prices, and the costs included in the cost of production have also increased for businesses this year. The average price of residential space in Tbilisi has increased the most on apartments that already have a main structure but do not have any cosmetic finishing work - a condition known in the industry as "white finish". The NBG also noted that the average price of apartments with "white finish" rose 46 percent from the beginning of 2022 to September, rising from $1,200 to $1,752 per square meter in the Vake district of Tbilisi. In Batumi, the price of apartments in "black finish" condition - which includes only exterior walls, windows, front door and communications - rose 52 percent to $1,073 per square meter.