How the influx of Russian citizens has affected the Armenian real estate market
The impact of Russians moving
The impact of the Russian-Ukrainian war on life in Armenia, particularly the country’s economy, is assessed differently by the government and independent experts, but all agree that a certain percentage of economic growth has been a result.
We made an attempt to find out what impact the large-scale relocation of Russian citizens to Armenia has had on the Armenian real estate market.
It turned out that a significant part of Russians do not intend to stay in Armenia for a long time and are looking for opportunities to decamp for other countries, so pros and cons are likely to be temporary.
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Rising apartment rents
Anna lives in Yerevan in a rented apartment. She is one of many who have experienced the inconvenience of the arrival of a large number of Russian citizens in Armenia. In March 2022, when the influx began, the owner of the apartment first demanded double the rent — instead of 100,000 drams [about $200], he asked for 200,000 [about $500], and then he kicked her out of the apartment altogether.
“He only gave me a week to vacate the apartment. Since I did not have a lease agreement with the owner, I had to comply. I found myself on the street and had to ask acquaintances to put me up while I found another apartment. It is clear that I was evicted, as Russians who had moved to Armenia were given more expensive accommodation.”
How the influx of re-locations has affected the rental market
There is no official data on how much the prices for renting apartments and private houses have increased in Armenia.
“The Cadastral Committee does not analyze rental rates. Firstly, because of the small number of registered transactions, and secondly, due to the fact that unrealistic amounts of rent are indicated in the contracts,” Aram Gugarats, deputy chairman of the committee, says.
The state has almost no control over the rental market. According to the current legislation, when renting out housing, the owner must pay income tax of 10 percent of the transaction amount, but most people do not document the transaction and pay nothing to the state treasury.
Realtors say that the Russian-Ukrainian war has significantly affected the real estate market in Armenia, and moreso rents than sale prices.
“Due to the influx of Russians, rents went up two to three times. And only in the last five-six months, together with the departure of some Russians from the country, the emergence of more profitable offers in the primary real estate market, as well as a decrease in demand, the rental prices have slightly decreased,” economist Suren Parsyan says.
How the influx of Russians affected housing prices
The arrival of Russians due to the Ukrainian war ranks third in terms of the impact on real estate market prices, according to economist Armen Ktoyan. He gives priority to the law on the return of income tax on mortgage payments, or rather, the approaching deadline for its abolition in the capital.
According to this law, if an apartment in a new building is purchased from the developer itself, the mortgage interest is paid from income tax withheld from the salary. It went into effect in 2015. Initially, the purpose of the program was to support people with small and medium incomes so that they could buy apartments, as well as to stimulate the construction of new buildings.
Then both the authorities and experts started talking about the fact that the concentration of construction in Yerevan does not contribute to the development of the regions. It has already been decided that from 2025 the law on income tax refund for mortgage loans will no longer be in force in the capital. This led to increased demand and higher prices.
“In any case, the influx of Russians can be considered one of the main factors of price increase, and this applies to both rent and prices of real estate for sale,” Ktoyan says.
As a result, due to the influx of thousands of migrants, as well as internal factors, the price of 1 square meter in apartment buildings in Yerevan increased by 13.9 percent in 2022 compared to 2021. Whereas in 2021, compared to 2020, the prices decreased slightly, but by 0.02 percent.
The growth of housing prices in the regions in 2022 was more significant. There, prices increased by 18.9 percent compared to 2021. Despite this, housing is cheaper in the regions than in the capital.
In 2022 the most real estate transactions were concluded in Yerevan, 33.5 percent of all transactions in Armenia.
“Since January 2022, we have periodically recorded an increase in prices and the number of transactions in the real estate market. This trend continued in July-August 2023 as well. This is explained, in particular, by the growing demand of solvent buyers,” Aram Ghugarats, deputy chairman of the Cadastral Committee, says.
Few Russians buy real estate in Armenia
Since 2022, the interest of Russians in real estate in Armenia has generally increased. But the number of housing transactions is generally low.
Last year they purchased 1,207 real estate properties in Armenia, 62 percent of the total number of transactions made by foreign citizens.
In 2022 Russians purchased 31 percent more real estate compared to the previous year, the highest percentage increase in the last five years.
In 2021 and 2020, Russian citizens purchased 833 and 767 apartments/houses — 52.4 percent and 56 percent, respectively, of the total number of real estate purchases by foreigners.
In the first half of 2023, Russian citizens purchased 579 properties, 64.6 percent of the total number of transactions registered by foreigners.
The number of housing purchase transactions by Russians is very small and in proportion to how many of them are in Armenia now.
According to Armenia’s National Security Service, as of June 30, 2023, 133,352 people had entered the country and stayed for 28 days or more since the start of the Russian-Ukrainian war.
Most buyers are Armenians by nationality
“The Real Estate Cadastral issues indicators based on the buyer’s citizenship, without fixing nationality. But in the process of working with clients we realize that a significant part of buyers are Armenians who are Russian citizens.
Many of them came to Armenia when the Russian-Ukrainian war started, fearing mobilization. And since the mentality of Armenians is that an Armenian should have a house in Armenia, they started buying real estate in their homeland,” Andranik Arutyunov, director of Silver Rea real estate agency, says.
The agency he heads has helped many Russians to buy housing as well. Arutyunov conditionally divides them into two groups:
“The first group includes those who bought real estate to live in. The second group includes those who considered the purchase from the point of view of investing their money. They bought one or more apartments, private houses in order to rent them to other re-locants at high prices”.
According to the Cadastral Committee, Russian citizens are more interested in apartments. In 2022, more than half of the housing they purchased (55.6 percent) were apartments.
“From an economic point of view, Armenia is not interesting to Russians”
The number of transactions for the purchase of business premises is much smaller. In 2022, Russian citizens bought in Armenia
- 11 industrial premises (14 in 2021),
- 52 public buildings (43 in 2021),
- 4 agricultural land plots (in 2021 – 3).
“This means they only needed housing. Most of them are not interested in Armenia from an economic point of view,” Arutyunov says.
Armenian experts believe that this is explained by the professional peculiarities of a significant part of migrants. They can afford to work remotely, from anywhere, as well as easily move to another country.
In this context, acquiring industrial or public premises makes no sense. Some of the newcomers have opted to rent office space rather than buy, so that they can leave for another country without delay if necessary.
In 2022, 4,736 public buildings were leased to Russians, about 500 more than in 2021. In 2021, 350 more public buildings were rented than in 2020.
“When the Russian-Ukrainian war started, the vast majority of first stream re-locants were IT specialists. We said even then that Armenia could not associate long-term plans with them. When moving from one country to another, they need to take only a laptop with them,” economist Nairi Sargsyan says.
“Armenia is a transit country, especially for IT specialists”
Oleg (name changed) is a programmer. He moved from Russia to Yerevan in May 2022 and plans to leave soon.
He pays 320,000 drams [about $800] a month for an apartment in the central part of the city. He says he was lucky to find housing at a time when prices in Armenia stabilized a bit.
He complains that not only housing is expensive in Yerevan, but also food and clothes:
“When we compare the rental prices in Yerevan with some European countries, it turns out that it is about 18 percent cheaper there.”
Oleg considers the biggest advantage of Armenia for himself and his colleagues to be the tax benefits:
“However, this is not enough to consider Armenia as a place of permanent residence. Armenia is a transit country, especially for us, representatives of the IT sphere.”
Oleg says he decided to leave Armenia owig to tension on the border and the possibility of Armenian-Azerbaijani military clashes:
“I could have considered staying longer if the Armenian government would have finally started to control the real estate rental market. If rents were reduced by 50 percent.”
But so far this is not expected, and Oleg’s family is discussing a list of possible countries to move to.
Housing prices have become unaffordable for Karabakh Armenians resettled in Armenia
Now high prices have hit the pockets of Karabakh Armenians who have resettled in Armenia. After Azerbaijan’s military operation in Nagorno-Karabakh on September 19, 2023, more than 100 thousand people came to Armenia. It is very difficult for them to find rented accommodation, as there are almost no vacant apartments and houses — at least in the capital, and they now have to pay three times more than in 2020.
“For many of them it is an unaffordable sum. Unlike Russians who came to Armenia, most of whom are people with high incomes. It is normal for Russians to rent a place for 800-1000 dollars,” Arutyunov says.
Armenia failed to retain the majority of Russian migrants
According to the data provided by the Statistical Committee of Armenia,
In 2022
- 1,129,829 Russian citizens entered Armenia,
- 1,064,680 left.
In the first half of 2023
- 776,623 entered Armenia,
- 753,141 people left.
Exodus-22 social research team conducted a survey among Russians who moved to Armenia in 2022. And it turned out that the majority, namely 57 percent, intend to leave.
“Considering and analyzing the conditions in neighboring countries, relocants noticed that the situation in Georgia is more favorable for them. As a result, most of them have already moved. Armenia has not been able to retain Russian relocants, unlike Georgia, which has complicated relations with the Russian Federation,” economist Nairi Sargsyan says.
Controversy over impact of war in Ukraine on economic growth
To what extent did the Russian-Ukrainian war affect Armenia’s economic growth rate? Experts’ opinions and the government’s calculations differ greatly.
In 2022, Armenia’s economic growth in Armenia amounted to 14.2 percent. The government declared the result unprecedented, as growth of seven to nine percent was projected. By comparison, growth in 2021 was 5.8 percent. The best performance in the last five years was in 2019 at 7.6 percent.
The Ministry of Finance reports that they conducted a serious study. According to its results, five to six percent of economic growth is directly related to the consequences of the Russian-Ukrainian war — a large-scale influx of migrants, a sharp increase in the export of goods from Armenia to the Russian Federation, and a large inflow of capital and companies from Russia.
However, economist Nairi Sargsyan believes that the economic growth registered in the country is almost entirely due to the Russian-Ukrainian war:
“The Armenian government has done nothing for economic growth. The economic activity is entirely due to the influence of the Russian-Ukrainian war, the relocation of migrants to the country and the arrival of a large number of tourists.”
Economist Armen Ktoyan is of the following opinion:
“I would say that the impact is at least five to six percent. This is the lowest figure we can field. Perhaps the real figure is higher — seven percent.”
In fact, the government estimates that only 35 percent of economic growth is due to the impact of the Russia-Ukraine war, while experts estimate that the figure ranges from 50 to 100 percent.
The investigation was conducted by the Women Investigative Journalists Network (WIJN) with support from International Media Support (IMS). Legal support for the material was provided with the support of the UNESCO project.
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The impact of Russians moving
