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Real Estate Investments

It is no secret that Armenia ranks highly as a place to do business thanks to a stable government and prudent economic policies. In addition, it has been one of the fastest growing economies in the Eurasian Economic Union (EEU) over the last decade averaging around 7% a year prior to the Covid-19 pandemic. Unsurprisingly, the same can be said for the real estate market and here we are going to tell you about some of the investment opportunities Armenia has to offer.

Armenia has experienced steady economic growth over the last two decades thanks to its economic stability and prudent economic policies. At the same time, the government has fostered business-friendly policies (including tax laws) to attract FDI. Being a small country of around three million people, most of the economy is oriented towards the services sectors, especially IT.

Over the last 10 years, overall economic growth has been positive with the exception of 2019 due to the Covid-19 pandemic. As you can imagine, positive economic growth also means opportunities for growth in the real estate market which we will cover in more detail below.

Office Real Estate

With a highly skilled and low-cost workforce, Armenia has become a popular outsourcing destination for many European and Russian companies, especially in the tech and IT sectors. As such, there has been a high demand for office real estate in Yerevan, especially in the central business district. This is where many of the main government offices and the shopping district are located. In addition, many domestic and international telecoms and IT companies have offices here as well.

For commercial real estate, it is usually broken down into three categories, Class A, B, and C with the majority of the first two located in the business district of Yerevan. As for the main differences between them, Class A offices are typically newer and more centrally located than B. Likewise, they typically offer more amenities. Class C offices offer many of the amenities of A and B but they are usually located outside of the city center.

Below are some of the major business centers that are located in Yerevan and what you can expect to pay per square meter.

KAMAR Business Center (Class A)

Centrally located in Shahumyan Square, this is a nine-story BREEAM certified business center, and it is one of the newest in Yerevan with a total space of 23,100 sq/m.

Elite Plaza (Class A)

Located next to the Armenian Central Bank, this 18-story building is the largest office complex in the capital comprising 24,000 sq/m.

Piazza Grande and Yerevan Plaza (Class A)

Also located in the business district, these new business complexes are home to many small and medium-sized domestic and international firms.

IT Park, Viasphere Technopark, Eraz (Class C)

Located outside of the downtown area, these complexes offer many of the amenities of their Class A counterparts and are ideal for larger operations like call centers and manufacturing.

Typical Rents

Class A: €20-25/m²/month

Class B: €15,5-20/m²/month

Class C: €8,5-13,5/m²/month

As you can see, office space is fairly cheap although there has been considerable demand due to the booming tech sector from international firms, especially for centrally located Class A and B office space.

Tourism and Real Estate

This is another industry that had been experiencing growth prior to the Covid-19 pandemic.

While the majority of tourists are from neighboring Iran, Georgia, and Russia there recently have been more coming from Western Europe and the US. However, it can be said the tourism industry is underdeveloped and depending on your point of view, being a tourist or an investor can be a good or bad thing. At Mundo, we like to think of it as a good thing as it means there are opportunities for investment and here is why.

Steady increase in visitors: Prior to the Covid-19 pandemic, the number of visitors had been steadily growing over the last five years with many repeat visitors. While many come to visit family, Armenia is a popular destination due to its culture, history, and natural beauty.

Safe and Affordable: Armenia is not only affordable, but it is renowned for being one of the safest countries in the region. Likewise, it is a popular destination for remote workers.

Underdeveloped tourism sector: While this may not be good news for visitors who prefer all-inclusive vacation packages, it represents an opportunity for businesses that offer them. Likewise, foreigners can own land and have the same rights as locals.

Residential Real Estate

This is another growing industry in the country and from 2018-2019 alone the values of residential properties in central Yerevan increased by 34.5%. In addition, yields for rental properties have been steadily increasing thanks to the increase in tourism and the growing expat population. Despite the rising prices, many ideal areas in the capital are more than affordable. As noted earlier, foreigners can own property along with renting it out and in 2019, 12% of all real estate purchases were made by foreigners.

What does this mean? Well, Armenia is an affordable place to live so it is ideal for anyone looking to relocate or for investment opportunities. At the same time, (and with tourism starting to increase again), there will be a growing demand for Airbnb and rental properties that are orientated towards remote workers.

Advantages of Owning Property in Armenia

Foreigners can buy, sell, and rent out their own property and have the same rights as locals and a residence permit is not needed for property ownership. At the same time, you may qualify for a residency permit by owning real estate.

High appreciation rates and rental yields: Property values and rental yields have been steadily increasing the last few years. In addition, the growing tourism sector means opportunities for rental incomes.

Fast and easy registration process: Like many government processes in Armenia, registering property is simple and straightforward. Not to mention, it can often be done in as little as a few days.

Low taxes: There are no gift or inheritance taxes. In addition, there are usually no capital gains taxes on the sale of individually owned property with low annual taxes. Taxes on rental income are 10% for amounts under 58.35 AMD (appx. $120,000) a year.

Why Armenia?

Armenia is the safest and most stable CIS country. At the same time, the economy has been steadily growing thanks to its business-friendly government policies. In addition, the highly educated and low-cost workforce has attracted many IT and tech firms from Europe and Russia. As such, it has created many opportunities in the commercial and residential real estate markets.

After the collapse of the Soviet Union, Armenia has made significant steps in economic, cultural and political progress. Yerevan hereby became the regional center for political, economic, financial and cultural events in the country and the region.

Armenia has registered continuous strong economic growth since 1995, while the inflation has been negligible for the past few years. New sectors, such as precious stone processing, jewelry making, and communication technology are steadily growing year on year. This steady economic progress has earned Armenia increasing support from international institutions. The International Monetary Fund (IMF), World Bank, EBRD, as well as other international financial institutions (IFIs) and foreign states are extending considerable grants and loans to the country.

Armenia joined the World Trade Organization (WTO) in January 2003. Additionally, Armenia has also managed to tackle inflation, stabilize its domestic currency and privatize most small and medium-sized enterprises.

According to official preliminary data, Armenia’s GDP grew by 7.6% in 2019, which is the largest recorded growth since 2008. At an 8.3% growth rate, Armenia has also recorded the highest degree of GDP growth compared to the rest of the Eurasian Economic Union (EEU) countries in 2018 (January–June). These figures, along with Armenia’s economy reaching a nominal GDP of $11.5 billion per annum and GDP per capita growth reaching over 9.5% in 2019, present strong evidence to suggest that a high demand for a World Trade Center in the capital is present.

Furthermore, Armenia’s PPP produced the sixth highest results worldwide, growing at a total of 356% per capita since 2000. This, along with GDP growth totaling at 40.7% between 2012 and 2018, as well as assets and credit exposures almost doubling, suggest that a World Trade Center in Yerevan would mutually increase trade opportunities for existing WTC members.

The 2021 budget, adopted in November 2020, focuses on Armenia’s priority to defense and security, social protection, health, education, and infrastructure development (repair and construction of roads). These policies provide an economic incentive for further privatization, mobilization of investments and an improvement of legal regulation in these areas. The restoring of peace in the Nagorno-Karabakh region has made this one of the Government’s highest priorities. This new treaty is expected to generate a new wave of optimism, economic growth and opportunity for the Armenian state.

Top 10 Armenia’s international trade partners

TOP 10 EXPORT INDUSTRIES

Ores, slag, ash: $665.1 million (25.5% of total exports)

Gems, precious metals: $414 million (15.9%)

Tobacco, manufactured substitutes: $290.5 million (11.1%)

Beverages, spirits, vinegar: $290.2 million (11.1%)

Iron, steel: $149.7 million (5.7%)

Clothing, accessories (not knit or crochet): $124.2 million (4.8%)

Aluminum: $99.6 million (3.8%)

Mineral fuels (including oil): $68.9 million (2.6%)

Optical, technical, medical apparatus: $55.7 million (2.1%)

Clocks, watches (including parts): $40.3 million (1.5%)

Armenia’s top 10 exports accounted for 84.2% of the overall value of its global shipments. Optical, technical and medical apparatus production represents the fastest growing industries among the top 10 export categories, up by 188.3% from 2018 to 2019. The second highest exported industry, by sales, was the gems and precious metals industry. This had a 34.7% gain, with gold and precious metals scraps being the most highly exported commodities, while Armenia’s shipments of beverages, spirits and vinegar registered the third-fastest gain in value (up by 26.4%). Finally, the industry which has declined the most among Armenia’s top 10 export categories was unknit and non-crocheted clothing and accessories, which dropped by -21.2% year on year.

From the more granular four-digit Harmonized Tariff System code level, copper ores and concentrates represent Armenia’s most valuable exported product; at 24% of the country’s total. In second place were cigars, cigarillos and cigarettes (10.5%), trailed by alcoholic spirits and liqueurs (9.6%), gold (8.6%), iron ferroalloys (5.5%), thin aluminum foil (3.6%), precious metals waste (3.4%), electrical energy (2.5%), unmounted and unset diamonds (2.1%) and lastly jewelry (1.6%).

Dynamics of export of goods and services from Armenia in 2006—2016, (million dollars)

Also, Armenia is known for being affordable and expats from Russia, Europe, and the US have relocated here. At the same time, the tourism industry has been experiencing growth and there are opportunities here as well.

This can be thought of in two ways. First, there are people looking to buy property and it can be held onto as a long-term investment and then resold later at a higher price later. Additionally, there is money to be made with rental properties that can be marketed towards tourists and expats.

Here at Mundo, we like the investment potential of Armenia and this is why it is one of our favorite countries. Don't hesitate to contact us to enjoy Armenia’s opportunities as well.

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