We enjoy covering markets which most people overlook. There’s just more opportunity in countries not yet swarmed by multinational firms and hordes of tourists.
Plus, there isn’t any lack of information about places like China or Japan on the internet. Major news outlets such as BBC and CNBC report on these large economies all the time.
Today’s topic is a bit outside our normal scope though. We often focus on Southeast Asian markets, but Georgia is located in the Caucasus region bordering Europe and Asia. They’re more western than anywhere else we’ve covered so far.
Depending on who you ask, Georgia (the country, not the U.S. state, to be clear) isn’t even on the Asian continent.
Several geographic definitions, like the United Nations geoscheme, put Georgia in West Asia. Yet they’re very European in a cultural and political sense.
Putting semantics aside, our main goal is informing you about places worthy of investment. Keep reading to learn why property in Tbilisi, Georgia is among the world’s most undervalued.
Weak Reputation, Different Reality
Georgia doesn’t really have a bad global reputation. They simply don’t have much of one at all.
Investors choose foreign markets based on their perception of them. For example, you’re more likely to invest in Thailand if you visited as a tourist. Similarly, someone who rarely travels will usually stay home and buy assets they’re familiar with.
People have a strong confirmation bias. Meanwhile, most of us can’t visit every country, judge the situation “on the ground” with our own eyes, and make comparative global investment decisions.
You can only consider investing in markets you know about. Georgia is quickly gaining a reputation among tourists and businesses though.
A mere 547,000 people flew into Tbilisi’s international airport back in 2005. Barely a decade later, there were over 2,200,000 arrivals in 2016. That’s an increase of more than 400%.
Georgia is climbing up the international rankings too. The World Bank rates them 9th place out of 190 countries in their annual Ease of Doing Business Index. They’re also ranked 13th out of 180 countries in the Economic Freedom Index.
Of course, it’s just a matter of time until the rest of the world notices and catches on. First movers gain most.
Tbilisi Property Offers Great Valuations
Prime real estate in a capital city usually costs US$1,000 per square meter ($90 per square foot) at the very minimum.
It doesn’t matter if the local economy is undeveloped. Heck, a two bedroom condo in central Beijing costs around two million dollars. Property in less established capitals such as Ljubljana or Prague are still worth around US$4,000 per square meter.
You might consider these prices expensive if you’re living somewhere like Dallas or Miami. However, a nation’s capital or main business center has a type of sway which other cities don’t.
That’s because residing in the capital is often the only way a business, whether local or international, can effectively operate in a country. Greater demand drives up real estate prices – especially in smaller nations with just one major city.
I can count the number of capital cities where you can buy central property for under US$1,000 per square meter on one hand. Tbilisi makes the list, joining places like Cairo and Karachi which are far less developed.
Rental yields in Tbilisi are also high, hovering around the 5%-6% range. Buying an apartment to rent out while awaiting long-term capital appreciation is certainly an option.
These factors all mean Georgian real estate is highly undervalued in a global context. Prices have few places left to go except upwards.
A large, newly built, one-bedroom apartment in Tbilisi costs around US$60,000. That’s almost unparalleled for a capital city.
Georgia’s Economy: Best in the Caucasus
A single country’s asset prices, whether you’re buying real estate or stocks, depends heavily on their broader economic performance.
Georgia is one of the biggest success stories to come out of the former USSR. Following institutional reform in the early 1990s, a newly democratic Georgia began opening up to foreign investors. Their economy surged forward since then.
The Georgian economy has proven largely immune to the rest of the world’s problems, in fact. They boast a long history of avoiding recessions and suffered just a single year of contraction in the past two decades.
Meanwhile, large multinational firms such as McDonald’s and Carrefour are setting up shop in Tbilisi. Luxury malls are opening, the airport is undergoing expansion, and entire neighborhoods of the city are being refurbished.
These developments are very positive for not just Tbilisi’s property market, but Georgia’s economy as a whole.
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