Uzbekistan’s Housing Market Overvalued by 28% in First Half of 2024
In a recent financial stability review, the Central Bank of Uzbekistan has raised concerns about the surging housing prices in the country. According to the report, housing prices have soared to levels 28% above their fundamental value in the first half of 2024. This alarming trend indicates a significant disparity between market prices and the underlying economic conditions.
The report reveals that housing prices in Uzbekistan have increased at a rate 1.8 times faster than wage growth. The national currency has seen a staggering 44% rise in housing costs compared to the same period in 2023, while the increase in housing prices measured in foreign currency was lower at 23%. The Central Bank attributes these elevated prices to an imbalance in supply and demand, indicating that fundamental economic factors are no longer driving the real estate market.
Despite the impact of rising construction costs beginning to lessen, concerns remain about the sustainability of current housing prices. The ratio of real estate prices to nominal GDP per capita has increased by three percentage points from the previous year, signaling potential overvaluation in the housing market.
The report also points out a high ratio of annual growth rates for both housing prices and rent, indicating that market participants view real estate as a lucrative investment opportunity. However, the widening gap between wage growth and housing prices has worsened the affordability crisis, with housing prices surging at a rate 1.8 times higher than average wages.
While Uzbekistan’s population continues to grow, real estate market activity has declined, with fewer property sales recorded in the first half of 2024 compared to the previous year. The Central Bank attributes this decrease to a reduction in purchasing power among consumers, as well as the limited number of mortgage borrowers in the country.
Despite rising wages, the increasing cost of mortgage payments is putting a strain on households’ purchasing power. The average loan amount per person has increased, while the loan repayment period has decreased, leading to higher monthly payments. The Central Bank warns that this trend could further burden households with debt, limiting their ability to invest in real estate.
Furthermore, the average interest rate on mortgage loans has also increased in the first half of 2024. These developments paint a complex picture of the housing market in Uzbekistan, raising questions about the future sustainability of housing prices and affordability for the population.
