Fluctuations in Rental Values in Armenia in Recent Years: Causes and Trends

One of the most significant factors affecting the rental market in recent years has been the influx of thousands of individuals from the Russian Federation to Armenia. Former minister of Economy Vahan Kerobyan stated in an interview with Russia’s Vedomosti that in 2022, approximately 110,000 Russians relocated to Armenia on a permanent basis. This migration triggered a sharp increase in rental prices, as demand far outpaced supply. Furthermore, many of these new residents, rather than continuing to pay high monthly rent, opted to purchase property, driving up both rental and sale prices.

However, more recently, rental prices have begun to decline, a trend that can be attributed to several key factors:

– A decrease in the number of Russian citizens establishing permanent residence in Armenia, coupled with the natural dissipation of the initial surge in demand.

– A significant increase in housing supply, as numerous residential buildings and complexes have been completed and made available for occupancy.

– The conclusion of the peak tourist season, which often leads to lower short-term rental demand.

Additionally, government tax policies play a crucial role in shaping the real estate market. The Armenian government has approved a draft law proposing amendments and additions to the Tax Code, which aims to impose stricter conditions on individuals who rent an apartment in yerevan. These regulatory changes may further influence rental values and market dynamics.

The decline in rental prices is evident not only in the residential sector but also in commercial real estate. While properties used for business purposes are generally more resilient to market fluctuations, their rental values remain closely linked to the country’s broader economic policies. For example, initiatives that facilitate business development in Armenia—such as offering incentives to local and foreign investors—can have a stabilizing effect on commercial real estate demand.

Furthermore, changes in tax regulations could lead to a slight increase in rental values. While a 10% tax on rental income has been introduced, it remains uncertain for any real estate company how this cost will be distributed. Landlords may choose to pass the tax burden onto tenants by increasing rent, or they may absorb the cost themselves, maintaining current rental prices. The implementation of this tax policy will play a decisive role in shaping future market trends.

Based on our analysis, we anticipate that the real estate rental market will experience minimal changes in 2025. One key factor contributing to this is the presence of newly constructed, unfinished buildings, which, as they remain incomplete, do not substantially contribute to increasing the supply of available properties. If the market remains unaffected by unforeseen events, such as significant political or economic disruptions, we expect a noticeable shift in the market by 2026. Overall, the process of “stabilization” is likely to continue, though at a gradual pace.