In July 2018, prices in the Baku real estate market increased by 2.06 percent compared to June, General Director of the MBA Group and a real estate expert
Why is Azerbaijan, in particular Baku, the most expensive place compared to other European cities, as the average salary in Baku is less than 200 AZNM?
Prices for Real estate
Buying real estate (apartments, specifically) has always been considered a traditional and safe investment by many Azeris. Lack of the reliable equity market, and inaccessibility of foreign equity markets for the investment by a majority of Azeris, real estate remained in that status, fueled by the inflow of the foreigners, mainly oil & gas expat workers, who were renting properties in Baku. All of this resulted in a higher than usual prices for prime locations in Baku.
In the last few years, Azerbaijan government adopted a policy of nationalization by 2018, meaning majority of oil & gas workers, including executive staff should come from the local cadre, which meant less foreigners would come to Baku. In addition, the oil price crashed in 2015, depreciating manat, the Azeri currency twofold, with no signs of bottoming out in sight. The real estate prices have been dropping significantly (about 2–3 times) since. Everybody knew it is going to happen at some point a few years ago, but nobody knew exactly when.
Some speculate, that real estate prices are going to drop to an average of $30–40,000 per apartment, with $100–120,000 to be a top price for an apartment in Baku.
Prices for restaurants and entertainment
Night life, restaurant and entertainment prices mostly target the extremely rich population of Azerbaijan, for which the price is not an issue. At a restaurant at the top of the TV Tower, a cup of tea for 2 with some pastry can run up to $50.
Prices for Food and Consumer prices
Reseller business for cars, clothing and other consumer items have been traditional and easiest for many Azeris. To cover official (and, especially, unofficial) fees imposed by the Customs, Taxation and make the resale profitable for themselves, the items include significant overhead. The other reason for a higher overhead is lack of options (many imports are monopolized by certain groups, belonging to government officials).
In case of the clothing, for example, the European prices are about 5–6% higher than the US prices, while Azeri prices are 10–15% higher than European prices.
Again, these kind of marked up prices are targeting an extremely rich population of Azerbaijan (which is about 10% of all shoppers), hopefully with some lack of awareness. I’ve been told a story of some guy, profiting well on the sale of produce, coming in to the one of the high end suit stores, and asking to buy the first 10 Armani suits he saw, without trying them on.
I’ve also heard another story of a middle class worker, making around 300 manats a month, coming to a Salvatore Ferragamo store, buying boots, for which she took a 2 years loan in the bank.