Georgia’s Real Estate Market Shows No Signs of a Bubble, Says Central Bank Report

The National Bank of Georgia (NBG) has concluded in its latest analysis that there are no signs of a price bubble in the country’s real estate sector. Price trends are consistent with macroeconomic fundamentals, and the risk of a sharp correction remains low. The most vibrant activity is currently observed in the commercial real estate sector in Batumi.

No Sharp Correction Expected

Using the GSADF test—a methodology for detecting explosive price behavior—the NBG analyzed long-term trends. It noted that prior to the 2008 global financial crisis, housing prices in Georgia grew faster than household incomes, showing signs of overheating in 2008 and partially in 2014–2015. Another spike occurred in 2019 but was interrupted by the COVID-19 pandemic. In 2020, no bubble signs were detected, although a reverse capitalization index indicated rapid growth due to rent declines rather than price inflation.

Stability During Turbulence

Rental rates dropped amid lockdowns, remote work and education, and the collapse of tourism. Despite this, housing prices remained stable, supported by state subsidies and an accommodative monetary policy. Rising construction costs in 2021 also helped stabilize prices.

Following the pandemic, market activity increased, bolstered by rising demand due to a wave of migration. In 2022, this migration significantly boosted residential demand and rental prices. Even as some foreigners left in 2023, domestic demand stayed strong thanks to GDP growth, low inflation, and ongoing monetary support.

Capitalization Index and Balanced Growth

The capitalization index, measuring price-to-rent ratios, also showed no signs of a speculative bubble. Rent prices peaked in 2022 and gradually returned to trend, helping reduce market overheating risks. The NBG notes that current pricing aligns with real income growth, consumption trends, and a shift from foreign to domestic buyers.

Commercial Real Estate Momentum

A special commercial real estate (CRE) index, developed based on Eurostat methodology, revealed that centrally located and high-quality commercial properties show the highest value retention. Batumi has become a key growth driver. While prices fell during the pandemic, they’ve rebounded since 2022 due to a strong economic recovery and rising business activity. The CRE index in Tbilisi is also rising, even as residential price growth slows.

Final Outlook

According to the NBG’s comprehensive report, the Georgian housing market does not exhibit bubble characteristics. Price movements are fundamentally sound, driven by economic growth, rising incomes, inflation control, and stable credit policy. Temporary spikes were not speculative, and the market is expected to remain balanced, with commercial real estate showing the most robust growth, particularly in Batumi.