Real-Estate Bubbles and Optimism on the Caspian
Oil and gas were go-go drivers of the former Soviet economy for years -- until the U.S. subprime catastrophe cut off the flow of easy Western loans. Businesspeople in Russia, Kazakhstan and elsewhere socked away their personal profits and skimmings, while relying on Western loans often coursed through local banks to finance easy loans for investment. To call the resulting real estate bubble huge would be a gross understatement.
According to an index quoted by Symbat Abilkhassimova in the Caspian Business Journal, the price of real estate in Almaty rose 10-fold in the four-year period after 2003, from $360 a square meter for residential real estate to $3,700 a square meter in 2007. That index is exaggerated, but prices definitely exploded. As a personal example, in 2002 our landlord was asking $80,000 for our five-room apartment in the Samal II complex overlooking Ramstore; we didn't buy, but two years later learned that the same apartment was going for $250,000. I saw the same phenomenon around the country -- in Astana, in Atyrau and in Aktau, all of it fueled by the same hot money from abroad. As it has around the world, the asset bubble has popped in Kazakhstan and elsewhere in the region. Clare Nuttall at Business New Europe reports that it could take two or three years for the Kazakhstan market to recover.
Optimism dies hard. The other day, two young American businessmen -- Kenyon Weaver and Mike Druckman -- stopped by the office to talk about the Caspian Business Journal, an on-line magazine venture they are launching despite the downturn. Their first issue is this month. The pair -- both of them former Peace Corps volunteers in Turkmenistan -- aims mainly to chronicle business outside the energy sector in the Caucasus and Central Asia.
That's one contrarian bet. Another is that readers must pay $30 a month from the outset -- unlike the mantra of writers like Chris Anderson, Weaver and Druckman don't believe that the wave of the future is free.
I saw Druckman again the other day at a Russia event. He said the venture is getting a good initial reception.
According to an index quoted by Symbat Abilkhassimova in the Caspian Business Journal, the price of real estate in Almaty rose 10-fold in the four-year period after 2003, from $360 a square meter for residential real estate to $3,700 a square meter in 2007. That index is exaggerated, but prices definitely exploded. As a personal example, in 2002 our landlord was asking $80,000 for our five-room apartment in the Samal II complex overlooking Ramstore; we didn't buy, but two years later learned that the same apartment was going for $250,000. I saw the same phenomenon around the country -- in Astana, in Atyrau and in Aktau, all of it fueled by the same hot money from abroad. As it has around the world, the asset bubble has popped in Kazakhstan and elsewhere in the region. Clare Nuttall at Business New Europe reports that it could take two or three years for the Kazakhstan market to recover.
Optimism dies hard. The other day, two young American businessmen -- Kenyon Weaver and Mike Druckman -- stopped by the office to talk about the Caspian Business Journal, an on-line magazine venture they are launching despite the downturn. Their first issue is this month. The pair -- both of them former Peace Corps volunteers in Turkmenistan -- aims mainly to chronicle business outside the energy sector in the Caucasus and Central Asia.
That's one contrarian bet. Another is that readers must pay $30 a month from the outset -- unlike the mantra of writers like Chris Anderson, Weaver and Druckman don't believe that the wave of the future is free.
I saw Druckman again the other day at a Russia event. He said the venture is getting a good initial reception.
Labels: asset bubble, kazakhstan real estate, real estate bubble
