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Tensions in Real Estate Sector

By News Briefing Central Asia
The government must intervene immediately to calm escalating tensions in Kazakstan’s real estate market caused by over-inflated house prices and dishonest property valuations, say observers.

The National League of Consumers, The Kazakstani National Chamber of Assessors, and the Academy of Assessment and Construction announced on February 14 that there is a dire need to adopt a single method for assessing property value to prevent growing tension in the land and housing sector.

The statement was made after a wave of protests in and around Almaty against lawlessness in the property market.

Kazakstan does not currently have guidelines that surveyors have to follow when determining how much a property is worth. Different agents will often come up with very different figures for the same house, especially if they have some connection with the buyers or, in the case of demolitions, the construction firm.

Residents of Almaty’s Golden Square, a residential area in central Almaty earmarked for demolition, went on a week-long hunger strike from February 5 to 12, in protest against their meagre compensation. Residents argued that their property was not valued correctly and the amount they were offered by the construction company and the municipal housing management agency, Almatyjer, was not enough to buy a similar property nearby.

In another protest on February 8, representatives of the Almaty regional education department said that land with a children’s home on it had been seized illegally.

On the same day, residents of the Karasu settlement near Almaty issued a statement saying that the land on which their homes are built was sold illegally at an auction.

Analysts say that social tensions will escalate unless the state intervenes to regulate the land and housing sector through new laws.

NBCentralAsia economic observer Yaroslav Razumov said, “This sector will remain full of conflicts if these issues are not settled legally."

Evgeny Porohov, director of the Research Institute for Financial and Tax Laws, who specialises in Kazakstan’s real estate market, suggests that growing tension in the housing sector is partly caused by the fact that “construction has been directly handed over to the private sector without [any oversight].”

“To minimise the chance [of social tensions], a clear, legal set of housing market regulations [should be put in place],” Porohov told NBCentralAsia.

The housing market is saturated with investors, which keeps property prices artificially high and real estate developers keen to exploit the fact.

Experts suggest that the state should encourage people to invest in economic sectors outside of the property market to diffuse the tension.

“Measures need to be introduced to force real estate prices down. First of all banks and buyers should be offered new ways of investing their money,” said Razumov.

(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)