Buying a home or paying rent has become a serious problem for more and more people in the modern world. Migration flows from Russia and Ukraine due to the war in Ukraine increased the demand for housing in countries with relatively high numbers of migrants/refugees. In such a situation, it is logical for the states to start looking for a solution, to protect the interests of their citizens from this economic problem exacerbated by the Russia-Ukraine war.
Taking into account the local context, the decision to limit the scale of purchase of real estate by foreigners has been put on the political agenda even in states geographically far from our region. For example, New Zealand, where real estate had been mainly purchased by wealthy Chinese and American investors, banned the sale of real estate to non-residents in 2018. The provision of access to housing for the local population was named as the reason. This decision was preceded by an average 60% increase in real estate prices in the country. The decision taken by the New Zealand’s authorities was criticized on the basis of the argument that the share of the real estate purchased by migrants was insignificant (2.9%) and that the restriction imposed only on foreigners would not bring relief to locals. However, the following circumstances were important: the real estate purchased by foreigners was concentrated in a specific part of the country. For example, 20% of the real estate bought by foreigners was located in the city of Auckland, where real estate prices had risen by around 70% over the past 5 years, making even the cheapest home an expensive luxury for a family with average income.
Canada took a step similar to New Zealand in 2022. The authorities banned the purchase of real estate for non-residents, except for foreign students and persons employed in international organizations, until 2025. Canada's decision was also criticized for a similar reason, as the share of the real estate purchased by foreigners in the Canadian provinces where real estate is the most expensive was less than 6%.
Restrictions on the purchase of houses has a negative effect on the prices of apartment rents. The foreigners, who are unable to buy real estate, but have to stay in the host country for a certain period of time due to work/certain situation, can only rent a house, which increases the demand and prices for rents.
Despite the fact that there are no restrictions on the purchase of real estate by foreigners in Georgia, the especially large flow of Russian migrants has radically increased rents in Tbilisi. That's why only restricting the purchase of real estate will most likely further increase rents. However, increased rents is a problem not only for Georgia. Other states have also thought about a political solution to this problem. In Canada, in the Nova Scotia province, due to the dynamic increase in rents, a regulation was adopted, according to which rents are allowed to be increased only within 2% compared to previous year’s prices.
Unlike Canada and New Zealand, the problem of access to housing is much more acute in Georgia. The housing problem is unsolvable for a large part of persons displaced from Abkhazia and South Ossetia, eco-migrants, students, who spend the most on housing and utility bills.
In addition, it is even more difficult to have housing in Tbilisi due to increased internal migration into the capital, which is the largest center of employment. Due to the influx of Russian and Belarusian migrants in 2022, the rents for housing in Tbilisi increased by 120%. In 2022, the prices of newly built apartments increased by 13% on average and the prices of old apartments increased by 12%. According to the data of May 2022, Russian citizens have bought more than 15 thousand buildings and up to 14 thousand plots of land in Georgia. According to TBC Capital, in 2023, the contribution of migrants will again be significant in sectors related to the purchase of real estate.
In this situation, ignoring the problem of access to housing by the State turns the right to adequate housing, which is guaranteed by the Constitution of Georgia, into an absurd record. How the Government perceives housing is important for solving the housing problem. The decision to regulate rent prices in support of housing affordability in Canada was explained by the Canadian Ministry of Finance by saying that a house is first a place to live for Canadians and only then an investment asset. The rationale of New Zealand’s Ministry of Finance for making a similar decision was that it was not in their interest to favor relatively wealthy foreigners, but to make a decision that would primarily benefit those New Zealanders who created the country's economy with their own labour, who paid taxes and had families in New Zealand.
The inaction of the Georgian Government to solve the housing problem puts Georgian citizens in an unequal situation in relation to Russian migrants. Unfortunately, the authorities lack reasonability to protect the interests of their citizens in the first place, instead of meeting the needs of the citizens of the occupying country.
Kote Chachibaia's blog
Lawyer at the Democracy Research Institute