Real estate liquidity
The concept of liquidity is familiar to anyone who buys and sells real estate. How is liquidity calculated? Can it change or be “negative”? Today we will try to answer questions about liquidity indicators.If we consider this concept as a whole, without dwelling on residential real estate in particular, liquidity means the ability to sell an object in a short time and at a more affordable price. In other words, if there is demand for your apartment and you can sell it at the maximum price, it has a high liquidity ratio. There are three types of liquidity in the real estate market: high, medium and low liquidity.
As we already know, high liquidity means a quick sale of the property. Medium liquid assets include assets sold for a longer period. Examples of minimal liquidity are properties for which there is no demand and which are very difficult to sell. There are several criteria that directly indicate the liquidity of an object.
If we consider only residential properties, the following liquidity indicators can be noted.
Real estate liquidity indicators
Secondary housing or new buildings
Apartments in modern buildings have a higher liquidity compared to similar apartments built during the Soviet period. For example, a person interested in one-room apartments will be primarily interested in new buildings, because this object has a number of advantages over Soviet apartments. New buildings are being built in accordance with modern requirements. They do not need to replace communications. In a new building, the owner can make a layout for himself, as he is comfortable.
What does the real estate market for old buildings offer? As a rule, in the apartments belonging to the old fund, the layout does not meet modern standards and many of them need major repairs. In fact, it is not easy to find an apartment with high liquidity in this market sector.
Object geolocation
Here, first of all, attention is paid to convenience on the part of transport. Everyone, when choosing an apartment, analyzes the possibility of getting to any point in the city. The area in which the apartment is located, social infrastructure, as well as the location of kindergartens, schools and supermarkets play an important role. The ecological state of the region has recently become one of the important criteria. In general, the location of the property has a great influence on determining the liquidity of an apartment. For example, the construction of a new metro station or the opening of a large mall can dramatically increase the liquidity of an apartment.
Technical indicators of the apartment
These indicators include the size of the apartment, the floor, the number of rooms and warehouses, a separate or combined bathroom, the presence of built-in furniture, and so on. You yourself may have noticed that when viewing ads, you paid attention to these indicators.
Considering all of the above, you can decide that there is a certain formula for calculating the liquidity of an apartment. We can tell you with certainty that there is no specific formula. You can take as an example people who have an open point of view and refer to the sale and purchase of apartments as a source of income. For example, you buy a one-room apartment in a new building, at the initial stage of construction (laying the foundation) for 40 thousand. As a result, after the completion of construction, you will be able to sell the same apartment for 48 thousand, without the contribution of additional capital. That is, the benefit for you will be 8 thousand. This indicator of income is directly proportional to liquidity.
Do not forget that the property you are buying also has negative liquidity. For example, an object bought for rent, if for some reason there is no demand for it, this object can be considered meaningless in terms of investment.
Real estate liquidity in Baku and regions
In the capital, as always, the highest liquidity is possessed by one or two-room apartments, which are located near the metro. The same situation can be observed in the regions. The only difference is that there is no metro in the districts, and people mostly focus on transport stops.
But the market of Baku is much different from the market of other cities of Azerbaijan. Baku is the only metropolis in Azerbaijan and the largest economic center - and it is not so prone to crises, there is a greater inflow of money, as well as a greater number of emigrants and migrants.
Along with this, we have areas in which, due to the lack of demand for residential buildings, from an economic point of view, they are unprofitable for investors. Before investing in any area, investors learn about the market, the level of industrial development, the service sector, the development of trade, international and domestic relations, migration, unemployment, average earnings, and so on.
In Azerbaijan, regions that are profitable for investors can be shown Ganja, Sumgait, southern and northern tourist regions. In these regions, comparatively, there is a need for residential properties. And therefore, the level of liquidity is higher there.
Who should pay attention to liquidity
In any case, not only investors should pay attention to the liquidity of real estate, but also people buying apartments for living. The exit strategy (that is, the sale of an apartment) must be calculated from the very beginning. Because in life we are faced with various situations, including unpleasant ones. In this case, if you do not think about it now, in two years you may have to change the apartment. For this reason, it is worth considering the liquidity of your apartment from the very beginning.
Negative liquidity
This occurs when there are any changes associated with the apartment itself or with its location. For example, you can show apartments located in a good area of the city, but left in the middle, unfinished. Due to the negligent attitude towards the work of developers, the sale of one apartment to several people, most of the apartments were left empty. And this is a clear reason for the decline in liquidity. People can no longer sell an apartment at the purchased price, or even rent out an apartment, due to the lack of gas and an elevator.
The bottom line.
In Baku, and in almost all districts, the highest liquidity belongs to economy class, small apartments with a relatively developed infrastructure and transport network. When buying an apartment, you must first of all pay attention to the condition of the building itself, its location, documentation. To plan an exit strategy, both investors and ordinary buyers should pay attention to liquidity indicators.
