Prices for real estate are booming across Central Asia's Ferghana Valley in what some observers fear could stoke unrest in an overpopulated region. There are also concerns that the boom is actually a bubble whose eventual burst could have serious economic ramifications for the entire region.
The boom is most visible in the Kyrgyz part of the Valley, where political practices are more liberal and controls on economic activities relatively few. According to Kyrgyz officials, since 2004 the price per cubic meter of housing in the southern city of Osh has increased by 40 percent, and land by 38 percent. Osh-based real estate agents argue that there has been almost a ten-fold increase in prices over the past three years.
"A two-bedroom apartment in a downtown location cost not more than 100,000 Kyrgyz som in 2004 (or roughly $2,647 in current prices). Now it can cost up to 947,500 Kyrgyz som (or roughly $25,000)," said Chinara Kulmatova, a representative of Musav Ltd. Prices for luxurious houses in upscale neighborhoods can soar as high as $250,000 to $300,000 an astronomical sum in a country where the average monthly per capita income is just under $100, according to state statistics.
The upward direction of prices can be observed in smaller towns in southern Kyrgyzstan as well. A three-bedroom apartment in Kizyl Kiya, a town of roughly 36,000 on the Uzbek border, sells for 400-450,000 som (about $10,589 - $11,912), according to the town's deputy mayor, Farida Tsoi.
In an effort to reduce prices, Kyrgyz President Kurmanbek Bakiyev is planning to sign a decree that would introduce a real estate tax. However, observers worry that the measure will end up pushing prices even higher.
Similar price hikes can be found in the Uzbek and Tajik parts of the Valley as well. In the Uzbek towns of Andijan and Ferghana, residents say that apartment prices have doubled or tripled in the past few years. Prices for a well-situated house with land in the Tajik town of Khudjand, for example, can cost up to $60,000, according to one inhabitant there.
Why are prices going up? A decline in housing construction, a larger population, and remittances from abroad appear to drive the trend.
Between 1990 and 2006, housing construction in the Ferghana Valley by government-owned companies fell more than threefold, according to a November 2006 Kyrgyz government report. At the same time, in some parts of the Valley such as in Uzbekistan government-funded construction projects now mostly focus on government buildings, colleges and shopping centers rather than residential housing. Hurdles in obtaining licenses for residential construction projects further add to the problem, said the representative of one construction firm in the Uzbek town of Ferghana who requested anonymity.
Meanwhile, urban populations are growing. In recent years, many rural dwellers have migrated to larger urban areas such as Osh, Ferghana, Andijan and Khudjan in search of better job opportunities. The region already has Central Asia's largest population density.
At the same time, cash transfers from Uzbek, Kyrgyz, and Tajik labor migrants in Russia and Kazakhstan have increased dramatically over the past few years. Uzbek labor migrants are believed to transfer close to $500 million annually to Uzbekistan, according to estimates cited in international organization reports. A 2006 study done by the Soros Foundation-Kyrgyzstan estimated that a similar sum is transferred to Kyrgyzstan each year by Kyrgyz labor migrants. [EurasiaNet.org and the Soros Foundation-Kyrgyzstan both work under the auspices of the Open Society Institute and Soros Foundations network.] These remittances have greatly expanded regional residents' purchasing power.
Some observers say that the price hike is boosting economic activity in the region, as opportunities for real estate and construction companies expand. Osh real estate agent Kulmatova says that the number of realtors is growing by the month; currently, this town of a few hundred thousand has 15 such firms.
Meanwhile, other observers worry that the price hike is stoking social unrest, as Valley residents increasingly find themselves unable to afford housing. In the Kyrgyz part of the Valley, some homeless residents have illegally occupied private property.
Special treatment by government officials who are charged with regulation and distribution of land plots for private development is another concern. Some ethnic Uzbeks in Osh and Jalal-Abad charge that officials are giving away the best land to Kyrgyz. Officials could not be reached for comment.
Solutions to the problem, for now, are few. Attempts to introduce housing mortgages in the Valley's Kyrgyz and Uzbek sections have been ineffective since many local residents do not have the steady sources of income needed to guarantee the loans. Kyrgyz, Uzbek and Tajik officials have so far done little to pledge resources to housing construction.
Meanwhile, real estate experts argue that the authorities must take more decisive measures to regulate real estate markets and avoid artificial price inflation. "We can definitely see a [real estate market]
Alisher Khamidov is a doctoral candidate at the School of Advanced International Studies (SAIS) of Johns Hopkins University in Washington, D.C.