A special housing program for young families launched by the Central Bank of Armenia (CBA) can only be welcomed. But, you can sometimes find a fly in the ointment.

Late this January the RA Government approved the Affordable Housing to Young People program. Executive Director of the Flat to Youth universal credit institution Mher Yedigaryan said that about 300 families can benefit from the program this year. Not a bad figure for Armenia.

The program sets both age limits (the age of both spouses is not to be over 60, with neither of them to be over 35) and the minimum wage limit (300,000 AMD monthly, including nearest relatives’ incomes). A similar program launched in Russia set identical age limits, which evoked varied responses. Compromises are inevitable, and the problem can be settled if mortgage lending terms for other population groups are improved.

The point is that the maximum amount of credit is 16m AMD (about U.S. $42,000), which is sufficient for purchasing 34 sq meters of housing in the center of Yerevan. The Yerevan center has always been “famous” for high housing prices. As regards the “suburban” districts, this amount would be sufficient for purchasing 45 sq meters in the Arabkir community and up to 113 sq meters in the outlying Nubarashen community, not far from the city dump.

The skyrocketing housing prices in post-Soviet Armenia defied imagination. In 2008, the price for 1 sq meter of housing in a block of flats in the Yerevan center reached 471,600 AMD (U.S. $1,580). The global crisis, which delivered a severe blow on the Armenian economy, as well as on the potential purchasers’ incomes, put an end to the inexorable price rise. Last year, the average price for 1 sq meter of housing in blocks of flats in Yerevan was 10% lower (24% lower in USD terms) as compared with 2008.

The housing prices in the Armenian regions are much lower than in Yerevan. In the satellite town of Abovyan the price for 1 sq meter of housing is 55% of that in Yerevan. As regards the other regions, it ranges from 1% of the Yerevan price (in Shamlugh, Lori region) to 67% (in Tsakhkadzor, Kotayk region). The Yerevan young people would hardly agree to less expensive housing in Armenian regions no matter how badly they need flats — it is much more difficult to find jobs in the regions.

Citizens aged 19-30 constitute 18.3% of the officially registered unemployed – the age group the housing program is intended for. The official data, however, are only the tip of the iceberg.

As regards the “income qualification”, it is not so serious, with the nearest relatives’ incomes considered. The problem is actually the credit interest rates.

With an annual interest rate of 10.5% and 2% subsidized by the Armenian Government, the beneficiary will have to pay 8.5%. With annuity payments during the 10-year credit period, the beneficiary will pay 85% of the amount. That is, the actual price for housing will prove to be twice as high! With differentiated payment, the beneficiary will not overpay so much, but the actual amount remains relatively high. Thus the current high annual interest rates disfigure the idea of providing housing to young families in need.

The blame, of course, lies with commercial banks, which, in pursuit it easy profits, are jacking up credit interest rates. And the reason is not at all the lack of “long” money, but the banks’ huge speculative margin – up to 10%. Such a margin is impossible in any civilized country! On the contrary, after the recent global crisis credits are issued at symbolic interest rates in a number of countries. In Armenia, however, the CBA’s recent decision to raise the refinancing rate from 5.5% up to 6% even worsened the situation.

T.P.