Archive for January 28th, 2008
The Lessons from Kazakhstan’s Real Estate Crisis
Kazakhstan has been hit hard by the recent banking and real estate crisis. Will the lessons from this crisis lead to a more developed, resilient and just economy in the future?
Background:
Kazakhstan’s GDP grew by 10.6 percent in 2006 but slowed to 8.7 percent in 2007, and according to the forecasts of local analysts, will slow even further to 6 percent in 2008. Inflation, at the same time, grew from 8.6 percent in 2006 to 18.8 percent in 2007. The main factor that led to worsened economic conditions was the local credit crisis triggered by this summer’s subprime woes in the United States and the subsequent global liquidity crunch. This crisis has hit hard Kazakhstan’s praised banking sector and exposed its reliance on cheap foreign credit and overexposure to the speculative construction and real estate sectors.
A shake-up of such magnitude was a first for Kazakhstan. Until this summer, the market has been increasing steadily, and Kazakh real estate was among the most attractive investment plays in Central Asia. The growth came after nearly a decade of stunted development following the collapse of the Soviet Union in 1992 and the Asian financial crisis in 1998.
With the introduction of mortgages in the early 2000’s, the real estate industry began expanding quickly, especially in the more affluent urban areas. Residents of Almaty, the largest city in Kazakhstan, have been particularly active and have held almost half of all outstanding mortgages in Kazakhstan. In the last two years, however, the market has clearly been showing signs of troubles lying beneath. The unprecedented pace of growth in real estate prices has started to crowd out potential middle-class homebuyers and gave way to unregulated speculation.
As the market boomed on and reached its peak in the summer of 2007, the presence of the bubble was obvious and widely discussed. But only the global credit crisis triggered by the uncertainties about the U.S. mortgage sector has finally brought the exuberant growth to a stop. The crisis and the lack of global liquidity have forced banks to make credit standards more stringent and raise interest rates. This has virtually overnight turned Kazakhstan’s speculative demand-driven real estate market into a state of near-panic, and the years of double- and triple-digit growth in real estate prices in metropolitan have come to an end. So far, the price of one square meter on Almaty’s real estate market has fallen almost a quarter from a June peak of nearly $4,000.
News Roundup - January 28, 2008
Reuters: Kazakhstan to raise Central Asian gas transit fee
Kazakhstan plans to raise its fee for the transit of Turkmen and Uzbek gas to Russia to $1.4 per 1,000 cubic metres across 100 km from $1.1, a source in state oil and gas company Kazmunaigas said on Friday…
Kazinform: The US plans to intensify energy coop with Kazakhstan
“The US intends to intensify energy cooperation with Kazakhstan,” Senior Advisor for the Caspian Basin Energy Diplomacy of the US Department of State, Ambassador Stephen Mann, has stated during the meeting with Kazakhstan’s Secretary of State Kanat Saudabayev…
TREND: The USA to support Trans-Caspian projects: US diplomat
The USA has always supported and will support new Trans-Caspian projects, said Steven Mann, the US Department of State’s Advisor for Caspian Basin Energy Diplomacy, on 25 January in Astana while answering the question of Trend Capital Special Correspondent…
World Politics Review: Kazakhstan’s economic nationalism could set precedent for other oil states
On Jan. 15, the government of Kazakhstan ended months of uncertainty in world energy markets by announcing that KazMunaiGaz, the country’s national oil and gas company, would assume a lead role in developing the Kashagan oil field, one of the world’s largest…
AsiaNews.it: Work continues in Caspian Sea oil field after deal is struck
The renegotiation of a deal covering the development of the Kashagan oil field in Kazakhstan indicates that the balance of power in the Caspian Basin energy game is tipping in favour of Kazakh authorities but also US oil giant ExxonMobil, which has replaced Eni SpA as the top partner in the foreign-dominated consortium…
PennEnergy: New consortium formed to manage Kashagan field
A new managerial consortium consisting of Eni SPA, Royal Dutch Shell PLC, Total SA, and ExxonMobil Corp. has been formed to perform operational management of Kazakhstan’s Kashagan oil field, said Eni Chief Executive Officer Paolo Scaroni. He said Eni will continue to manage the test phase…
Forbes: JSC Halyk Savings Bank seeking banking licences in Georgia, Mongolia
JSC Halyk Savings Bank of Kazakhstan said it has set up a new legal entity in Georgia called JSC Halyk Bank Georgia and submitted an application for a banking licence to the National Bank of Georgia…
RIA Novosti: Russia, Belarus and Kazakhstan to establish Customs Union
Russia, Belarus and Kazakhstan signed a number of documents Friday outlining the legal basis for a Customs Union as agreed in Dushanbe, Tajikistan in October 2007…
China Daily: New railways to link Xinjiang with Central Asia
Construction will hopefully start this year on two railways linking China’s westernmost Xinjiang Uygur Autonomous Region with the central Asian nations of Kyrgyzstan, Uzbekistan and Kazakhstan, sources with the regional government of Xinjiang said…
Interfax: Kazakh parliament head praises relations with China
The chairman of the Kazakh parliament, Kasymzhomart Tokayev, has expressed satisfaction with his first official visit to China in his current capacity and has described Kazakh-Chinese relations as “increasingly stable and increasingly extensive.” …
The Independent: Party: Almaty, Kazakhstan
Almaty is Kazakhstan’s biggest city and, thanks to the petrodollars flowing through the country, it’s changing rapidly. Almaty’s Hyatt and Intercontinental hotels will be joined by a JW Marriott hotel in mid-2008, which will be the city’s tallest building, a 38-storey skyscraper on Al-Farabi Avenue, the city’s main shopping street…
Itar-Tass: PMs of Eurasian EC countries meet in Moscow
Prime ministers of the countries, integrated I Eurasian Economic Community (EURASEC), have started the discussion of priority directions of its work…
Rigzone: Kazakhstan asks Ukraine for help in developing gas fields
Kazakhstan has asked Ukraine to participate in actively developing that country’s gas fields, the press service of Ukraine’s Fuel and Energy Ministry reported…
Press of Atlantic City: In Kazakhstan, there’s no rush to democratize
Erlan Idrissov is a dour looking fellow. At first glance he could be mistaken for a Soviet-era apparatchik, which he once was. But all of that disguises a rich, wicked sense of humor that is omnipresent - except when he is asked why his country remains a repressive autocracy…
The Buffalo News: From Kazakhstan with love
Matthew and Stacey Pynn made four trips in a little over a year to the former Soviet Central Asian Republic of Kazakhstan to select and adopt the children, who were living in government “baby houses,” or orphanages…
