THIS ARTICLE REVIEWS THE CURRENT STATE of the housing situation in Bishkek, Kyrgyzstan and examines the factors that influence price and availability, particularly the development of supporting institutions. The topic is relevant because security in and alienability of this asset, which is one of the few widely held tradable major assets in developing countries, is important in the development of vehicles for the accumulation and storage of wealth.
Over the last two years, price increases in residential real estate in Bishkek have generated much attention and analysis among residents of this capital city of Kyrgyzstan. Prices have risen by more than 100% over the months since the summer of 2002. Along with this growth in prices has come development in agency matters and mortgage lending. This article provides an overview of the market in Bishkek and a review of the ancillary changes that will affect the housing market.
The city of Bishkek, with population of 600,000, is the capital of the Kyrgyz Republic, a mountainous country in Central Asia along China's western border with over 5 million people. Over 90% of Kyrgyzstan, as it is commonly called, is 3,000 feet above sea level or higher. Named Frunze, after a Red Army general who operated in Central Asia, the city was the capital of the Kyrgyz Soviet Social Republic and changed its name to the Bishkek at the time of independence. Before its Soviet status, the city was called Pishpek and served as an outpost for the Russian Army in the 19th century expansion of the Tsarist empire into this region.
In the 1990s, after independence, the city became the base for organizations operating in the newly independent country. The Kyrgyz government made an effort to attract multilateral and aid organizations to the city, where the impact on the population, which was relatively small for a capital city, would be palpable. Organizations like the UN, TACIS, the Organization for Security and Cooperation in Europe, and even Helvetas, which brings Swiss expertise to the country's dairy industry, set up offices in the city. The country's proximity to Afghanistan made it attractive to the U.S. government after September 11, 2001 and the U.S. Air Force soon established a base next to the Bishkek's Manas International Airport, which is less than 25 miles from a Russian air base.
Most households in the capital live in apartments, with single houses becoming more popular. Single-family dwellings are usually located on the outskirts of the city, where residents must have transportation means to reach the city center, given the slowness of the municipal system.
THE MACROECONOMIC SETTING
The Kyrgyz economy has stabilized over the last several years, with annual rates of inflation consistently averaging in the single digits and evidence of long-term economic growth emerging. These factors have in turn promoted stability of the currency against the dollar and euro and gains in the purchasing power of wages and salaries since the end of the 1990s. (1) With the new wealth of many Kyrgyz and few attractive investment alternatives, real estate has become a desirable asset for households with incomes above their spending needs. (2) The poor state and crowded conditions of much of the Soviet-era housing stock have also stimulated spending on renovation of existing structures, often on an individual basis.
Before independence, Bishkek was a russified city, with the majority of its population ethnic Russians. Currently, that ethnic group is about 20% of the city's population, reflecting a large emigration in the years following independence. With fears primarily of economic uncertainty, rather than ethnic unrest, many Russians with familial or professional connections to other post-Soviet republics emigrated from Kyrgyzstan. This migration resulted in a large quantity of housing for sale on the city's market, with a corresponding slump in real estate prices. …