## A New Housing Strategy for the Earthquake Zone

**The Republic of Armenia**

###### Housing Certificate Pilot Project

## 

## 

## Report \# 2

## Methodology for Determining Housing Values

###### Gyumri, Armenia

###### Prepared for USAID / Armenia

###### Contract No. EEU-I-99-00015-00

**Task Order 804**

**(Urban Institute Project No. 6901-009-00)**

**Prepared by**

**Leonid "Eric" Mesropyan**

**President, Scientific Research Center on Real Estate, Yerevan**

**V.P., Real Estate Appraisers Association, Yerevan**

**The Urban Institute, Washington DC**

# The Institute for Urban Economics, Moscow

**The Center for Policy Analysis at the**

**American University of Armenia, Yerevan**

**Yerevan, Republic of Armenia**

####### **April 2000**

### Confidential

# Methodology for Defining Housing Values in Gyumri

USAID Housing Purchase Certificate Pilot Project

By Leonid "Eric" Mesropyan

When gathering information about the apartments for sale in Gyumri, and
for calculation per square meter of housing (apartment) in multi-family
buildings, an apartment with the following price determination
indicators was taken as a model:

-   stone building

-   location on the middle floors (2, 3)

-   average renovation condition (2, 3 points according to the scale of
    Yerevan Construction Information Centre).

Undoubtedly, when gathering information, it is necessary to try to aim
at the apartments that are close in indicators to the model. But if
there are no such apartments, it is necessary to enter correction
factors, the purpose of which is to bring the deflected parameter closer
to the model.

Specification and price demand for apartments in Gyumri showed that, in
considering the main price determination indicators:

-   in accordance to housing types, there is practically no difference,
    and

-   according to state of damage/deterioration - no inspection and
    definition of buildings from the degree of damage aspect have been
    made following the earthquake.

For this reason, it is practically impossible to identify these
indicators; therefore, they cannot be taken into account.

Since 3-story and 4-story buildings are prevalent in Gyumri, the factor
of number of stories is adjusted by a 10 percent correction, taking into
account the upper floor, e.g. the value of apartments on upper floors
decreases by 10% (this factor was calculated by the comparative method).

Consequently, the value index for 1 square meter of apartment on upper
floors should be increased by 1.1 times, to bring it closer to the
model.

The next correction indicator is the renovation indicator. Survey of the
real estate market in Gyumri showed that 90 percent of housing stock has
not been repaired for a considerable time (interior finishing).
Renovation indicator difference when grouping it according to a 6-point
scale of renovation condition could be marked as (0-1), (2-3), (4-5).
Taking into account our average model version (2-3), the difference
compared to one of those groups is taken as plus or minus 20%.

For example, if when collecting data, we came across an apartment with
the renovation indicator (0-1), consequently the factor increase will be
(+20%) in order to bring it closer to the model value, and consequently
(-20%) for apartments with the renovation indicator (4-5).

After establishing correction factors (if they are available) in summary
forms #1 and #4; and getting the calculation value, the data are
arranged in the table under "Value per square meter of housing according
to price zones (form #6)". This table includes the average indicator per
square meter of all types of apartments according to each zone.

If there are no indicators for any of the zones, it is appropriate to
establish an indicator close by interval with the purpose of getting a
correct statistical line.

To get the final average value per square meter of housing, taking into
account the differentiation percentage correlation indicator of housing
availability, we use the given tables (Form #5), as well as, the
mathematical model of the average statistic selection, which is
calculated according to the following formula.

$$C_{T\text{.}y\text{.}} = \frac{\sum_{}^{}{\lbrack(C_{T\text{.}p\text{.}i}x\prod_{}^{}{p_{i} + \text{.}\text{.}\text{.} + (C_{T\text{.}p\text{.}j}x\prod_{}^{}{p_{j})\rbrack}}}}{\text{100}}$$

Where

$C_{T\text{.}y\text{.}}$ is the average value per 1 square meter in \$
US,

$C_{T\text{.}p\text{.}i}$ is the calculated value per 1 square meter
according to **i-** price zone, and

$\prod_{}^{}Cp_{i}$ is the percentage correlation of housing in **i**
price zone.

After getting the value indicator per square meter of housing,
$C_{T\text{.}y\text{.}}$needs to be multiplied by calculating the
average indicator of the area of the housing type.

So, calculation of the average area of apartments based on the planning
data of standard projects in multifamily buildings demonstrated the
nominal indicator of the total area for standard types.

1 room-apartments - 42 square meters

2 room-apartments - 68 square meters

3 room-apartments - 85 square meters

4 room-apartments - 103 square meters

5 room-apartments -- 115 square meters

All these norms and formulas are used in calculating housing values.

# Calculation of Housing Value in Gyumri

1.  Calculation of the average value is done according to the following
    formula:

$$C_{T\text{.}y\text{.}} = \frac{\sum_{}^{}{\lbrack(C_{T\text{.}p\text{.}i}x\prod_{}^{}{p_{i} + \text{.}\text{.}\text{.} + (C_{T\text{.}p\text{.}j}x\prod_{}^{}{p_{j})\rbrack}}}}{\text{100}}$$

Where

$C_{T\text{.}y\text{.}}$ is the average value of 1 square meter in \$
US,

$C_{T\text{.}p\text{.}i}$ is the calculated value of 1 square meter
according to **i-** price zone, and

$\prod_{}^{}Cp_{i}$ is the percentage correlation of housing in **i -**
price zone.

Based on the data in the tables of the Forms #5 and #6,

$$C_{T\text{.}y\text{.}} = \frac{\lbrack(\text{65}\text{.}1x4\text{.}\text{25}) + (\text{60}\text{.}3x\text{23}\text{.}8) + (\text{44}\text{.}8x\text{37}\text{.}5) + (\text{31}\text{.}2x8\text{.}5) + (\text{25}x5\text{.}\text{75}) + (\text{20}\text{.}8x\text{10}\text{.}\text{75}) + (\text{17}\text{.}7x9\text{.}5)\rbrack}{\text{100}}$$

$= \frac{\text{267}\text{.}7 + 1,\text{435}\text{.}1 + 1,\text{680} + \text{265}\text{.}2 + \text{143}\text{.}8 + \text{223}\text{.}6 + \text{168}\text{.}2}{\text{100}}$=$\frac{4,\text{192}\text{.}6}{\text{100}} = \$\text{42}$

the average value of 1 square meter of housing in the multifamily
buildings in Gyumri for April is \$42 US.

In accordance with the accepted methodology, taking into account the
accepted average normative for the total area of apartments, such as:

1 room-apartments - 42 square meter

2 room-apartments - 68 square meter

3 room-apartments - 85 square meter

4 room-apartments - 103 square meter

5 room-apartments - 115 square meter.

as well as, using the following formula:

$$C_{T\text{.}p\text{.}\text{cp}\text{.}} = C_{T\text{.}\text{.}y\text{.}}\text{xS}$$

where

$C_{T\text{.}p\text{.}\text{cp}\text{.}}$ -is average market value

S - is total normative area, and

Based on the given calculation, the average market value of housing
(apartments) in Gyumri for April, 2000 will be the following:

1 room-apartments - \$1,764

2 room-apartments - \$2,856

3 room- apartments - \$3,570

4 room-apartments - \$4,326.

5 room-apartments - \$4,830

## Form #1

# Summary Table

Value of 1sq.meter of one-room apartments in Gyumri

for \_\_\_\_April\_\_\_\_\_ 2000

+---------+------+-----+-----------+-----------+---------+----------+
| Code of | Zo   | To  | Apartment | Value of  | Total   | Cal      |
| IC      | ning | tal | value in  | 1 sq.     | cor     | culation |
|         |      | a   | US \$     | meter     | rection | value of |
|         |      | rea |           |           | factor  | 1        |
|         |      |     |           |           |         | sq.meter |
+---------+------+-----+-----------+-----------+---------+----------+
| 1-1     | 1    | 43  | 1500      | 35        |         | 35       |
+---------+------+-----+-----------+-----------+---------+----------+
| 1-2     | 4    | 42  | 1000      | 24        | +1.1    | 26.4     |
+---------+------+-----+-----------+-----------+---------+----------+
| 1-3     | 3    | 45  | 1000      | 22        |         | 22       |
+---------+------+-----+-----------+-----------+---------+----------+
| 1-4     | 2    | 36  | 1200      | 33        |         | 33       |
+---------+------+-----+-----------+-----------+---------+----------+
| 1-5     | 7    | 36  | 600       | 17        |         | 17       |
+---------+------+-----+-----------+-----------+---------+----------+
| 1-6     | 3    | 36  | 1700      | 47        |         | 47       |
+---------+------+-----+-----------+-----------+---------+----------+
|         |      |     |           |           |         |          |
+---------+------+-----+-----------+-----------+---------+----------+
|         |      |     |           |           |         |          |
+---------+------+-----+-----------+-----------+---------+----------+
| ##      | 1    | 38  | 2000      | 53        |         | 53       |
| # F-1-1 |      |     |           |           |         |          |
+---------+------+-----+-----------+-----------+---------+----------+
| F-1-2   | 3    | 45  | 1800      | 40        |         | 40       |
+---------+------+-----+-----------+-----------+---------+----------+
| F-1-3   | 2    | 48  | 2200      | 46        |         | 46       |
+---------+------+-----+-----------+-----------+---------+----------+

**Form#2**

# Summary Table

Value of 1sq. meter of two-room apartments in Gyumri

for \_\_\_\_April\_\_\_\_\_ 2000

  --------- -------- ------- ------------- ------------ ------------ -------------
  Code of   Zoning   Total   Apartment     Value of     Total        Calculation
  IC                 area    value in US   1sq. meter   correction   value of
                             \$                         factor       1sq.meter

  2-1       3        60      2300          38                        38

  2-2       1        80      3000          38                        38

  2-3       2        50      2500          50                        50

  2-4       7        62      1200          19           +1.1         21

  2-5       4        70      1600          23           +1.1         25.3

  2-6       6        64      1400          22           -1.2         17.6

                                                                     

                                                                     

  F-2-1     3        62      2500          40                        40

  F-2-2     3        65      2800          43                        43

  F-2-3     2        78      300           38                        38
  --------- -------- ------- ------------- ------------ ------------ -------------

Form#3

# Summary Table 

Value of 1sq.meter of three-room apartments in Gumri

for \_\_\_\_April\_\_\_\_\_ 2000

+--------+-----+-------+------------+-----------+---------+---------+
| ##     | Zon | Total | Apartment  | Value of  | Total   | Calc    |
| # Code | ing | area  | value in   | 1 sq.     | cor     | ulation |
|  of IC |     |       | US \$      | meter     | rection | value   |
|        |     |       |            |           | factor  | of      |
|        |     |       |            |           |         | 1s      |
|        |     |       |            |           |         | q.meter |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 2   | 90    | 6000       | 67        |         | 67      |
| ## 3-1 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 3   | 100   | 3000       | 30        | +1.1    | 33      |
| ## 3-2 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 1   | 68    | 7500       | 110       |         | 110     |
| ## 3-3 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 1   | 80    | 6800       | 85        | +1.1    | 93.5    |
| ## 3-4 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 1   | 80    | 6500       | 81        | +1.1    | 89      |
| ## 3-5 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 2   | 88    | 7700       | 88        |         | 88      |
| ## 3-6 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 3   | 80    | 3700       | 46        |         | 46      |
| ## 3-7 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 4   | 65    | 2500       | 38        | +1.1    | 41.8    |
| ## 3-8 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| #      | 7   | 80    | 1200       | 15        |         | 15      |
| ## 3-9 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ##     | 7   | 90    | 1400       | 15        |         | 15      |
| # 3-10 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ##     | 6   | 85    | 1800       | 21        |         | 21      |
| # 3-11 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    | 3   | 68    | 4000       | 59        | +1      | 53.2    |
|  F-3-1 |     |       |            |           | .1,-1.1 |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    | 3   | 68    | 3500       | 51        | +1      | 66      |
|  F-3-2 |     |       |            |           | .1,+1.2 |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    | 3   | 78    | 4000       | 51        |         | 51      |
|  F-3-3 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    | 3   | 82    | 3500       | 43        |         | 43      |
|  F-3-4 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    | 1   | 90    | 5500       | 61        |         | 61      |
|  F-3-5 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+
| ###    | 7   | 84    | 2500       | 29        |         | 29      |
|  F-3-6 |     |       |            |           |         |         |
+--------+-----+-------+------------+-----------+---------+---------+

#### **Form#4**

# Summary Table 

**Value of 1sq.meter of four-room apartments in Gumri**

**for \_\_\_\_April\_\_\_\_\_ 2000**

+-------+-----+-------+------------+-----------+---------+----------+
| Code  | Zon | Total | Apartment  | Value of  | Total   | Cal      |
| of IC | ing | area  | value in   | 1sq.meter | cor     | culation |
|       |     |       | Us \$      |           | rection | value of |
|       |     |       |            |           | factor  | 1        |
|       |     |       |            |           |         | sq.meter |
+-------+-----+-------+------------+-----------+---------+----------+
| 4-1   | 3   | 92    | 4800       | 52        | +1.1    | 57       |
+-------+-----+-------+------------+-----------+---------+----------+
| 4-2   | 2   | 100   | 10000      | 100       | -1.2    | 80       |
+-------+-----+-------+------------+-----------+---------+----------+
| 4-3   | 1   | 100   | 9000       | 90        | \-      | 90       |
+-------+-----+-------+------------+-----------+---------+----------+
| 4-4   | 6   | 90    | 2200       | 24        | \-      | 24       |
+-------+-----+-------+------------+-----------+---------+----------+
|       |     |       |            |           |         |          |
+-------+-----+-------+------------+-----------+---------+----------+
|       |     |       |            |           |         |          |
+-------+-----+-------+------------+-----------+---------+----------+
| ###   | 3   | 95    | 4800       | 51        | \-      | 51       |
| F-4-1 |     |       |            |           |         |          |
+-------+-----+-------+------------+-----------+---------+----------+
| F-4-2 | 5   | 88    | 4500       | 51        | \-      | 51       |
+-------+-----+-------+------------+-----------+---------+----------+
| F-4-3 | 3   | 92    | 4500       | 49        | +1.1    | 54       |
+-------+-----+-------+------------+-----------+---------+----------+

**Form#5**

# Table

# Percentage Correlation of Multifamily Housing in Gyumri According to Price Zoning 

+--------+-----------+-----+--------+-----+------+------+-----------+
| ##     | #         |     | # Ex   |     | #    |      | ########  |
| # **Zo |  Expert 1 |     | pert 2 |     | Expe |      | Average % |
| ning** |           |     |        |     | rt 3 |      |           |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ###    | #         | # % | #      | # % | #    | # %  | #         |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 1  |           | 3.5 |        | 5   |      |      | 4.25      |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 2  |           | 2   |        | 18  |      |      | 23.8      |
|        |           | 9.5 |        |     |      |      |           |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 3  |           | 35  |        | 40  |      |      | 37.5      |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 4  |           | 10  |        | 7   |      |      | 8.5       |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 5  |           | 3.5 |        | 8   |      |      | 5.75      |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 6  |           | 9.5 |        | 12  |      |      | 10.75     |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ### 7  |           | 9   |        | 10  |      |      | 9.5       |
+--------+-----------+-----+--------+-----+------+------+-----------+
| ###    |           | 100 |        | 100 |      |      | 100       |
| Total: |           |     |        |     |      |      |           |
+--------+-----------+-----+--------+-----+------+------+-----------+

##### "Shirak Estate" "Vektor"

#### **Form#6**

# Table

**Value of 1sq.meter According to Price Zoning**

<table>
<colgroup>
<col style="width: 8%" />
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 13%" />
<col style="width: 9%" />
<col style="width: 11%" />
<col style="width: 4%" />
<col style="width: 13%" />
</colgroup>
<tbody>
<tr class="odd">
<td>Price Zoning</td>
<td colspan="2">1-room</td>
<td colspan="2">2-room</td>
<td colspan="2">3-room</td>
<td colspan="2">4-room</td>
<td><p>Average</p>
<p>index of calculation value</p></td>
</tr>
<tr class="even">
<td></td>
<td>Calcul. Value of 1sq. meter</td>
<td>Aver.</td>
<td>Calcual. value of 1sq. meter</td>
<td>Aver.</td>
<td>Calc. value of 1sq. meter</td>
<td>Aver.</td>
<td>Calc. Value of 1sq. meter</td>
<td>Aver.</td>
<td></td>
</tr>
<tr class="odd">
<td>1</td>
<td><p>35</p>
<p>53</p></td>
<td>44</td>
<td>38</td>
<td>38</td>
<td><p>110</p>
<p>93.5</p>
<p>89</p>
<p>61</p></td>
<td>88.4</td>
<td>90</td>
<td>90</td>
<td>65.1</td>
</tr>
<tr class="even">
<td>2</td>
<td><p>33</p>
<p>46</p></td>
<td>39.5</td>
<td><p>50</p>
<p>38</p></td>
<td>44</td>
<td><p>67</p>
<p>88</p></td>
<td>77,5</td>
<td>80</td>
<td>80</td>
<td>60.3</td>
</tr>
<tr class="odd">
<td>3</td>
<td><p>22</p>
<p>47</p>
<p>40</p></td>
<td>36.3</td>
<td><p>38</p>
<p>40</p>
<p>43</p></td>
<td>40,3</td>
<td><p>33</p>
<p>43</p>
<p>46</p>
<p>53,2</p>
<p>66</p>
<p>51</p></td>
<td>48,7</td>
<td><p>54</p>
<p>57</p>
<p>51</p></td>
<td>54</td>
<td>44.8</td>
</tr>
<tr class="even">
<td>4</td>
<td>26.4</td>
<td>26.4</td>
<td>25.3</td>
<td>25.3</td>
<td>41.8</td>
<td>41.8</td>
<td>-</td>
<td>-</td>
<td>31.2</td>
</tr>
<tr class="odd">
<td>5</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>-</td>
<td>25</td>
</tr>
<tr class="even">
<td>6</td>
<td>-</td>
<td>-</td>
<td>17.6</td>
<td>17.6</td>
<td>21</td>
<td>21</td>
<td>24</td>
<td>24</td>
<td>20.8</td>
</tr>
<tr class="odd">
<td>7</td>
<td>17</td>
<td>17</td>
<td>21</td>
<td>21</td>
<td><p>15</p>
<p>15</p></td>
<td>15</td>
<td>-</td>
<td>-</td>
<td>17.7</td>
</tr>
<tr class="even">
<td>Av.</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>37.8</td>
</tr>
</tbody>
</table>