ALMATY, Jan 21 (Reuters) - Wealthy Kazakh investors have turned to property markets of Europe and Middle East after the global credit squeeze put the domestic real estate sector into a prolonged slump, market players said.
The Kazakh property market, with a turnover of around $30 billion in 2007, delivered annual yields of up to 100 percent until the global credit crunch sent property prices plunging.
"After the panic that spread through the Kazakh market investors who don't trust financial instruments fled to foreign markets," said Oleg Alfyorov, Vice-President of the National Real Estate Association.
Wealthy local investors who did not need mortgages and often bought several expensive apartments at a time accounted for at least half of all deals before the credit crunch, market players say.
As their mood changed advertisements for new apartment blocks and mutual funds that had heavily invested in the sector have given way to those promoting properties in United Arab Emirates and Eastern Europe.
"The middle class can now afford to invest $100,000-200,000 in foreign property," said Aida Dauletalina, head of the Invest Realty real estate company. She said her foreign business expanded by 30 percent over past months.
"Popular places among our customers are Bulgaria, Dubai -- for investment purposes -- and Spain," Dauletalina said.
A QUARTER DOWN
As wealthy investors pulled out prices sagged further since potential buyers, many of whom would have to take out mortgages, are no longer factoring in potential gains.
In the commercial capital Almaty the average price of residential property has shrunk almost by a quarter since then.
"Supply has hit record levels," said Alfyorov of the National Real Estate Association.
He said the trend was not limited to Almaty and the capital Astana, but has persisted throughout Kazakhstan, a country the size of Western Europe with a population of 15 million.
This has raised concerns about the ability of banks -- which have lent aggressively to construction companies and individual buyers -- to withstand the pressure.
"Construction and related sectors have been affected the most by the recent events," said Yekateriina Trofimova, a banking analyst at Standard and Poor's. "This area causes the highest concern with regards to bank asset quality."
Meanwhile Kazakh banks, short on liquidity, have tightened the terms and raised their rates on new mortgages.
ALL HOPES ON OIL
The property market will hit the bottom this year, analysts say. But they expect the current decline in real estate prices to continue for another three to six months.
"Liquidity in Kazakhstan will continue to shrink in the first half of this year which may put additional pressure on the real estate market," said Gairat Salimov, head of research at the Central Asian office of Renaissance Capital. [size=4]Maxim Dmitriyev, deputy chairman of Kuat, one of the largest Kazakh construction firms, adds: "It will all depend on when the financial sector stabilises."
The greatest help could come from oil -- Kazakhstan's main export and the key generator of cash, analysts say.
The Caspian nation, home to some of the world's most developed as well as yet to be tapped deposits, plans to triple oil production by 2017.
Its largest oil producer, Chevron-led venture Tengizchevroil, plans to launch new facilities this year that will allow it to boost annual output to 23 million tonnes from the current 13 million tonnes.
"There will be a new stream of petrodollars, banking problems would ease and those who do not miss the opportunities in 2008 will see support from macroeconomic factors," said Salimov of Renaissance Capital. (Writing by Olzhas Auyezov)
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