How is Rental Yield in Tbilisi?

Buying and renting out apartments in Tbilisi has long been considered a profitable opportunity for investors, but this market is constantly evolving. The key question investors ask is whether real estate investment is still worth it considering rental yield.

Rental yield, which reflects the ratio of annual rental income to the market value of a property, stood at 9.6% in December 2024 (source: TBC Capital). According to international standards, a yield of 6-8% is considered a good investment, while anything above 10% falls into the high profitability zone. A 9.6% yield remains attractive for investors, but its annual decline (-1.2 percentage points) raises questions about how sustainable this trend is.

Looking at recent trends, rental yield in Tbilisi has not always been this high. In 2021, it was around 6%, making it less attractive compared to bank deposit interest rates. However, from 2022 onwards, with rising rental prices and increasing demand for real estate, rental yield grew rapidly, reaching close to 10% in 2023. 

Comparing rental yield to bank deposit interest rates is crucial because both serve as sources of passive income, and investors often choose between them. The key question for investors is where to allocate capital to achieve the highest returns with the least risk. Deposits are more stable and require minimal management, whereas real estate investments involve tenant management, potential vacancies, and price fluctuations.

In recent years, long-term deposit interest rates in foreign currency have fluctuated between 4-5%, while in Georgian lari, they have reached 10-11%. In 2021, when rental yield was around 6%, deposits were seen as a more attractive alternative for investors. However, in 2022-2023, rental yield rose sharply, surpassing bank interest rates and increasing interest in real estate investments.

By the end of 2024, this picture is changing again. With declining rental prices and rising deposit interest rates, rental income is now getting closer to what investors can earn from bank deposits. This means that while rental property was significantly more profitable a few years ago, today investors need to carefully analyze whether investing in an apartment is still worthwhile, especially when bank deposits offer comparable returns with significantly lower risk.

If deposit rates continue to rise while rental yield keeps decreasing, the decisions for real estate investors will become even more challenging. For Tbilisi’s real estate market, 2024 could be a turning point—will investors continue buying apartments for rent, or will they shift toward alternative investment options? The answer will depend on market trends in the coming months.