Batumi’s Real Estate Bubble: Why Oversupply Makes It a Bad Investment

Batumi, Georgia, once hailed as the “Las Vegas of the Black Sea,” has witnessed a dramatic real estate boom over the past decade. Promises of high rental yields, booming tourism, and economic growth have attracted investors from around the world. However, beneath the glossy marketing brochures and towering cranes lies a stark reality: Batumi is drowning in oversupply. This glut of properties is not only eroding the value of real estate investments but also creating a precarious situation for those hoping to profit from this market. In this article, we’ll explore why the numbers don’t add up and why buying real estate in Batumi is a risky proposition.

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The Construction Craze in Batumi: Too Much, Too Fast

Unchecked Development

Batumi’s skyline is dominated by construction cranes, with new high-rises sprouting like mushrooms after a storm. Between 2015 and 2023, Batumi issued construction permits for tens of thousands of residential units. The city, which has a permanent population of around 200,000, has seen an influx of properties that far exceeds its needs.

Comparing to Other Markets

To put this into perspective, let’s compare Batumi to Dubrovnik, Croatia—a similarly sized tourist hotspot. While Dubrovnik has strict controls on construction to preserve its cultural heritage and balance supply with demand, Batumi appears to have no such restrictions. The result? Batumi has more than five times the number of new properties under construction despite hosting fewer tourists annually.

The Myth of Endless Demand

Developers often justify the oversupply by pointing to Batumi’s growing tourism industry. However, even at its peak, Batumi’s tourist numbers cannot sustain the sheer volume of new properties. This disconnect between supply and demand is a ticking time bomb for investors.

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Airbnb and Short-Term Rental Oversaturation

The Airbnb Explosion

Batumi has seen a dramatic rise in the number of properties listed on Airbnb and other short-term rental platforms. As of 2024, there are over 17,000 active Airbnb listings in Batumi and over 30,000 still under construction — a staggering figure for a city of its size. To put this into context, that’s roughly one Airbnb property for every seven residents.

Let’s compare Batumi’s vacation rental market in 2023 to other more established tourist markets.

Batumi had 13.2 tourists per Airbnb in 2023. At first, this may sound like a lot, but when you think about it in perspective of 365 days during a year, it means if every tourist was evenly distributed among all the Airbnbs in Batumi, then each property would have 13.2 bookings per year. This is an extremely terrible situation as an investor. And to make matters worse, there are an additional 30,000 Airbnb style properties still under construction in Batumi.

While Batumi is actively constructing an additional 30,000 Airbnb style properties to add to the existing 17,000, both London and Paris have begun to cut down on the number of active Airbnb listings because of over supply. Both cities have implemented licensing initiatives to try to bring the number of tourists per Airbnb listing to 700 or more while Batumi is actively in the process of cutting the number of tourists per Airbnb listing all the way down to 4.8, a losing proposition for investors.

When you consider the fact that governments managing cities such as New York City, Istanbul, London, Dubai and Paris are all under the impression that 700 tourists per Airbnb is considered the minimum threshold to avoid over supply, Batumi will soon face the reality of 4.8 tourists per listing creating the possibility that Batumi could be the worst property bubble in the history of the world.

Seasonal Tourism Challenges

Unlike year-round tourist destinations, Batumi’s appeal is highly seasonal. The city experiences a surge in visitors during the summer months, but for the rest of the year, occupancy rates plummet. Investors who rely on consistent rental income are often disappointed when their properties sit empty for 7 to 9 months at a time.

The Race to the Bottom

The oversupply of short-term rentals has created fierce competition among property owners. As a result, nightly rates have dropped significantly, and many investors are forced to undercut their prices just to attract tenants. This “race to the bottom” makes it increasingly difficult to achieve positive rental yields.

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The Economic Impact of Oversupply

Falling Property Prices

When supply vastly exceeds demand, property prices inevitably suffer. Many investors in Batumi are already experiencing this firsthand. Units purchased at a premium just a few years ago are now worth less, with some struggling to find buyers even at discounted prices.

Declining ROI

For investors who bought into Batumi’s real estate market with the expectation of high returns, the reality has been sobering. Declining occupancy rates, reduced rental income, and increasing maintenance costs have eliminated the return on investment.

Maintenance Challenges in Overcrowded Markets

Overbuilding doesn’t just affect property values; it also impacts the quality of the built environment. In their rush to meet demand, many developers in Batumi have prioritized quantity over quality, leading to poorly constructed buildings. Investors are often left with properties that require costly repairs and ongoing maintenance, further eroding their profitability.

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Why Investors Should Be Cautious

Lessons from Other Oversupplied Markets

Batumi is not the first city to experience an oversupply problem. Cities like Dubai and Phuket have faced similar issues, where rapid development outpaced demand, leading to falling property prices and widespread investor dissatisfaction. These examples serve as cautionary tales for those considering investing in Batumi.

A Certain Real Estate Bubble

A real estate bubble occurs when property prices are artificially inflated due to speculative demand. In Batumi, the combination of oversupply, declining rental yields, and falling property values suggests that the market is already a massive bubble. When the bubble bursts, investors will be left holding the bag.

Lack of Regulation

One of the key factors exacerbating Batumi’s oversupply problem is the lack of regulatory oversight. Unlike more mature markets, Batumi has few mechanisms in place to control development or protect investors. This laissez-faire approach has allowed developers to flood the market with properties, with little regard for the long-term consequences.

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Conclusion: DO NOT INVEST IN BATUMI

Batumi’s real estate market may seem enticing at first glance, with its false promises of high rental yields and booming tourism. However, a closer look reveals a market plagued by oversupply, declining returns, stagnated tourism and significant risks. The sheer volume of properties being constructed, coupled with an oversaturated Airbnb market, makes it all but impossible for investors to achieve positive outcomes.

For those considering investing in Batumi, it’s crucial to weigh the risks carefully and think long-term. The numbers don’t lie, and the current trajectory of Batumi’s real estate market suggests that it’s a bubble waiting to burst, and the cracks are already starting to appear. Rather than getting caught up in the hype, investors would be wise to explore alternative opportunities where supply and demand are more balanced.

Ultimately, Batumi’s real estate market serves as a stark reminder of the dangers of overdevelopment. By learning from the mistakes of others and approaching investments with caution, you can avoid the pitfalls of a market that promises much but delivers little.

And finally, if you do own property in Batumi, you should SELL NOW and get your money out while you are still able. The bubble will burst suddenly. And when it does, you may find it impossible to recoup your investment.