At the peak or in the peak: where prices for new buildings will go
Prices for new buildings should significantly decrease, and the process has already started, said Russian Construction Minister Irek Faizullin. The situation for developers is becoming quite unpleasant, given the fact that 60% of apartments in new buildings are now unsold. Although many expected a slump in sales after the abolition of preferential mortgages, this amount of unsold space is impressive. At the same time, we are still seeing new home prices rise, albeit weakly. What will happen to the prices of houses and apartments and whether mass bankruptcies threaten construction companies in the market of the near future, "Izvestia" analyzed.
Life after a favorable mortgage
About the impending decline in sales of new buildings, and with them the prices, talked about immediately after the abolition of preferential mortgages on July 1. However, if we judge strictly from the changes in prices, the break in the trend is not visible. Thus, by mid-November, all major analytical services found an increase in prices for apartments in new buildings over the past 30 days - from 0.3% according to "Yandex.Nedvizhimosti" to 1.1% according to "Cian.Analytica". In comparison with the previous month there was even recorded acceleration of price growth. In general, they have not decreased in any of the months since July 1. The market is still supported by the family mortgage, which gives the opportunity to purchase housing at ridiculously low rates at the present time - 6% against 24-25% of market rates, which gives very wide opportunities for arbitrage.
At the same time, some indirect indicators do not look so spectacular anymore. Irek Faizullin stated that 60% of apartments in new buildings have not found a buyer, but there are other data. For example, DataFlat reports a 46% year-on-year drop in October sales in Moscow. In St. Petersburg, the decline was more than twofold - by 51%. In addition, it is characterized by the fact that the difference between the price of the announcement and the price of the real mortgage transaction is significantly different. The average offer price is 188 thousand rubles per square meter (nationwide), while purchases are made at a price of 169 thousand, that is, the difference reaches 11.3%. The strongest gap is noted in Bashkiria (24%) and Nizhny Novgorod region (21%). In this light, the situation really looks like the primary market is overbought and a significant drop in prices is a matter of time.
What is the reality? Russian analysts believe that the situation is still far from the threshold of the crisis.
As the head of "Cian.Analytica" Alexey Popov noted, the decrease in demand by a quarter of the background values of the first half of the year has not led to a correction in prices.
- They are either growing very slowly or decreasing very slowly (different speakers cite both options to describe the situation with price dynamics). A strong decline in prices (but not in times, but by values tangible for everyone, not only for analysts) can start in case of a drop in actual demand (number of transactions) over a long period of time. So far such situation is not observed on the market, - comments the speaker.
In order to significantly reduce the price, either the situation for developers must become frankly critical, or there must be effective support measures that will allow developers to sell objects cheaper, but at the same time keep the margins of the business at adequate levels, says the director of the federal company "Etazhi" Ildar Khusainov.
He added that taking into account high inflation risks and reduction of construction volumes, even a 10-15% decrease from the current values becomes doubtful.
Denis Zhalnin, Director of the federal wall materials plant "Winzer", in turn, noted that his company has already reduced prices for apartments in its residential complexes by an average of 10% in order to accelerate the filling of escrow accounts to the required level and reduce the cost of credit resources.
- But it is a little easier for us to manage the cost of construction, as we are a full-cycle developer and we produce part of the basic building materials at our own enterprises. However, further price reductions are hardly possible: the cost of other groups of construction materials, land plots for construction, labor resources, as well as inflation risks associated with the fact that the funds received from the sale of apartments are kept in escrow accounts until the house is commissioned. This means that they actually depreciate under the influence of inflation. And the last argument is the decline in the ruble exchange rate, which is noted now. It is still difficult to give up imported equipment and materials entirely, and such a difference in the exchange rate is another additional burden on the cost of production, - explained the interlocutor.
Without bankruptcy
Developers have accumulated a colossal volume of apartments (their stock now exceeds 3.4 years). Almost any negative news concerning the key rate, additional restrictions on preferential mortgage programs or the prospects of the real estate market in general in recent days lead to a significant drop in their shares on the stock market, sometimes even in opposition to the general trend. But experts believe that the current situation is not particularly problematic for them.
- Mass bankruptcies of real estate developers are unlikely to be expected, as most of them have quite balanced portfolios and have formed a good safety cushion over the last few years of high demand. Of course, there are developers who in the current situation literally go for broke and take on more risks than usual, - says Khusainov.
As for the secondary market, the situation here is still more or less stable, despite the absolutely prohibitive rates (to take a significant loan for housing at 25-30% can only be desperate). According to Popov, the number of transactions in the secondary market due to the flow of demand from new buildings is not falling. At the same time, it can be stated that in many cities (for example, in St. Petersburg) prices for secondary housing remain at their levels for many months.
Khusainov notes that the rate of sales in the secondary market is now comparable to the levels of May-June this year and does not look so critical.
- Most transactions are for cash. Of course, buyers are attracted by the 20-25% difference in price with similar objects on the primary market. However, this is ready housing, which can be repaired and where you can immediately move in. In mortgage transactions are dominated by new buildings, because the difference in rates between the family mortgage (6%) and the market (30%) is simply enormous. Plus the choice in the secondary market is much wider, after all, new buildings in most major cities are built in certain locations, and ready-made housing can be found almost anywhere in the locality, - said the expert.
Khusainov added that in 2014-2024 there was a large volume of construction, which was also summarized with a huge investment demand for real estate.
- Now all these objects are entering the secondary housing market, and some of them are much cheaper than similar apartments, as they were purchased 5-10 years ago, when the order of cost was completely different. There are new residential complexes, where up to 15-30% of apartments are for sale, - concluded the interlocutor of "Izvestia".
It should be noted that at the moment there is a huge gap between the cost of primary and secondary housing (Br169 thousand versus Br110 thousand). The only reason for such a difference is the favorable conditions of mortgage lending. This gap determines a rather good potential for moderate price growth in the secondary market in the coming years. So far we can only guess which of the trends will prevail: undervalued prices for secondary housing or excessive supply and the general crisis in the Russian residential real estate market.
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