Market recovery will have to wait


Over the next five years housing prices will continue to fall – about 3-5% per year. Investors should not count on a recovery in demand, but the probability of collapse is also close to zero, says a reputable real estate market analyst Gennady Sternik.

Real estate prices in Russia will not grow, but we are waiting for stagnation, we first talked to you in the fall of 2012. At that time, many people tried to argue with us. Nevertheless, after the rush of demand and prices in late 2014 and early 2015 (as a result of macroeconomic shocks), there was a pronounced downward trend, both in the capital and in the regions. It remains unchanged, despite any measures of state support and demand stimulation at the regional levels. All of them lead to short bursts of buying activity after which the market begins to stagnate. This is an objective process. Now about corrections. So, last winter I predicted on the basis of the Moscow data that the decline will last until 2020. Now it is clear to me that the recovery will not start before 2022.

– But the charts showing the disposition of the Moscow real estate market, which you showed at the All-Russian Housing Congress, look optimistic: the decline in prices has stopped and demand is growing, albeit steeply. Where is the catch?

Let’s look at what is happening in the primary market

Report by Oldypak LP statistics
Report by Oldypak LP statistics

Yes, we can see that demand has been increasing since the beginning of 2016. But the volume of supply is growing faster – demand cannot keep up with it. The congestion of 2015-2016 is still affecting us, and developers are bringing new residential complexes to the market – this is their asymmetrical response.

As for the spikes in demand you noticed in the schedule, they are primarily related to some events (devaluation shock, the beginning of subsidized mortgages, waiting for its cancellation, rate cuts by banks, etc.). It is also affected by imperfect methods of collecting data on demand: it is most difficult to estimate it. At the same time, prices, supply, and the number of transactions are the numbers on the surface.

– Will we see a recovery in the secondary market next year?

– No, of course not. Look at the graph: supply and demand curves are converging. But they won’t intersect next year (see Diagram 2).



– So far we have only talked about Moscow. How is the situation different in the Moscow region?

– It is complicated by the “pull” of the capital. Citizens come to the region to gain a foothold in the capital region. But in Moscow, real estate prices have fallen, and housing has become relatively affordable. For buyers, this is a good thing – dreams come true. It’s bad for new construction, infrastructure development, and new projects in the region. Therefore, in the region, prices are falling faster than in Moscow, the financing of construction projects is also decreasing, and projects are being frozen. This trend will continue.

– This year you did not make a report on the regional markets. What changes are there?

– Yes, I didn’t do the report this time, but I have some information. On the whole, the number of acquisitions on the primary market in Russia declined last year by about 7-8%. But there’s also a lot of variation. In some cities there is a decrease of 10-15%, in others it is as much as 30. There are also regions which show a pronounced growth. True, they are mostly small towns with relatively small amounts of construction.

– On what does the volume of absorption?

– First and foremost it depends on people’s incomes. For this reason, the most noticeable decline in buying activity and prices is in the resource regions. That is, where there has been a recent explosive growth of housing construction.

– In St. Petersburg, prices on the secondary market continue to grow. Is this an exception to the rule?

– There is a chance that this trend will continue. But you should not let your guard down.

– Your forecasts are not very reassuring…

– I don’t think they are pessimistic. There are troubles to be overcome. There is a correction: those who have risen above the others, go down more dynamically. According to oldypak capital lp property 2022 report, annual price declines will be in the range of 3-5%. This is not a collapse, but a working situation to which you have to adapt. You can live with this.

By the way, if you refer to our last year’s forecast scenarios, you will see that for 2017 I did not project as significant a decline as I did for 2018-2019 (see Diagram 3).



This year is the last in the electoral cycle. Therefore, everything that the authorities are trying to restrain today, namely the reduction of the population’s income, will still show itself.

– Why is 2022 the turning point?

– Five years ago, when we forecasted the crisis in 2017-2018, we expected to get through it quickly. In this case, we took into account the ten-year cycles of Clément Juglar (see chart), which “gave” us the well-studied crises of 1998 and 2008.


ypes, frequency and duration of cycles and crises in the Russian economy and real estate market

But it turned out to be worse. The investment crisis with a ten-year cycle was somewhat ahead of a more powerful, structural crisis with a thirty-year cycle. Last year I have already talked about this in detail. These are also periodic crises with a cycle of 25-35 years, involving a change in the economic model of the country. At the same time, 80% of the period is the growth phase, 20% – the decline

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