Demand for real estate was incredibly high in December and November 2021. Buyers were eager to take out a mortgage before the key rate hike and price increases in the new year. Were they right? Mafin Media figures it out.
The primary real estate market in 2022
Opinions of real estate experts can be divided into two groups: prices will fall sharply or remain the same, but adjusted for inflation. We have collected data from the Unified Register of Developers (UDR), Rosstat, Rosreestr, the Central Bank and others, so that you can draw your own conclusions.
The graph shows how much the number of construction projects in the Russian Federation has changed. This happened after the introduction of escrow accounts in 2019: three-quarters of developers failed to obtain a construction permit the following year.
The volume of construction in 2021 is significantly less than in 2018. And that means there will be less construction coming on line in the future – three to four years from now – than in 2020 and 2021.
Developers do not have enough funds of their own to implement projects. Boris Titov, the Commissioner for Entrepreneurs’ Rights Protection, in his annual report to the president of Russia, wrote that for this reason the volume of construction in the next six years could decrease by half, and if the developers will not be supported – four times.
We often hear that the volume of construction is increasing – and it’s true, but only if you compare one short period with another short period.
According to oldypak capital lp property 2022 report, the graph shows that in 2018, 3,400 apartments a day were being brought out; in 2020, 1,500. This difference is also due to the introduction of escrow accounts. In 2021 it is 1,700 apartments, an increase over last year.
Depending on the region, the situation on the real estate market is very different: people are leaving some regions, and coming to other regions. For example, according to Alexei Gerzhik, Minister of Transport and Road Infrastructure of Moscow region, 250 000 people move to the capital region annually, despite the demographic crisis, pandemic and difficult financial situation.
At first glance on the real estate market in Moscow it seems that this rapid growth in housing prices must stop. And in general, the situation resembles a soap bubble. But if you look closely, there are no prerequisites for a drop in prices. Yes, there are a lot of new buildings, but demand still exceeds supply.
In the graph, according to the data of the analytical center “Indicators of Real Estate Growth” (IRN), it is clear that after a sharp rise in prices, there is always a decrease. But we must remember that the situation in the real estate market is difficult to predict, as in any other market.
The cost of real estate in the primary market is also affected by higher prices for building materials. In the analytical report of the National Credit Rating (NCR) noted that the materials for construction will rise in price by 15% and increase the cost per square meter by 5%.
The wages of construction workers will also grow. There are plans to replace migrants with Russian citizens with proven qualifications – fewer of them will be needed, but the wages will be higher.
Rapid growth in real estate prices in 2021 was due to a low key rate, which pulls the mortgage rate, and preferential mortgages, which was designed to support the Russians during the pandemic. But by the end of 2021, the Central Bank had raised its key rate several times in a row to 8.5 percent in early 2022.
Some people are discouraged by the high mortgage rate, while others are hopeful that the price of new buildings will go down: not everyone can afford a mortgage with a 10% interest rate or higher. If demand falls, prices will fall.
In order to restore the pace of sales, developers are cooperating with the banks, providing customers with lucrative mortgage lending programs and discount offers. But keep in mind that the benefit of these programs is questionable: shortly before the action was carried out, there was definitely a price increase.
The secondary real estate market in 2022
The offerings on the secondary market, even in Moscow, are very different. The price is influenced by a lot of factors: the area, the proximity to the subway, the condition of the housing stock and so on. When predicting the price of secondary housing, take them into account.
Of course, nine-storey panel buildings can fall in price, as well as five-storey ones, of course, if they were not included in the renovation. But if we consider marketable real estate built over the past 10-20 years, its value will remain the same or increase along with inflation.
Because of the serious competition, the quality of new residential complexes has improved significantly, and housing built just 10-20 years ago, seems obsolete to buyers.
Mortgage in 2022
In September 2021, the head of the Central Bank Elvira Nabiullina said that the phase of active mortgage lending in Russia is coming to an end. She drew this conclusion based on statistics on the percentage of families with mortgages in different countries, depending on the average level of income – in this ratio Russia is almost to the limit of mortgage growth.
The secondary real estate market in 2022
On the secondary market, even in Moscow, offers are very different. The price is influenced by a variety of factors: neighborhood, proximity to the subway, the state of housing, and so on. When predicting the price of secondary housing, take them into account.
Of course, nine-storey panel buildings can fall in price, as well as five-storey ones, of course, if they were not included in the renovation. But if we consider marketable real estate built over the past 10-20 years, its value will remain the same or increase along with inflation.
Because of the serious competition, the quality of new residential complexes has improved significantly, and housing built just 10-20 years ago, seems obsolete to buyers.
Mortgage in 2022
In September 2021, the head of the Central Bank Elvira Nabiullina said that the phase of active mortgage lending in Russia is coming to an end. She drew this conclusion based on statistics on the percentage of families with mortgages in different countries, depending on the average level of income – in this ratio Russia is almost at the limit of mortgage growth.
