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Wednesday, December 7, 2016

The experts identified three measures to reduce the cost of housing


The volume of supply in the housing market is at its historical maximum. According to the Moscow Association of realtors, in the capital in the segment of new buildings and apartments are on sale more than 7 million square meters. However, effective demand is very low and continues to fall. Developers are forced to sell apartments at a cost. Seest case — is not at odds even luxury housing, which all previous years stood apart due to the financial viability of its customers.

Are there effective workarounds? On request “MK” experts have identified three measures that could improve the situation.


photo: Alexander Astafyev

Most experts tend not to dramatize the situation. But recognize that the real estate market is in critical condition — buyers what to buy, sellers have no one to sell. But there is interest from the other — the housing question was and will be one of the most important for people. And the first and most effective measure — intervention of the state. Needless to say, the citizens don’t like when the government tries to get into their private life. But in this case this action would be justified. A significant reduction of banking interest rates on mortgages (for example Western countries) — the real way to allow the Russians to improve their living conditions. Not to mention the release of the real estate market of the deepest stagnation.

5 — fold increase in the number of bankruptcies of companies with experience in the real estate market more than 7 years, — says first Deputy Chairman of State Duma Committee on housing policy and housing and communal services Elena Nikolaeva. — Reduced interest rate mortgages to 7% will increase the demand, it is beneficial for the country, but unprofitable banks. Therefore, we need a bold Bank, who was the first to do it.

— Indeed, the amount of supply of new mass segment in recent years is growing rapidly. In 2014, it increased compared to the previous year by 34%, in 2015 — by 79%. Since the beginning of this year this index grew by 8.4%, says managing partner of “Metrium Groups” Maria Litinetskaya. — It is interesting that in the first half to reduce the interest went commercial, not government banks. In the primary market of real estate operating loan program from 8-9% per annum, while officially the government subsidizes the rate to only 12%. The situation with demand is not critical, however, it is important to note that the buyer went into more affordable segments of the housing and strives to reduce the cost of your purchase. Some customers moved from the suburbs to Moscow, as a minimum the budgets of purchases in the capital and the Moscow region is almost equal.

Record the volume of deals increase competition between developers, which is evident in quality improvement projects, discounts, promotions and of course, the decline in prices, the expert continues. The average cost per square meter in the mass segment during the first half of 2016 decreased by 4%. “The possibility of supporting the market in this area is not settled, and in this context, everything will depend on movements in the key rate of the Central Bank, — says Litinetskaya. — The fact that banks cannot issue mortgages at rates that are lower than the rate in the interbank market where they borrow money. Otherwise they will operate at a loss. But this rate is in direct proportion to the key rate of the Central Bank. The June decline of 0.5% did not have an impact on the mortgage market — it’s too minor a change that does not contribute to the cost of credit is still expensive. If in Europe you can get a mortgage at 2-5% per annum, in Russia the credit in two to three times more expensive. By the way, the reduction of the key rate will help developers to reduce the cost of attracting and servicing a loan for the construction of housing. “Expect that by the end of next year without government support, mortgage rates are around 8%,” — says financial analyst “FINAM” Timur Nigmatullin.

We conducted a study whose purpose was to establish what percentage of families in a particular region can afford to improve their living conditions, for example, move from a Studio to a one bedroom apartment, — says head of Department of Analytics of CENTURY 21 Russia Kirill Kotrikov. — In Moscow, 22% of families of three (two working and dependent) can afford improved housing conditions using mortgage. 44.6% of families consisting of two working can also afford to improve their living conditions. This suggests that the market has hidden potential, and it should work. Another conclusion suggests that the change in mortgage rates at reasonable 1-3% does not significantly change the situation with the availability of housing improvement (as evidenced by a number of related studies by other organizations). Significantly changes the situation considerably lowering the interest rates — for example, twice (which is unrealistic in terms of economy of Russia).

Experts of the mortgage centre Est-a-Tet has estimated that in the mass segment mortgage payments is approximately two times higher than rents. In the first half of 2016 the average budget of buying one-bedroom apartments in economy-class amounted to 5.9 million rubles. According to the program of mortgage with state support, the minimum interest rate currently available in “Sberbank of Russia” — from 11,4% with an initial contribution of 20% and maximum loan period is 20 years. “If you take into account the credit conditions and the average budget of purchase, the amount of the monthly payment for a Studio apartment (with a contribution of 20% from apartment cost) will amount to 50.1 thousand rubles a month. If you take a loan in the standard mortgage program, where the minimum rate now stands at 12.9%, and the down payment starts from 15%, the monthly payments will be equal to 58,5 thousand rubles, analysts say. — If we consider a one-bedroom apartment in the mass segment with an average budget of purchase 9.1 million, the amount of the mortgage payment under the program with state support will amount to 77,3 thousand rubles a month, and according to the standard program of 90.2 thousand. At the same time, because the programs subsidized mortgage loan amount should not exceed 8 million rubles, the initial payment for two-bedroom apartments shall be not less than 35% of the total cost of the apartment.”

Measure number two is very unpleasant for developers, but quite a effective — lower cost per square meter. Of course, over the last 2-3 years the price bubble deflated, but not enough to allow people to buy homes without austerity on the rest. According to VTSIOM, more than 30% of Russia’s population have started saving on purchases, including food. And one of the main problems which now face the real estate market is the reluctance of buyers to take on long — term loan obligations. “Now there are developers who at the initial stage of the sales offer apartments below cost. However, it is rather a tactical maneuver to attract consumer interest at the start of sales, rather than long-term strategy. Such examples on the market are rare, and they are unlikely to be massive, otherwise it would mean a crisis in the industry”, — says the expert “Metrium Groups”.

— The decline remains mostly outside of Moscow. Separate the least liquid apartments in buildings — first floor, large areas can be sold below cost, — says a leading analyst CYANOGEN Alexander Pypin.

More than a year in the real estate market is out of balance. Because of the peculiarities of technological processes, the volume of significantly exceeded the demand. However, as expected, a nominal decrease of prices in rubles were not observed. Unlike the crisis of 2008-2009, the developers for the most part was not overly loaned up, and they were observed dumping. On the contrary, a number of players have increased their profitability, even amid a decline in sales by focusing on more profitable areas of activities, — says Timur Nigmatullin. In the second half of 2016, I expect insignificant growth of ruble prices and the demand by buyers in the mortgage, including the background of the implementation of the program supported by the state. Now the share of such transactions exceeds 45-50% of sales.

— Many potential buyers mistakenly expect further price declines, which seriously constrains the demand, — says the managing partner of M9 Development Maxim Morozov. But the big developers there is no sense further to reduce prices, it is easier to wait a few extra months. Therefore, neither of which sell at cost, much less below it of the question. It’s just a fantastic script. On this can go just a little company at the very least. Additional accumulation of a proposal, of course, will put pressure on prices, but a strong fall will not.

Measure number three can be described like this: give the potential buyer an apartment to rent or take him for a few months all free. No, well there is a test drive cars — so why not transfer this experience to the housing market?

Is a rather effective measure. We fully admit that this method of attracting customers will begin to spread in the near future, ” Kirill said Kotikov.

— In the fight for the buyer developers significantly increase the qualitative characteristics of housing, — says the Chairman of the Board of Directors “BEST new Building” Irina Dobrokhotova. For example, in the segment of comfort-class new projects today are derived from underground Parking, a variety of planning concepts, architectural concepts, which previously corresponded to only the projects the business class. By the way, I want to note that the political process in recent times has ceased to have any appreciable impact on the market. First, people were trying to balance their actions with the situation. And secondly, life is constantly requires the solution of the simple everyday issues related to the birth of children, weddings and divorce and, accordingly, the purchase, sale or exchange of housing. And these needs remain the same regardless of the elections to the Duma, Western sanctions and retaliatory sanctions. The only thing that may affect political instability, so it’s the number of investment transactions, the share of which in the last two years has decreased in all market segments.

In General, having lived in a cozy comfortable apartment, getting used to the place and the neighbours, the client is likely to want to buy it. Another thing — will the material capabilities?..

In the second half of 2016, the situation will likely remain the same. It is unknown how much is enough buying activity (savings to end), incomes fall and, according to forecasts of the Central Bank and the government, will continue to decline until 2019. The market may begin to revive until the end of 2019, — said Kirill Kotrikov.

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