Translated material
Neither up nor down
Specialists from the IRN.RU analytical center note that the average cost of housing in Moscow in March was $4,218 per square meter. “Taking into account the inevitable statistical errors in calculations, it would be more correct to say that prices continue to mark time. The analysis shows that mainly expensive apartments in good buildings and prestigious areas remain in the black (from the point of view of price dynamics. - Ed. ), while cheaper and low-quality housing goes into the minus,” the center’s analysts note.
According to Andrey Beketov, head of the ARN.RU website, prices in the first quarter of 2007 decreased, but only slightly. In general, the market has been in a stable state for six months now. But judging by the growing volume of offers, buyers are not ready to take the current price level for granted. “For now, the market is seeing a decline in prices for housing in the lower price range and quality. It should be noted that against the backdrop of a stop in the growth of dollar prices, ruble prices for apartments are declining to a greater extent due to a decrease in the exchange rate value of the dollar. Sellers are no longer able to compensate for this loss. The maximum they can do so far is not to reduce prices in advertisements,” says Mr. Beketov. In his opinion, in the second quarter of 2007, housing prices in Moscow will most likely fall, but a significant drop in prices for standard apartments should not be expected.
“Since the beginning of the year, offer prices have decreased by an average of 1.1%. At the same time, in the segment of mass economy-class housing (panel and block houses) in March, average supply prices decreased by 0.6%, and since the beginning of the year - by 1%. Business-class housing (monolithic and brick houses) fell in price by an average of 1.1% in sellers’ advertisements in the first month of spring, and by 1.3% since the beginning of the year,” notes Alexander Krapin, general director of the information and analytical RWAY agency.
Looking at the pit...
Despite the stabilization of prices, the cost of Moscow apartments from the point of view of consumers remains high, and they are naturally looking for a way to minimize costs when purchasing residential real estate. Hence the interest of potential owners in housing under construction.
According to analysts, prices for economy-class apartments at the initial stage of construction are $3,200-$3,700 per sq. m. meter, and apartments in buildings that are close to completion are sold for $3,900–$4,500. New business-class buildings are initially offered for $4,500–$5,000, and at the final stage for $6,000–8,000.
According to Boris Flexer, director of the research center for the management of new buildings of the MIEL holding, the majority of new buildings are sold before construction is completed. “The difference in the cost of an apartment at the level of construction and complete readiness ranges from 10-25%. The price begins to rise most actively when the construction of the facility reaches the ground level. Accordingly, the lowest price level is maintained only up to the first floor,” Flexer emphasizes. -- Meanwhile, economy-class housing is mostly sold at the final stage, that is, there are more finished economy-class housing on the market than unfinished ones. And in the business class and elite segments, on the contrary, sales mainly come from properties under construction (this figure is about 70%).” According to Flexer, about 20% of projects are being implemented in accordance with Federal Law No. 214 on shared construction. At the same time, at least 50% of objects are sold under preliminary agreements and promissory note schemes.
As analysts at Soho Realty note, buyers of luxury housing are increasingly refusing to purchase in the early stages of construction, buying ready-made apartments without finishing. The reason is that the price of purchasing a home at the start of construction and a finished apartment is almost equal. Previously, construction began in the absence of a complete package of necessary documents, so the developer needed private investors. Now, in accordance with new legal acts, the developer is required to have all the necessary documents already at the time of construction.
As for the secondary market, according to the Inkom-Real Estate Corporation, the volume of supply in this segment reached its maximum value in the last two years and amounted to almost 49 thousand apartments as of mid-March. Despite the increase in the number of offers, there are no prerequisites for a significant reduction in prices. However, the increase in the volume of proposals has led to an increase in the terms of sale of apartments. Buyers, realizing that they should not expect a significant reduction in prices, will return to the market, and this, in turn, can lead to a new rise in prices, albeit insignificant (within inflation). A more significant downward price correction is unlikely, so now potential buyers can safely be advised to carry out purchase and sale transactions and not put off making a decision until tomorrow.
The situation in the luxury housing segment is somewhat different. Here, the gap between supply and demand in the market for expensive new buildings is noticeable, and a supply shortage remains.
Experts note that in the current market situation, it’s time to make alternative transactions (now such transactions account for more than 60% of all contracts concluded).
In-kind exchange
An alternative transaction in its purest form is the sale of an old apartment with the simultaneous purchase of a new home. The sale of an old apartment and the purchase of a new apartment are registered simultaneously. One of the important advantages of the “alternative” is that you enter into a deal only when a new apartment has already been found. Therefore, there cannot be a situation in which the money from the sale of a two-room apartment is only enough for a modest one-room apartment, provided that prices are relatively stable. However, last year the capital’s market grew at such a high rate that even the “alternatives” had a hard time. Let’s say a participant in the transaction wanted to exchange a three-room apartment in the center for one- and two-room apartments in residential areas. He found a buyer for his property, and then began to look for options for himself. But prices could rise by 2-3% during the week. Then the first participant raised the price or refused the deal. The current market has removed the obstacle in the form of a constant rapid rise in prices, and now there are a comfortable two to three weeks left to select options. And sellers began to take into account the opinions of buyers, who, in turn, became much more discerning. It is not for nothing that the share of alternative transactions exceeded 60% of the total.
However, problems remain. For example, due to too many people in the chain. One of the owners may change his decision - and the whole harmonious scheme will fall apart. A buyer who is unsure of his decision will always find many reasons to terminate the deal. There are also buyers and sellers who are very afraid of losing what little they have. Therefore, they refuse to make a deal, sometimes for frankly fictitious reasons. Another problem is the lack of transparency of such transactions and, as a consequence, high commissions for realtors, reaching up to 7-8%.
It is true that he who seeks will find. So, last year, pawn lending became widespread - receiving money secured by an existing apartment. As Alexey Shlenov, director of the secondary real estate department of the MIEL-Real Estate company, notes, this form allows you to buy a new apartment, renovate it, calmly move, and then sell the old one. This option was most profitable precisely in conditions of rising prices: the apartment was sold later, and the interest on servicing the loan was paid off due to the increase in its value. But even now everything looks good - primarily because real estate becomes free, without the need to drag out a chain of alternatives. The bank's only condition is the need to sell the old apartment within six months from the date of purchase of the new one. By the way, interest payments on the loan begin only after the sale of the old apartment.
Will a mortgage help?
It seemed that bank specialists had done everything to attract potential borrowers: they eliminated the down payment, lowered interest rates and sharply reduced loan processing fees. However, to obtain a loan for a one-room apartment in residential areas of the capital in the amount of 120-150 thousand dollars, a monthly income of 1-1.5 thousand dollars is clearly not enough. For this layer of citizens, a mortgage in Moscow is possible only if they have original housing and a desire to improve their living conditions. In this case, the loan amount will cover the difference in the cost of the desired and existing apartment.
In fact, today only those earning about 4 thousand dollars a month can get a loan even for a one-room apartment. However, a person with such an income is unlikely to want to live in a one-room apartment on the outskirts and would rather prefer to rent more prestigious housing. “Realizing that potential borrowers are leaving, some banks are already offering their borrowers a loan before the transaction is completed. To do this, the borrower needs to find two guarantors for the period of the transaction. And this issue can almost always be resolved,” says Petr Skoda, Deputy General Director of the Svetly Grad company. The timing of the transaction is of particular importance for bank borrowers. At the same time, many banks are ready to enter into a deal in five to seven days. But in the “high market” conditions, borrowers did not receive 30% of the loans approved by banks, since they could not find an apartment of a suitable price within the allotted time. Therefore, the constant rise in prices, combined with the length of the process of selecting an apartment, has led to the fact that today mortgages have become accessible primarily to those who have a financial reserve. In addition, not all apartments receive bank approval.
To fully compete for the apartment you like with the owners of “real” money, a maximum of two to three days is required. During this time, the selected apartment must be assessed, an assessment report must be prepared, and a package of documents must be agreed upon with the bank. According to Skoda, when there is a shortage of time to reach a deal, the most successful scheme is one in which apartments that have already been approved by the bank are offered for consideration. The borrower chooses the appropriate option and without unnecessary delays receives funds from the bank for its purchase. Many banks have introduced the possibility of non-cash payments (which is often important for an apartment seller who wants to receive money from the bank closest to their home). There is also an option when, due to a sharp rise in apartment prices, consumers of mortgage loans find a suitable apartment in the Moscow region. And then, having saved up money, they try to buy housing in Moscow.
Fallback option
In the first quarter of 2007, there was an increase in consumer demand for business-class properties located in the immediate Moscow region.
In 2006, the Moscow region became the leader among Russian regions in housing commissioning - more than 6.4 million square meters. m. Active development is underway in cities near Moscow (Balashikha, Khimki, Krasnogorsk, Lyubertsy, Mytishchi, etc.).
Interest in the Moscow region does not subside and increases in proportion to the development of other sectors of the economy, especially those related to the development of infrastructure, transport, energy, and maintenance of the housing stock.
The demand for real estate in the Moscow region, which has sharply increased over the past year, has raised prices. Starting from March 2006, the growth rate of real estate prices in the Moscow region began to outstrip the Moscow growth rate, and the growth in real estate prices in the nearest Moscow region in some cities reached 20% per month.
According to the analytical center of the real estate agency Domostroy, despite the massive development of the near Moscow region, demand in the primary market is still unsatisfied and supply does not currently meet demand. A more favorable environmental situation compared to Moscow makes the near Moscow region more attractive. Currently, real estate near Moscow is in great demand not only among residents of the Moscow region, but also among Muscovites and residents of Russian regions.
Due to the sharply increased demand, prices for apartments in the near Moscow region have now come very close to prices for apartments in Moscow residential areas. The houses that are currently being built in Khimki, Krasnogorsk, Balashikha, Lyubertsy, Mytishchi, Odintsovo are not inferior in quality to new buildings in the capital, and in many factors they are superior to those in Moscow. In terms of the availability and variety of infrastructure (shops, schools, parks, clinics, kindergartens, etc.), the Moscow region today has almost caught up with Moscow. Active road construction is underway in key areas, which also contributes to the growth of home purchases in the region.
Offer prices in various administrative districts of Moscow, including in various types of houses
| 5 P/B | 5554 | 4266 | 4101 | 3831 | 3727 | 3998 | 4255 | 4339 | 4209 | 4131 |
| 9 P/B | 5477 | 4167 | 4067 | 3825 | 3772 | 4033 | 4291 | 4486 | 4224 | 4098 |
| 12 P/B | 5675 | 4136 | 4128 | 4040 | 3805 | 3868 | 4372 | 4424 | 4259 | 4185 |
| 14 P/B | 5885 | 4151 | 4265 | 3855 | 3877 | 3978 | 4191 | 4323 | 4247 | 4154 |
| 16 P/B | 5770 | 3856 | 4323 | 4083 | 3962 | 4052 | 4555 | 4609 | 4358 | 4347 |
| 17 P/B | 6045 | 4146 | 4409 | 3837 | 3984 | 3963 | 4633 | 4808 | 4100 | 4339 |
| 5 K/M/S | 6272 | 4506 | 4296 | 4098 | 3867 | 4583 | 4761 | 4568 | 4311 | 4845 |
| 6-8 K/M/S | 6958 | 5313 | 4975 | 4641 | 4326 | 5069 | 6277 | 6733 | 4423 | 6074 |
| 9 K/M/S | 6844 | 4991 | 4644 | 4311 | 4063 | 4537 | 5726 | 6189 | 4597 | 5344 |
| Average price for the district | 6564 | 4425 | 4282 | 4024 | 3883 | 4107 | 4664 | 5032 | 4258 |