What's going on with real estate? Moscow housing prices may fall sharply
At the beginning of each year, real estate experts reflect on the future of the primary and secondary markets. What awaits the residents of Moscow and the Moscow region in the next five years? What will be the experts' forecasts for 2017-2021?
Expert forecasts for the real estate market from 2017 to 2021
No income, no demand for housing - the main rule of the real estate market. The weakened state of the Russian economy, which has already dragged on for quite some time, does not provide a reason to improve the solvency of Russians and increase their income. But the demand for housing reacts very sharply to such moments. If the situation does not change in the near future, and there are no prerequisites for this yet, then we can expect a decrease in the cost of real estate in the capital by 30, or even 40%.
The official forecast of the Ministry of Economic Development states that the recession will end in 2017. But GDP growth, despite this positive aspect, will be in the range of 1.7-2.6% per year. If we compare these indicators with the world average, they will be approximately one and a half times lower. As for the real income indicators of Russians, even according to the most optimistic forecasts, their growth will not exceed 1.4% annually. At this rate, the level of profitability that was in 2013 will be reached as early as 2021.
The situation we are seeing now is completely different from an ordinary economic crisis. The crisis is characterized by a sharp drop in indicators and a rapid recovery. And the situation in which our country currently finds itself is characterized by protractedness and a lack of signs of improvement in key indicators.
I want it, but it hurts
Now let's transfer all this to the real estate market. According to the factors and circumstances described above, real estate prices will not rise in the coming years. People with high incomes and savings have already managed to resolve the issue of personal housing. Citizens who have only recently begun to consider options for purchasing real estate and seriously think about improving their living conditions will be forced to postpone the implementation of their idea until better times.
Although real estate is declining in value, at the same time the costs of its maintenance are increasing. This point stops many people from investing their savings in square meters. People who are in dire need of improving their living conditions do not have enough funds and cannot decide on a mortgage loan. Some people do not have the funds for a down payment or monthly payment, while others were rejected by banks themselves for certain reasons. Demand for real estate is in a situation where there is an urgent need for a more significant reduction in prices.
The decline that we can observe today is extremely imperceptible for most. Sometimes developers make discounts and rebates, but 300-500 thousand does not always play any serious role, especially when the cost of an apartment is 7-10 million rubles. In 2016, a square meter of secondary housing decreased from 179 thousand rubles. up to 173 thousand rubles. According to many realtors, of all Moscow apartments that are for sale, only a quarter can be purchased. And then, subject to successful bargaining, as a result of which it will be possible to reduce the cost by 10%. All other proposals are dead weight.
Can we talk about housing affordability? According to experts, thanks to lower rates and a number of government programs, it is theoretically much easier to buy an apartment compared to previous years. Over the year, the average mortgage rate fell by slightly less than one percent. Plus, the cost per square meter has decreased. All this has led to the emergence of a certain number of citizens who can purchase housing on credit. At the same time, Moscow region developers remain the losers, since real estate prices in Moscow are not much higher. In practice, everything is more complicated, since few people would risk parting with their savings in such unstable times.
Experts say the number of empty houses will only increase. Despite the positive dynamics of transactions in 2015-2016, the next five years may turn out to be critical. Today they build too much and too quickly. The capital's real estate market expanded by almost three million square meters last year. At the same time, even half of the objects were not sold out. According to experts, large companies are trying to compensate for low prices with large sales volumes.
Will there be a price reduction?
Many experts express a unanimous opinion, which clearly shows the connection between the decrease in supply volume and changes in price dynamics. Based on this information, we can predict a decline in prices for Moscow real estate within 10% annually. So it turns out that by 2021 we will see a drop in prices per square meter within the range of 30-40% in the primary real estate market. A square meter on the secondary residential real estate market can fall in price by an average of 50 thousand rubles in five years.
The first thing that will happen is low-quality new buildings. Economy- and comfort-class houses located in ecologically clean areas of Moscow or in areas with developed infrastructure will show the greatest stability in pricing policy.
“Nobody undertakes to predict a sharp drop in property values. This situation could be the result of some catastrophic event in our economy. An increase in sales volumes will alternate with periods of stagnation, which will provoke a decrease in the solvency of potential buyers. To again cause an increase in sales volumes, developers will have to dump. Some developers who cannot compete with larger companies will have to leave,” shares the opinion of Alexey Shmonov, CEO of the real estate portal Move.ru.
The course of predicted events can only be changed by reducing the volume and pace of construction by 30% from the maximum indicators that were planned for several years in advance. Such a development of the situation is quite possible, since many developers are already operating at a profitability level. There is a possibility that they will not agree to lower prices, but will actually reduce the volume of construction of new meters.
No one can say with complete confidence what will happen to the real estate market. This is a complex area that depends on many external factors. Any unforeseen situation may have an unexpected impact on the value of residential properties.
How to estimate the cost of an apartment in Moscow yourself, online or contact a real estate company, because the correct assessment is the main key to selling real estate.
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Prices in the real estate market have remained unchanged for a long period, while the downward trend continues. Based on the results of 2017, we can say that favorable conditions have emerged for purchasing real estate, which is also associated with a decrease in mortgage rates, which reaches 7% per annum. There are preferential programs, government subsidies, and discounts from developers. So is it worth buying a home or is it better to postpone the deal until next year? What are the prospects for the real estate market? Is investing in housing profitable and economically justified?
The situation on the real estate market at the end of 2017
At the end of 2017, the real estate market shows a downward trend in prices, which makes it possible to purchase housing at a moderate price. Population demand is limited, and supply is constantly growing. In Moscow the following situation arises:
Developers constantly hold promotions, partnerships and price discounts for clients, which is caused by fierce competition in the industry. At the end of 2017, prices did not increase, but the commissioning of new buildings increased significantly.
Should residents of the capital buy apartments with a mortgage or is it better to wait until next year? Experts believe that the current situation in the real estate market is the most favorable for purchasing housing. The lowest mortgage rate is 6.75%, it is subsidized by the developer. Of course, we can expect that a promotional rate of 6% will be applied in the coming years, but it is already profitable to purchase apartments.
Today, mortgage rates have dropped significantly, and banks are implementing a variety of schemes for purchasing properties. Even if the mortgage turns out to be more profitable in 2018, you can refinance the existing loan.
Should I buy a home with a mortgage or is it better to save the required amount? Of course, each person decides this independently. If you find a suitable apartment that suits you completely at the price, it’s worth taking out a loan. If there are no optimal offers on the market yet, you can continue saving. True, there is a risk of financial turmoil and loss of savings, as was the case in 2014. For those who save, it is better to convert more than half of their savings into foreign currency and put it in Sberbank or VTB - in cash in a safe deposit box.
The price tag for housing from the developer turns out to be lower due to low demand and the impressive volume of square meters put into operation. How much money is needed to purchase a primary home?
In general, buying an apartment from a developer is the most attractive option. Not only are there promotions and reduced rates waiting for you, but the prices are affordable. So, by choosing an apartment in the new Liner complex and paying 100% of its cost, you will receive designer finishes and a kitchen equipped with modern appliances.
Should we expect that housing prices in Moscow will decrease and that buying apartments will be much more profitable than now? This trend exists, but making long-term forecasts is problematic. Experts believe that by 2021 prices will reach the following levels:
But it’s not worth talking about the average price, because it depends not only on the prospects for market development, the level of supply and demand, but also on the selected object, its location, and the availability of infrastructure.
The investment attractiveness of real estate, although reduced based on the results of previous years, will still remain. It is still advisable to invest money at the construction stage and then resell the apartments on assignment. There are still classic investors on the market who purchase square meters for resale in a few years, as well as for rental.
There is no need to expect a sharp reduction in prices in 2018, although buyers may find an interesting offer due to impressive discounts from the developer. However, usually promotions do not apply to the entire volume of apartments - it is impossible to guarantee that the offer will suit you. One cannot count on a significant reduction in prices - the cost of housing is already extremely low, and given the constant rise in price of land, building materials and construction, developers simply cannot afford even greater discounts.
It’s really worth buying an apartment with a mortgage today, especially if your savings are not growing fast enough. If you manage to save at least 100-200 thousand a month, you should wait so as not to borrow a large amount from the bank.
real estate market prospects,
The situation on the real estate market at the end of 2017 The real estate market at the end of 2017 shows a downward trend in prices, which makes it possible to purchase housing at a reasonable price. Population demand is limited, and supply is constantly growing. In Moscow the following situation arises:
- Real estate is of less and less interest to investors and speculators planning to invest money in the short term;
- Unlike the market in other cities, luxury housing is in great demand in the capital - developers are erecting premium class buildings. Thus, over 140 thousand sq.m. will soon appear in Ramenki. business class housing;
- It is advisable to invest money in the early stages of construction, for example, in the Garden Quarters complex, the price of a meter is initially 450 thousand rubles, and at the readiness stage it increases to 600 thousand;
- The quality of facilities has improved significantly compared to the last decade. As competition grows, so does the level of comfort - comfort-class facilities are equipped with developed infrastructure and unusual planning solutions;
- The boundaries between housing classes are blurring, and you can buy a comfort-level apartment even cheaper than the economy segment.
- Apartments with small areas and corresponding prices are still in great demand. Not everyone can afford to buy a large and comfortable apartment in Moscow right away.
Mortgage – is it worth taking out in 2017?
Should residents of the capital buy apartments with a mortgage or is it better to wait until next year? Experts believe that the current situation in the real estate market is the most favorable for purchasing housing. The lowest mortgage rate is 6.75%, it is subsidized by the developer. Of course, we can expect that a promotional rate of 6% will be applied in the coming years, but it is already profitable to purchase apartments. Today, mortgage rates have dropped significantly, and banks are implementing a variety of schemes for purchasing properties. Even if the mortgage turns out to be more profitable in 2018, you can refinance the existing loan. Should I buy a home with a mortgage or is it better to save the required amount? Of course, each person decides this independently. If you find a suitable apartment that suits you completely at the price, it’s worth taking out a loan. If there are no optimal offers on the market yet, you can continue saving. True, there is a risk of financial turmoil and loss of savings, as was the case in 2014. For those who save, it is better to convert more than half of their savings into foreign currency and put it in Sberbank or VTB - in cash in a safe deposit box.What is more profitable: housing outside the Moscow Ring Road or within it?
The price tag for housing from the developer turns out to be lower due to low demand and the impressive volume of square meters put into operation. How much money is needed to purchase a primary home?- If proximity to the center is not important, you can find a lot of interesting options outside the Moscow Ring Road. For example, in New Moscow, in the Spanish Quarters residential complex, three-room apartments are sold for 6.5 million rubles;
- If you are looking for housing with developed infrastructure nearby, one-room apartments are the most affordable budget option. For 5.3 million you can buy a studio on Khodynka Field with the Aquapark shopping center, schools and kindergartens nearby;
- Secondary housing is sold at a price that directly depends on the location of the building and the desires of the owner.
Prospects for the development of the real estate market: what to expect?
Should we expect that housing prices in Moscow will decrease and that buying apartments will be much more profitable than now? This trend exists, but making long-term forecasts is problematic. Experts believe that by 2021 prices will reach the following levels:- Secondary housing – 100-140 thousand rubles per sq.m.;
- New economy class buildings – 100 thousand;
- Comfort segment housing – 120-140 thousand;
- Business class – less than 200 thousand.
Real estate market analysts assessed how the cost of apartments in the primary and secondary markets of the Moscow region will change
The outgoing year in the real estate market of the Moscow region was marked by large discounts: realtors every now and then reported the share of discount transactions, and Rosreestr reported an abnormally large number of transactions - both in the secondary and primary markets.
To find out how the market will behave, RBC Real Estate asked analysts what they think about changes in housing prices in Moscow and the region in the new year, 2017.
Sergey Shloma, director of the secondary market department of the real estate agency "Inkom-Real Estate":— The most important trend in the secondary market of Moscow housing is a slow but sure decline in prices. In January, the median cost of 1 sq. m reached 185.9 thousand rubles. - and this became the maximum value for the entire year. At the end of November, this figure reached a minimum of 181.4 thousand rubles. Such a price slide remains unnoticeable for some players in the real estate market, especially for ordinary consumers, as it amounts to only 0.3-0.5% per month. As for the real reduction in sales prices (and not the cost of supply), over the year it is at least 10%, since in most cases transactions on the secondary housing market in Moscow take place at a discount: in January the share of sales at a discount was equal to 82%, in November - already 86%. Based on the results of the last months of 2016, the average purchase budget also decreased: from 8 million rubles. in August to 7.85 million rubles. In November.
We expect that in 2017, real estate prices in the secondary housing segment will remain at the same level as now, or will continue to decline by approximately 5-7% per year. We do not see any reasons for prices to rise in the near future. As for the notorious price bottom, which has been mentioned so often lately, then, according to our forecasts, the market will reach it only in 2018 or 2019.
Alexey Popov, head of the analytical center of the CIAN ad service:— We expect that prices for new buildings in Moscow in 2017 will increase within the limits of inflation - that is, by no more than 6% per year. This is due to the fact that developers are trying to maintain their market share and maintain the pace of sales. An additional reason for the rise in prices for new housing can be the emergence of new infill development projects within the Third Transport Ring. The supply volumes in such houses are small, but the overall price level is, as a rule, higher than large projects on the site of industrial zones.
In New Moscow and the Moscow region, the price level for new buildings will remain virtually unchanged. The trend towards a decrease in the share of new projects on the foundation pit is also typical for these locations, but the increase in prices during the transition to the next stages of construction here is complicated by increased competition. It will be more important for developers to maintain targets for sales rates, perhaps to the detriment of meeting the model of price increases as construction readiness increases.
In the secondary market of Moscow and the region in 2017, one can expect a slow increase in prices - within 4-5% in annual terms. A significant volume of supply will not allow prices to rise above inflation, and in order to complete transactions, most sellers will have to reduce their stated price levels - however, the size of the discount will gradually decrease. Average price values in the Moscow region are now becoming increasingly difficult to analyze, since a significant part of the lots presented in the active supply are set at prices that are below the current level of effective demand. The slight increase in the average price level, which has been observed recently, reflects an increase in the share of these lots, and not the natural behavior of the market. Also in the new year, the trend towards an increase in the share of mortgage transactions will continue.
One of the long-term trends driving demand in the housing market in recent years is the long demographic cycle. The generation born in the first half of the 1980s entered the age of greatest demand for transactions. Since their consumer habits were formed already in the post-Soviet era, the greater attractiveness of modern new buildings (compared to outdated Soviet housing) fits into this pattern.
In general, developers start with the secondary market and, as the past year shows, they are winning this competition due to more effective advertising campaigns, discount opportunities, and effective installment and mortgage programs. The practical expression of this trend is the flow of buyers from the secondary market to the primary market.
— Effective demand is very limited, since household incomes are not growing. The relative stability of demand is supported by lower prices and bargaining on the secondary market and an increase in the number of budget new buildings in Moscow, where you can now buy an apartment for 3-4 million rubles. Attempts to raise prices in response to the revival in demand fail: people cannot afford more expensive properties, so they would rather refuse the deal than pay more.
As a result, the downward trend in prices continues in the market. The depth of the drawdown depends on the volume of supply, which has grown significantly in recent years. In 2016 alone, the supply volume in Old Moscow increased by 2.8 million sq. m. m of housing. Many projects are still on paper, but may enter the market in the coming years. Demand cannot keep up with this growth in volumes, therefore, if developers do not slow down the pace of launching new projects, prices will continue to decline steadily by about 10% per year and over the next five years they may lose 30-40% in price.
Vladimir Bogdanyuk, director of the projects department of the real estate agency Est-a-Tet:— In 2017, the average cost of housing on the primary market will grow moderately within 8%. The weighted average price at the end of 2016 was 238.2 thousand rubles. for 1 sq. m (excluding elite supply), annual growth was 1.4%. The price dynamics of new buildings are influenced by two multidirectional factors - on the one hand, price growth is facilitated by an increase in the construction readiness of projects, on the other hand, it is pulled down by the release of new projects at the initial stage with a lower cost. In 2016, growth factors prevailed, as large-scale integrated development projects that entered the market in 2015 increased in price.
For the secondary market, the forecast is quite pessimistic: the price decline, which was observed throughout 2016 and reached an average of 15% across the entire market, will continue. For an old “panel” older than the eighties, the price reduction can be 8%, for newer monolithic houses - 5%. Stabilization of prices without worsening the decline can be expected in certain narrow locations - for monolithic houses in a number of prestigious areas within the Third Transport Ring with limited supply in new buildings. Also, prices most likely will not fall for new panel houses, since this is a popular product on the secondary market due to its lower budget compared to a monolith and higher quality compared to old panel housing construction.
Denis Bobkov, head of the analytical center of the development company Opin:— Prices will rise the most in the Moscow region: we predict an increase in the cost of 1 sq. m. m for new buildings in the Moscow region within 5% for six months. Positive dynamics will be facilitated by the systematic recovery of the macroeconomy and, consequently, an increase in the solvency of buyers. Private investors hoping to make a profit from the sale of real estate will return to the market. The second reason for the rise in price of new buildings near Moscow will be the reduction in the volume of construction in the region, which is associated with the urban planning strategy of “live, work and relax in one place.” The trend is confirmed by the reduction in the number of new residential projects: at the end of 11 months of 2016, there were 2.5 times fewer than a year earlier. The volume of supply of new buildings in the Moscow region will continue to decline further.
Stable demand for housing in the Moscow region will be facilitated by loyal pricing. Today the average cost of 1 sq. m in the region, even in the closest projects to the borders of Moscow, is almost two to three times lower than in a similar segment within the Moscow Ring Road, and 20% more affordable than in New Moscow.
As for Old Moscow, we predict a restoration of the traditionally high share of new buildings in the supply volume of business class and above, which will have a positive impact on the average cost of 1 sq. m. m. The trend of restoring the traditional structure of supply within the Moscow Ring Road intensified in the second half of 2016 and at the end of 11 months of 2016, the share of expensive projects (business class and above) within the old boundaries of Moscow increased by 7 percentage points - now it is 45% of the total volume of new buildings.
However, with a qualitative change in the structure of supply in Old Moscow, an increase in the average price of 1 sq. m. m will be restrained by the constant release of new projects. Nevertheless, the traditionally crisis phenomenon - the predominance of mass segment projects - will gradually leave the capital market. The current market conditions for new buildings in the Moscow region create expectations of a gradual recovery of the market and the beginning of a gradual rise in prices next year.
The dynamics of prices on the secondary housing market, as a rule, correlates with the dynamics of prices for new buildings with a time lag of three to six months. Thus, as the market for new buildings recovers, we should expect a revival in the secondary housing market and, consequently, an increase in prices.
Yuri Kochetkov, analyst, head of the marketing department of ISK FORT:— The capital’s secondary market will extend its stay in a protracted depression. There will continue to be pressure from new buildings that have dropped significantly in price, and there will also remain a large “overhang” of unsold old apartments. At the same time, we will not see any noticeable reduction in ruble prices - the market correction has long been driven by inflation. To launch a spiral of price increases, a stage of hyperinflation is required, which the current government cabinet is unlikely to dare to enter.
The primary market is in a slightly more favorable situation, however, here too the supply of apartments is increasing, which will prevent direct price increases. However, the price dynamics here will initially be due to the abandonment of the current level of discounts (8-15%). As a result, in 2017, developers will have to pass another survival test.
In short, the apartment market of 2017 will remain a buyer’s market, which will receive both a rich assortment and price flexibility from apartment owners. Only a hyperinflationary scenario can reverse this situation.