2024 could change the trajectory of housing demand

The housing construction sector ended the year with new records – both in terms of housing commissioning volumes and in terms of the area of ​​launched projects. Overall, the backlog will be enough to maintain the pace for at least next year. However, the key decision for the industry in 2024 will be the fate of preferential mortgage programs, the limitation of which will affect the volume of apartment building commissioning in the longer term. If in the new year, against the backdrop of declining demand, developers begin to slow down the launch of projects, this could lead to a drop in the pace of commissioning after 2026. Whether administrative measures to support supply and the expected growth in demand for private homes will be enough to maintain and increase the pace is still an open question.

2023, according to preliminary estimates, has become the most successful year for housing construction: housing commissioning is expected to exceed 105 million square meters. m. Slightly less than half of this volume, 51 million sq. m, as reported, will ensure the commissioning of apartment buildings (versus 45.5 million sq. m in 2022). At the same time, the launch of new projects has also increased: according to the Ministry of Construction, the volume of their entry into the market is estimated at 47 million square meters. m, which became the absolute maximum for Russia. As a result, approximately 108 million square meters are under construction, as of December 26. m – 8% more than a year earlier. Now, as noted in the office of Deputy Prime Minister Marat Khusnullin, the task is to “maintain high rates of housing construction in the coming years in order to achieve an annual commissioning of at least 120 million square meters. m of housing.”

The growth in the launch of new projects was facilitated by the rush demand for mortgages, mainly preferential ones, due to the increase in the key rate; in addition, developers tried to make a reserve on sales in anticipation of the possible completion of part of the preferential programs from July 1, 2024.

Along with this factor of active demand, there was also the desire of citizens to prevent the depreciation of savings against the backdrop of rising inflation. However, preferential mortgages also have a downside: the Central Bank has already recorded signs of market overheating. Thus, the increase in demand for housing in 2023 provoked a sharp increase in real estate prices, and measures have already been taken to cool the market: first, the minimum contribution for all preferential programs was increased for all mortgage programs with state support from 15% to 20%, and for mortgages by new buildings at 8% since December 23, it has already increased to 30%.

The main preferential programs, in particular family mortgages at 6% and preferential mortgages at 8%, will end in the summer of 2024.

The authorities have already promised to extend family mortgages, but they plan to make mortgages for new buildings more targeted, in particular leaving them for regions with low demand for housing. There is still six months to make a final decision and find a balance, but the forecasts that are being made now predict a noticeable decrease in demand for housing, taking into account the fact that the key rate, according to the Ministry of Finance, may begin to decline, at best, by the end of next year. As a result, developers will reduce the launch of new projects – this already entails the risk of a drop in housing commissioning volumes after 2026, although the backlog that can be formed in the first half of 2024 may somewhat smooth out this effect. At the same time, as noted in Marat Khusnullin’s office, the government “regularly monitors the situation in the housing construction market, working in conjunction with the Central Bank and the Ministry of Finance – if necessary, new proposals will be developed to support citizens.”

It is likely that this risk can be partially compensated by the individual housing construction (IHC) market, which is still less susceptible to the influence of the mortgage factor, due to the fact that the coverage of this segment by mortgage lending is much more modest, despite the fact that this segment in terms of commissioning volumes is comparable to the market of apartment buildings. Thus, in individual housing construction, every fifth house is built with a mortgage, and in the multi-apartment building sector, 90% of transactions in the primary market are carried out with a mortgage. This year, the commissioning of private houses has slowed down somewhat, but remains high (according to data for January-November, 52.2 million square meters were commissioned, which is 6.8% less than a year earlier), while the potential of this segment According to expert estimates, it has not yet been realized and the demand, which has actively manifested itself since the covid year of 2020, will continue to grow.

The authorities have already thought about additional stimulation of interest in individual housing construction – in particular, the Ministry of Construction announced the development of a separate preferential mortgage program for this segment.

In the meantime, individual housing construction is mainly influenced, in particular, by regulatory factors – for example, the social gasification program pushes citizens to register houses. Further growth in demand for private housing construction is expected against the backdrop of regulatory changes – the extension to this segment of the possibility of financing construction through escrow accounts using standard documentation or house kits, which makes this segment more understandable for banks.

However, ensuring the commissioning of 120 million sq. m of housing, according to the head of NOSTROY Anton Glushkov, depends not only on mortgage programs, but also on other support measures: infrastructure bond mechanisms, simplification of procedures for amending urban planning documents, as well as scaling practices for the implementation of integrated development projects of territories. The Deputy Prime Minister’s office also reports that systematic work is underway to ensure high rates of commissioning – in particular, the Ministry of Construction has concluded memorandums with the regions to increase the urban planning potential of sites for housing construction, “which allows us to formulate foundations for the future.” As of December 1, the office notes, it amounted to 432.6 million square meters. m – 10% more than a year earlier. Work is also underway to identify and bring into circulation unused territories: this year, 140 thousand hectares of land suitable for housing construction have been identified. However, de facto, these are measures to support supply, which, as is known, is generated by demand.

Evgenia Kryuchkova