Developers are cutting costs – Newspaper Kommersant No. 5 (7450) dated 01/13/2023

After a sharp jump last spring in the cost of construction by more than 50%, by the end of the past year, this figure dropped to the level that it was before the start of the Russian military operation in Ukraine. This was influenced, in particular, by the reduction in exports of Russian producers of raw materials and construction products. Market participants expect construction spending to remain stable this year.

At the end of December 2022, the growth in construction costs amounted to 37.1% compared to the same period in 2020, follows from the review of RKS Development Group of Companies. Analysts took the year before last as the basis for their analysis, since from that moment on, developers began to noticeably increase costs due to disruptions in the supply of building materials and equipment due to the pandemic and against the backdrop of an increase in housing construction. By the end of 2022, this indicator returned to the level that it was before the start of the Russian special operation in Ukraine and the emergence of a new crisis in the economy. So, in February, the costs of developers increased by 37.6% compared to the end of 2020. In the past year, the prime cost reached its peak in March, when the growth amounted to 55.1%. For the economy of any development project, the increase in costs for each cost item throughout the entire construction cycle is tangible, recalls Alexander Ruchev, president of Osnova Group of Companies.

In 2022, for some items, there were price jumps of up to 30-80%, says Georgy Krinitsyn, Procurement Director of A101 Group. But now, according to Elena Bakarzheeva, head of the pricing department in the construction of RKS Development Group of Companies, most of the materials and equipment that were not available in the spring of 2022 due to sanctions can be purchased, including through parallel imports. Even such scarce items as elevators have been replaced by Russian products or analogues from China, Turkey and other countries, adds Denis Konovalenko, managing partner of Prime Life Development. But long delivery times, which can be up to several months, have been preserved, Ms. Bakarzheeva specifies.

Now prices are falling to the level of early 2022 in almost all categories, Elena Bakarzheeva notes. According to her, metal-dependent materials fell more significantly, as by the end of the year the cost of metal decreased by 31% compared to February, returning to the level of spring 2021. Also in December masonry materials fell by 17% compared to February. Prices for Russian-made general construction materials have dropped significantly, partly due to a reduction in the possibility of their export, adds Georgy Krinitsyn. Andrey Ivanenko, managing partner of Samolet Moskva Group of Companies, says that the total cost of materials for 2022 decreased by 7%.

However, the cost of some materials and equipment is still high. Thus, translucent structures have risen in price from February to December 2022 by 21%, engineering networks – by 15%, concrete and solutions – by 11%. The increase in the cost of finishing materials, facade and roofing materials, inert materials, works and mechanisms was recorded in the range of 4–6%, calculated in RKS Development. The cost of crushed stone, sand and asphalt in the center of Russia is growing due to high demand, including due to the construction of the M-12 Moscow-Kazan highway, Elena Bakarzheeva explains. Finishing materials are also keeping prices high, as ceramic tiles and sanitary ware are highly dependent on the cost of clay, some of which is now unavailable, she adds.

Without the emergence of additional reasons for a change in the cost price, it should remain stable throughout 2023, Vladislav Preobrazhensky, executive director of the Moscow Investors Club (unites developers), predicts. Denis Konovalenko also agrees that construction costs should not rise above the inflation rate. With a decrease in the income of potential home buyers, developers are forced to maintain a stable level of cost. According to Alexander Ruchiev, construction and installation works account for 30-40% of all costs in housing construction.

Daria Andrianova