Developers are losing their nerves: a lot of housing is being built, there is no one to buy

“We need to move on to mass industrial construction of houses on the principle of Khrushchev’s reforms”

Demand for housing continues to fall, and developers are feverishly thinking about how to attract buyers. It got to the point that developers are ready to reduce the cost of apartments by 30%, so long as new buildings do not gape with dark windows. Or, as an option, switch to the construction of “Khrushchev” of a new generation – the same cramped, but “increased comfort” – high-rise, with elevators and parking lots. Real estate market specialists offered such unusual ideas on January 31 at a business briefing at RBC.

Home sales for the year fell by 22%. At the same time, the purchasing power of Russians will not improve in the near future. Developers, accustomed to high demand for apartments for big money, do not like this situation.

“In 2022, housing construction in Russia reached 102 million square meters and took the lead in terms of GDP growth (6.6%), overtaking even agriculture,” says Anton Glushkov, president of the National Association of Builders Association. “However, the financial government bloc constantly declares that it wants to reduce state support for us.

For the first time in a long time, only 30 million square meters out of 100 million available for sale were sold in 2022, says INFOLine Analytics CEO Mikhail Burmistrov. And this, according to participants in the real estate market, is extremely small.

– The decrease in the share of apartments purchased in new buildings even up to 50% is a negative trend, – Kirill Kholopik, head of the apparatus of the Association “National Association of Housing Developers” is sure. – Previously, the figure was at least 60%. And if we are rapidly going to 40%, we are in for serious problems. The rate of withdrawal of new apartments is maintained, and the percentage of unsold apartments will grow. This is not good. This should not be allowed. On the primary prices “stand”. You need to accelerate sales – this is the basis of everything.

Kirill Kholopik believes that demand can only be supported by lowering prices, otherwise it will get worse every month.

– Despite the acceleration of inflation and the increase in food prices, there is a multi-month decline in the cost of building materials. And this is a potential source of lower housing prices,” says the expert. – The latest trends – land sellers are ready to reduce the price of land, which will also reduce the cost of housing. This is important – it will allow, in the event of a decrease in demand, to calmly respond to developers by lowering prices without bankruptcy.

The smartest sellers have already cut prices by 30%. But how to explain to buyers why apartments in a neighboring house, which has just been built, are cheaper by a third than in a new building two or three years ago?

Yes, in general, it is very simple, experts say. People need to be shown that apartments in new buildings are small, similar to “Khrushchev”, but are accessible to the general population.

– You can have different attitudes to the quality of apartments built in the time of Khrushchev. At the same time, this housing reform is the most successful in the USSR. Emphasis should be placed on the development of industrial housing construction, which will provide guaranteed quality in accordance with modern planning solutions, but will make it possible to start construction quite cheaply throughout the Russian Federation, – Kirill Kholopik shared his opinion.

– There were two shocks last year – the beginning of the SVO (people adapted to June) and mobilization in September, – says Konstantin Romanov, director of development of new buildings of a large company. “We noticed a trend that three months after the shock, people shrink in demand. We really hope that demand will recover in February-March.

According to the Moscow Department of Rosreestr, Russians have been preferring secondary housing to new buildings for 5-6 years. In 2021, about 143 thousand transactions were registered in the primary market of the capital, in 2022 – 122 thousand. On the secondary, respectively, 171 thousand and 132 thousand transactions.

The primary housing bubble seems to have burst: people are waiting for prices to continue to decline, they are in no hurry to buy, sometimes they just come to gawk at the options offered.

And some construction companies, realizing that in Russia, including in Moscow and St. Petersburg, good profits are not to be seen, they spread to new territories. This was also discussed at the briefing. And they proposed to actively distribute benefits for developers in new territories.