Experts told what surprises apartment owners should expect

“The government doesn’t like being fooled”

Any restriction by the state usually does not benefit citizens. Namely, this intention of the authorities, at first glance, is not only unprofitable, but also illogical: money will not flow into the treasury, and the opportunities for citizens to improve the housing issue will decrease. After all, if apartments are not cheaper than classic apartments, but legally still remain non-residential premises, people will lose interest in them. Or are there non-obvious reasons for VAT refunds?

– Initially, apartments are a trick, and the government does not like it when they try to deceive it, – political scientist Ilya Grashchenkov believes. – The apartments are intended for temporary, often commercial residence. But in Russia, many live in them permanently. Of course, choosing such a format, a person himself refuses a number of benefits and services.

As a rule, developers decide in favor of building apartments rather than housing, so as not to create social infrastructure (schools, kindergartens, etc.). Since the apartments are not considered housing from a legal point of view, they cannot be permanently registered (at best, temporary, if the apartments have hotel status), which means that you cannot enroll a child in a public kindergarten, school, etc.

The price of a “square” due to these shortcomings is lower than in apartments by 10-15%, and sometimes by 25%. Ekaterina Berezhnova, chief analyst at MIEL, says that it is easiest to see the difference in cost in residential complexes where there are both apartments and apartments that have the same location and finish.

— Buyers of apartments, as a rule, are young people or businessmen who buy small-sized housing, located in a convenient location, in areas with well-developed infrastructure. Most often, they choose housing in apartment complexes, which also provide a whole range of services (laundry, cleaning, etc.), says Berezhnova.

At the same time, the apartments are located in areas closer to the center, that is, this is such business-class housing at an economy price. But do not forget that compensation has to be paid already in the first month of residence. Taxes in apartments, as well as the cost of housing and communal services, are significantly higher. So people cover the relative cheapness of square meters with this difference. And after the adoption of the law, the difference will disappear.

“The authorities seize every opportunity to replenish the budget”

“The development of the apartment market after 2010 was one of the deterrents to rising prices for both housing and non-residential premises,” says Fedor Mezentsev, director of the real estate department of the Digital SNT federal project. “However, in the last five years, developers under the guise of apartments began to position middle and business class apartments in places where it is possible to build a full-fledged housing stock. Therefore, the current government initiative has two main reasons: the loss of relevance of the development of the apartment market and pressure from the developers of apartment buildings.

The point is simple. Sales in new buildings have fallen to a historic low, and if apartment prices rise, then, in theory, buyers will choose traditional apartments.

– Apartments are commercial real estate, actually offices or hotels with a residential function. “Undwelling”, if you like, – comments the head of the analytical center “Indicators of the real estate market” Oleg Repchenko. – The requirements for the construction of apartments are much softer than for houses with official residential status, developers may not take into account the norms of SanPiN (hence the proposals for apartments of 5 square meters without windows).

Apartment developers, regardless of the scale of projects, are not required to provide complexes with social infrastructure, says Ruslan Syrtsov, Managing Director of Metrium: “Such an approach contradicts the concept of integrated development of territories, which has become a priority of state policy for the development of the construction industry. However, of course, this is not the main reason for tightening tax laws, because relatively cheap apartments solved the important problem of providing the population with housing. First of all, the authorities are pursuing the goal of replenishing the budget in the face of unprecedented external pressure, and this decision is one of the obvious ways.”

The cheapest square meter is in the east

– The new law is capable of killing the very type of such development, – continues Ilya Grashchenkov. — Apartments can be an option for all sorts of renovations of old buildings. But the development of new-build apartments can become a thing of the past.

Against the backdrop of inflated apartment prices in recent years, the cost of apartments looks more or less acceptable. On average, apartments in the mass segment in Moscow cost 150-230 thousand rubles per square meter, and new buildings – 280-300 thousand.

In the Central Administrative District, the cost of apartments starts from 250 thousand rubles per square meter. The price is relatively low due to the fact that the district includes the Tagansky district, on the outskirts of which a lot of mass-market apartments have been built, says Rigina Gordeeva, director of Etazhi Prime. The most affordable price per square meter in the apartments of the Eastern District is from 200 thousand rubles, followed by the south (from 220 thousand), north (from 230 thousand) and west (from 240 thousand rubles).

If we talk about a more prestigious location, then, for example, in Zamoskvorechye a “square” will cost 400 thousand rubles, in the Presnensky district – from half a million, on the Arbat – from 700 thousand, in Khamovniki – from 900 thousand rubles.

And some more numbers. According to Valeria Tsvetkova, Managing Director of Bon Ton, in April 2023, the total supply of apartments in the primary market of old Moscow was 39% more than in April 2022, and 6% more than in March 2023 (406 thousand sq. m, 8.1 thousand lots). The supply of apartments accounts for 10-14% of the total supply in the primary market of old Moscow. Although this share looks small, 518 apartments were sold in April – 50% more than a year earlier.

“It is unlikely that apartments will be equated with housing”

What is the fate of people who have already bought apartments? Many hoped that gradually their housing will receive the status of apartments. But this did not happen – the relevant law has been lying around in the bowels of the State Duma for several years. Perhaps the legislative status of the apartments will be determined as early as 2023, said State Duma deputy Vladimir Resin. However, according to him, it is unlikely that apartments will be equated with housing – “this is a type of commercial real estate, and nothing more.”

But the adoption of a law on the return of tax is much more likely.

— If VAT on apartments is returned, their cost will approach the cost of apartments with official residential status. And this will become critical to ensure at least the current level of demand. According to the online voting on IRN.RU, which we conducted in April, more than a third of potential buyers are ready to prefer apartments with official status, but only if they are 20% cheaper than apartments, says Oleg Repchenko.

Interest in apartments is steadily declining, says Valery Kochetkov, director of the Novostroyki direction of INCOM-Nedvizhimost. This type of real estate cannot be bought with the help of preferential mortgages and family mortgages, and mother capital cannot be applied. Often, the neighboring premises can be used not as housing, but for other purposes, since the Housing Code does not apply to them. “The return of the value-added tax canceled in 2010 may lead to a complete cooling of interest in apartments from both buyers and developers,” Valery Kochetkov is sure.

Developers will have to cut prices to stay competitive, but a 20% cut is a cost cap, especially in the face of rising building material prices. Therefore, buyers and developers will share the newly introduced tax among themselves, Fedor Mezentsev believes.

It’s not easy for downshifters these days

Is it worth investing in apartments until the law on the return of VAT is passed? And in general, does it make sense to invest in any kind of real estate in the current geopolitical situation?

— Any property should be treated as an asset and used as efficiently as possible, — says Ilya Grashchenkov. – For example, you have a grandmother’s apartment, maybe even in the center of Moscow, but you personally do not need it for living. To rent it out, it must be put in order, and the cost of repairs in such an apartment can reach its value (of course, this is no longer about Moscow and the center, but more remote variants of the Moscow region or other Russian cities). In this case, it is better to get rid of the apartment, since in the sales segment, attention is not paid to repairs as much as when renting. People with money are ready to buy even “killed” housing with a 10–15% discount and invest in its restoration, and if you don’t have money, you will have to beat off investments even in cosmetic repairs for at least one or two years.

Before the introduction of Western sanctions, the cost of repairing a small apartment was not as high as it is now. “At the minimum wage” it was possible to make it for 200-300 thousand rubles. But the sanctions have doubled or tripled the price of building materials, so that even a modest repair has become much more expensive.

– So why not rent an apartment without repair? Especially if the owner understands that he will not live in it anyway?

— This is also possible, of course, but then the discount will be up to half the cost of rent, and it will be difficult to find those who want to live among the smell of old furniture and yellowed wallpaper. And it is unlikely that they will be decent tenants. In general, the main goal is to understand how the asset will bring you the most income, and make the minimum investment for the maximum return. In the current conditions, when there is a maximum discount for new buildings, and the secondary housing, on the contrary, is growing, the option to invest in new housing by selling the old one seems to be optimal, recommends Ilya Grashchenkov.

With the proceeds from the sale, you can buy real estate “at the excavation stage” and in a couple of years get a new apartment or apartments with basic repairs, which will be much easier to rent.

Purely politically, a whole class of rentier owners has formed in Russia, who have passive income from renting real estate and form a separate social stratum, with their own views on life and social needs. Previously, people rented out their grandmother’s apartments and left to downshift somewhere in India, but now the situation has changed, says Ilya Grashchenkov.

You can leave with money from a rented “odnushka” in a five-story building, except perhaps out of season to the Crimea or somewhere in the province, the expert continues. Of course, if the family has at least a “kopeck piece” in the center of Moscow, you can really go to distant hot countries. In any case, the more modern meters Russians have, the fewer problems. In old houses something constantly breaks, leaks, neighbors complain. It is hard to go far if you need to constantly be in touch and respond. Therefore, the best option is to invest in new buildings or apartments that will not bring unpleasant surprises, the expert concludes.