Margin new buildings – Newspaper Kommersant No. 204 (7405) dated 11/02/2022
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According to analysts, over the past two years, Russian housing developers have earned about 1 trillion rubles. more than directly invested in construction. Such results were achieved due to a significant increase in prices for new buildings, caused, among other things, by preferential mortgages, according to SMPRO. But these estimates do not take into account a range of costs, from infrastructure to land and advertising. And the drop in demand that began in the summer and the rise in the cost of building materials will contribute to a drop in developers’ revenues at the end of the year.
More than 1 trillion rubles. earned in 2020-2022 housing developers minus construction costs, including the purchase of building materials, payment for contract work, calculated in SMPRO (engaged in analytics and consulting on the building materials market). The analysts’ calculations did not include the costs of purchasing land and creating engineering networks, servicing loans, marketing costs, and developer profits.
Over the past ten years, the average price of housing in the primary market in the Russian Federation has increased by an average of 2.4 times, and the cost of construction – by 1.6 times, according to SMPRO. They say that a significant gap between the cost of housing and construction costs began in 2020, when the authorities launched a program of preferential mortgages.
According to the results of 2020 alone, in Moscow, the demand for housing under construction increased by 24%, to 57 thousand transactions, calculated in bnMap.pro. As a result, prices in new buildings rose by 19%, CIAN added. Significant dynamics continued in 2021, when demand grew by 17.5%, to 67.3 thousand transactions.
But there were other reasons for the increase in prices, says Yevgeny Protopopov, a member of the Delovaya Rossiya construction committee. Developers are experiencing a shortage of personnel, problems with the availability of building materials, explains the president of the intersectoral association of self-regulators in the field of construction and design “Synergy” Alexandra Belous. The final price of housing included additional costs that could arise due to these problems, she believes.
In addition, with the transition of the market to escrow accounts, the cost of borrowed funds for developers has increased significantly, says Alexander Ruchev, president of Osnova Group of Companies. According to him, the costs of Moscow developers for changing the type of permitted use of land in the capital in 2020 increased by two to eight times, and the share of this indicator in the cost of housing is about 10%.
But doing development in Moscow is still much more profitable than in other regions. If throughout the country the profitability threshold for housing construction projects is the same and is 20%, then in the capital this figure can exceed 40%, in St. Petersburg – 30%, adds Irina Dobrokhotova, chairman of the board of directors of Best Novostroy.
Ms. Dobrokhotova emphasizes that the difference between price dynamics and production costs is very different from region to region. According to her, in a number of regions, the growth of market prices for new buildings was very insignificant, in contrast to the increase in construction costs, and the marginality of development there was reduced. For example, in the Samara region, the cost of housing has increased by 31% since the beginning of 2020, and the cost of construction by 25–30%, says Alexey Dolmatov, shareholder of Glims-Production JSC (a manufacturer of building materials).
Moreover, as early as this year, developers may fall, experts believe. Evgeny Protopopov expects that sales will continue to fall relative to the peaks of 2020-2021, and due to the low rate of replenishment of escrow accounts, developers will be forced to pay more interest to banks. He believes that the dynamics of the market recovery will be greatly extended in time, while the cost will continue to grow due to sanctions, rising prices for raw materials and building materials.
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