Prices for Moscow apartments will no longer rise as before

New buildings

Last year, there was an unusual excitement in the primary housing market in Moscow. It was especially hot in early autumn, when many private investors who had invested in new buildings panicked amid the tightening of the Central Bank’s monetary policy. Fearing a decline in demand for new housing, they rushed to put new apartments up for sale. The activity of buyers was also fueled by rumors about the termination of preferential mortgages.

As Ruslan Syrtsov, managing director of the Metrium company, told MK, if at the end of 2022 the average cost of 1 sq. m of Moscow new buildings increased by about 4%, then in 2023 one “square” increased in price by 12%. At the same time, the volume of supply in 2022 increased by 25%, and in 2023 decreased by almost 5%.

Due to high demand, new buildings in the capital rose in price at a rate outpacing inflation. “The average price of 1 sq. m in December 2023 reached 453.8 thousand rubles,” noted Svetlana Bardina, director of the residential real estate sales department of the Summa Elements Group of Companies. According to her, in 2023 the share of mortgage transactions reached 77%, which is 10 percentage points higher. higher than a year earlier. The rushed demand for concessional loans was caused by the Central Bank’s policy, implying a sharp increase in the key rate.

Buyers of new buildings are accustomed to the fact that in any location of the capital the social, transport, and entertainment infrastructure is actively developing. Experts have recorded a surge of interest in houses built next to green parks and ponds. “Interest in such residential complexes is always 30–40% higher than in similar ones. In the urban concrete jungle, proximity to a reservoir raises the cost of housing by 20–25%,” emphasized Valery Kochetkov, director of the “New Buildings” department of INCOM Real Estate. In his opinion, weak demand is observed for apartments located on the first two residential floors, housing with views of industrial zones, railway tracks, power lines, landfills, etc. Today, less attention is paid to apartments of non-market areas. For example, a 1-room apartment of 52 sq. m will not be included in filters when searching, because how 90% of potential buyers of one-room apartments will limit the area to 35–40 square meters. m. The same applies to objects of other formats. Thus, 2-room apartments with dimensions of more than 80 square meters are considered illiquid. m with good demand for lots with an area of ​​50–60 sq. m. m.

The area of ​​apartments in new buildings continued to decline. In order to sell low-demand lots in a project, developers provide discounts on them – the declared one can reach up to 20-30%, but in fact on the market the difference between the media price and the transaction cost is no more than 15%, experts say.

As Valery Kochetkov believes, tightening lending under preferential programs will lead to a shift in demand from high-budget and multi-room apartments towards budget 1- and 2-room properties. Also, the attention of buyers will shift beyond the Moscow Ring Road, which will contribute to the growth of the Moscow region market. Tightening mortgage conditions, unlike the secondary housing market, will not lead to a decrease in prices for new buildings, because in this segment, the final cost of lots is influenced not only by demand, but also by the cost of construction. Accordingly, prices in Moscow will stagnate or slightly adjust downwards – up to 5–7% in the segment of 3- and 4-room apartments. “The budget supply will begin to actively decline, there will be a hunt for such objects, and the price will increase by 10–15%. In the Moscow region, following demand, the price increase may be plus 5–10%,” Kochetkov is sure.

It is already obvious that the authorities are preparing a “soft landing” for the construction industry. “It is expensive for the state to finance the difference between the key rate of 15–17% and preferential loans at 6–8% per annum, especially given the increase in other expenses. In this regard, the preferential mortgage program in its current form is likely to be revised. Perhaps we will see an increase in preferential rates to a level closer to the market (say, up to 12–13% per annum),” added Dmitry Golev, commercial director of Optima Development.

According to realtors, the wild party on the Moscow residential real estate market is coming to an end.

“Most likely, until the end of the election cycle, the authorities will not make radical decisions regarding the mortgage subsidy program,” Syrtsov noted.

Secondary

Interesting changes are also taking place in the neighboring segment. Director of the Est-a-Tet secondary real estate sales office, Yulia Dymova, noted three important factors: flipping (an investment strategy that involves purchasing a home in a “dead” state, with the goal of quickly renovating it and resell it at a higher cost. – Ed.), home staging (a method of decorating a home to improve its appearance and increase its market value upon sale. – Ed.), the influence of a formed community of a house on the purchase of an apartment in it. All of these trends are related to current buyer needs.

“Today’s generation chooses life “here and now”, the most ready-made options are apartments with already completed finishing,” says Dymova. — The preference for format has changed: the most popular have become Euro-“kopeck piece”, which is gradually replacing the demand for studios. Another trend is the increase in the cost of 1 sq. m. m of secondary housing. This is largely due to the renewal of the housing stock, improving the quality of housing, and the implementation of the renovation program.

Prices, of course, will be influenced by the policy taken by the authorities to curtail preferential mortgages. “If current mortgage rates remain the same, and even more so taking into account their possible increase, a weakening of demand is inevitable: in 2024, the market will operate at 70% of its normal level. Accordingly, an increase in the number of objects on display and a gradual decrease in prices will follow,” says Sergei Shloma, director of the “Secondary Market” department of INCOM Real Estate. According to his forecast, the price reduction will be approximately 10%, and it will occur no earlier than the second quarter of 2024.

At the same time, Shloma does not expect a massive outflow of buyers of Moscow “squares”, because most of the transactions are alternative, when a person sells one apartment and buys another with the proceeds. According to his estimates, 40% of owners and sellers of secondary apartments also purchase secondary housing in return, 30% buy properties in new buildings, and only 30% of the market is pure sales. “Buyers were not put off by the 17% lending rates as we expected, since they usually only need mortgage funds for additional payments. And these are not huge amounts,” the analyst added.

Tips for the case

Svetlana Bardina recommends that potential buyers of new buildings enter into a deal at the initial stage of construction, as this in the future allows them not only to save, but also to increase funds. It is desirable that projects have developed infrastructure, high-quality landscaping, good views and ergonomic layouts.

In the secondary market, in addition to the characteristics of the house and apartment, transport accessibility is especially valued. Residents should find it convenient to get to work or school, so it’s worth analyzing all possible routes and travel times in advance, recalls Yulia Dymova.

“Universal advice to home buyers is to choose the most liquid projects with an eye to the fact that under certain circumstances you will want to resell or rent out the apartment,” noted Ruslan Syrtsov. — Look at the premises you are purchasing (even for yourself) a little like an investor: is there a school, kindergarten, clinic, shops nearby, if you have to look for apartment buyers among families; how far is it to walk to the metro and go to the center, which is important for a potential tenant; Will an apartment without a dressing room, second bathroom, balcony, or storage room be in demand?