Review of prices for new buildings in October 2023
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The so far observed increase in demand for apartments in new buildings has led to prices in Russia’s largest regional markets increasing by 2.4% over the month. But consumer activity is gradually beginning to decline, analysts say. In the future, this may cause an increase in the volume of exposure and containment of average prices.
The average cost of primary real estate in the 18 largest regional markets in Russia (16 cities with a population of over a million, Moscow and Leningrad regions) in October amounted to 155.8 thousand rubles. for 1 sq. m, increasing by 2.4% compared to the previous month. Such data is provided by experts from Cian.Analytics, explaining that the growth of the average price has slowed down slightly: a month ago, the same dynamics were 3.6%. In Etazhi, the average cost of new buildings in Russia as a whole is estimated at 122.8 thousand rubles. for 1 sq. m. By September, the value increased by 1.1%. A lot on the primary market, according to Avito Real Estate, costs buyers an average of 6.28 million rubles. Over the month, the figure increased by 4.7%, year-on-year growth was less pronounced – 2.7%.
The continued increase in average prices, according to the head of Cyan.Analytics, Alexei Popov, is explained by the previous period of high demand: “Buyers are primarily looking for more affordable lots.” User activity is now 33.4% higher than in the same period last year, says Dmitry Alekseev, head of the primary direction of Avito Real Estate. Although the rush has already subsided slightly over the past month, by the beginning of September demand decreased by 2.3%. The second factor is increased prices from developers. Mr. Popov cites Moscow as an example: if at the beginning of summer the price of premises rose by 2% from the moment it entered the market until it was sold, now it is by 8%. “Business includes inflation risks in the price for the entire construction period,” explains Etazhi sales director Sergei Zaitsev.
During the month, the most noticeable increase in the average cost of supply was recorded in Cian.Analyst in Krasnodar. The indicator increased by 5.1%, to 166.1 thousand rubles. for 1 sq. m. In Nizhniy Novgorod there is an increase of 4.6%, to 165.3 thousand rubles. for 1 sq. m. In “Floors” we noticed pronounced dynamics in Rostov-on-Don: the average cost of new buildings increased by 3.4%, to 114.3 thousand rubles. for 1 sq. m. In Kazan their cost increased by 3.3%, to 149 thousand rubles. for 1 sq. m. The only large city where Cian.Analytika noticed a decrease in the average cost of the initial supply was Krasnoyarsk. Over the month, the figure decreased by 1.8%, to 127.4 thousand rubles. for 1 sq. m. In Moscow the average rate, according to analysts, is now 337.5 thousand rubles. for 1 sq. m, in St. Petersburg — 248.1 thousand rubles. for 1 sq. m. By mid-September, the values increased by 1.7% and 0.4%, respectively.
At the same time, developers are quite actively bringing new proposals to the market.
According to calculations by Avito Real Estate, the total volume of exposure of new buildings in Russia is now 41.2% higher than in the same period last year. It makes no sense for developers to hold back the proposal – on the contrary, they strive to implement the largest possible pool of their projects, explains Sergei Zaitsev. This is explained by market fears regarding a further decline in demand. Mr. Alekseev recalls that the short-term excitement in the market in August-September was associated with tightening conditions for mortgage programs. But most of those who were in a hurry to take out a new home with a mortgage on the old terms had already done so, he notes.
Sergei Zaitsev has no doubt that after the implementation of advanced demand, purchasing activity will decline. “The availability of even preferential mortgage programs has decreased, and the prospects for further lending volumes seem illusory,” he notes.
Although Alexey Popov suggests that no more than 10–15% of transactions will leave the market, recalling that the activity of buyers is also spurring the weakening of the ruble.
“If the national currency exchange rate stabilizes, and there is more certainty regarding the modality of mortgage programs, we should expect demand to return to the levels of this spring,” he suggests.
Subdued demand may help increase exposure. Alexey Popov assumes that for two to three months it will remain at the current level, and then it may grow by 10–15%. This situation encourages developers to take a more restrained approach to pricing in new buildings. Now they are sold in some regions at prices below average market values, he notes. Although a business can significantly change its strategy, according to the expert, only with a significant decrease in demand. Dmitry Alekseev does not rule out that by the end of the year developers will try to stimulate buyer activity through discounts and promotions. “This will help maintain not only demand, but also the price level on the market,” he argues.
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