Stagnation in the real estate market: the number of unsold apartments skyrocketed

On the one hand, the housing problem remains one of the main ones. So officials and developers are doing their best to provide Russians with apartments. But on the other hand, there are no buyers at the current cost of real estate and, apparently, it is not expected.

The president himself was worried about the problem, instructing his subordinates to reduce the risks associated with overstocking the real estate market and support demand for housing. Otherwise, according to the president, there will be a reduction in construction, and as a result, the construction sector will lose sustainable long-term development.

It is possible that the President is not being reported on the overly inflated housing prices that only wealthy Russians can handle. But the latter, again, do not need economy-class apartments – they are used to a different standard of living. This means that developers have only one way out: significantly, by 30-50%, to reduce the cost of real estate, which in itself has already become a utopia, but at the same time, this is the only way out for themselves and for Russians living in cramped conditions.

The head of the Analytical Center “INCOM-Real Estate” Dmitry Taganov does not agree that we are talking about overstocking. He believes that demand has become low primarily due to the general political and economic situation. “This is the only thing we can talk about now,” the expert says.

But what’s the point of blaming politics if it’s obvious: the cost of housing has long been out of touch with effective demand, prices are overheated. Oleg Repchenko, head of the Real Estate Market Indicators Analytical Center, argues that the artificial reduction in mortgage rates in the covid 2020-2021 years led to an imbalance in supply and demand in the real estate market, a rush of prices and the formation of a bubble.

In just two years, housing in the Moscow region has risen in price by 1.5–2 times, depending on the segment (in the economy, it is more significant than in the elite class). The cost of new buildings in Moscow increased from an average of 178 thousand rubles per square meter at the end of 2019 to 272 thousand rubles in April 2022 (at the peak after the start of the special operation).

Last year, in the second half, housing prices were kept high due to almost free mortgages, which were subsidized by the developers themselves: they reduced the interest on the loan to almost zero, but raised the price per meter by 20-30%. So low mortgages, instead of making housing more affordable, drove up the cost and alienated buyers.

In the next year or two, if force majeure shocks are excluded, the cost of housing will decrease, Oleg Repchenko is sure. Huge volumes of supply and rather low level of buying activity put pressure on prices. But here’s the bad luck: demand, which has decreased by a third compared to December last year, will still not recover soon.

In March, for example, developers made discounts of up to 40% (not explicitly, of course, in personal communication with buyers), offered gifts in the form of a parking space or storage room, but sales practically did not grow. However, as Yana Glazunova, CEO of VSN Realty, says, prices are reduced only in those residential complexes that cannot compete with their “neighbors”.

Developers are confused, as evidenced, in particular, by a sharp reduction in the output of residential complexes. Irina Dobrokhotova, managing partner of Dombook, founder of BEST-Novostroy, says that 27 projects entered the market in the fourth quarter of last year, and only 15 in the first three months of this year.

Dmitry Dolgov, founder of the real estate brokerage agency DOLGOV PRO, emphasizes that the volume of supply of residential square meters in Moscow has indeed become a record for the entire history of construction in Russia. Therefore, many developers are in no hurry to bring out new sites. Where to rush if no one buys apartments anyway? But this is something else: in half of Russian cities, housing construction has ceased altogether.

A couple of years ago, developers, who dispersed prices, began to reduce the size of apartments. Back in 2018, the average housing area in Moscow was 84 square meters, now it is 70. This figure is calculated for all classes of real estate, including luxury. As for economy class apartments, their average area is 32 square meters.

But even the new “odnushki” of a tiny square, the townspeople today cannot afford. Developers continue to raise prices as undermined. According to BEST-Novostroy, since the beginning of the year, the average cost per square meter in Moscow has grown by 6%.

It is curious that the relationship between overstocking and the cost of housing is obvious. Most apartments in new buildings (within the Moscow Ring Road) are offered in the Western Administrative District of Moscow – 8404. It also recorded the maximum average price per meter – 499 thousand rubles. Least of all apartments are put up for sale in the Eastern District, 2750. And here is the budget price of a “square”: 313 thousand rubles. The word “budget”, of course, is worth putting in quotation marks.

We do not take into account the center of Moscow, since premium housing is mainly concentrated in it, and the rules of the game are somewhat different. If suddenly anyone is interested, the average price per square meter in the Central Administrative District is 1.122 million rubles. And there are proposals worth three, and five, and even more millions per “square”. The normal price of an apartment in the outback …

Of course, New Moscow is beyond competition, where the price per square meter is lower than inside the Moscow Ring Road (from 170-180 thousand rubles). But Russians no longer want to buy housing just for the sake of a Moscow residence permit. In the end, you can buy a new building of a similar class in the region, but cheaper for a “square” by 30-40 thousand rubles. Although such a price, alas, few people can afford. And if anyone can afford it, he will prefer housing in a good area of ​​Moscow. But, most likely, in secondary housing, which is cheaper than the primary one by a third. Or just wait for price reductions in new buildings. After all, it is, I want to believe, inevitable.