The supply of new flats and apartments in Moscow is declining

In response to the risks of overstocking the market, Moscow developers are holding back the pace of new proposals. The volume of exposition of flats and apartments in the mass segment for six months decreased by 14%, and the output of new buildings – by 24%. Overstocking can help reduce prices by 4-5% in specific locations, but to reverse the trend, an increase in buyer activity is needed.

The total exposure of flats and apartments in the mass market of old Moscow for the first half of the year decreased by 14%, to 22.5 thousand lots, calculated in the Metrium company. In the first and second halves of 2022, the number of lots in the mass segment, on the contrary, increased by 26%. The current volume of supply exceeds last year’s level by 9%, but in December 2022 the difference with December 2021 was more – 60%, follows from Metrium’s data. Tatyana Podkidysheva, Executive Director of NDV Real Estate Supermarket, estimates the volume of supply in the mass segment in old Moscow at 1.1 million square meters. m, or 24.7 thousand lots, since the beginning of the year, the values ​​decreased by 8.3% and 6.4%, respectively.

Flats and apartments of the mass segment form 43.5% of the total supply in the primary market of old Moscow, according to Metrium. In total, there are 51.7 thousand apartments and apartments on the market. For six months, the indicator decreased by 2.6%, and increased by 18% year-on-year. Ruslan Syrtsov, managing partner of Metrium, says that developers have begun to respond to the overstocking of the market. The share of unsold supply in ongoing projects now reaches 44% against 22% a year earlier, he recalls.

Developers, indeed, are less active in bringing a new proposal to the market. Alexei Popov, head of Cyan.Analytics, points out that sales began in 247 buildings with an area of ​​3.7 million square meters in Moscow and the region in the first half of the year. m. This is 24% less than in the second half of last year and 15% less than in the first six months of 2022. “Although activity in terms of buying land, obtaining documentation, and so on remains relatively high,” notes Mr. Popov. Ruslan Syrtsov believes that the delay in the development of new projects in 2022 and a more moderate policy of replenishing the supply in ongoing projects are affecting.

Now demand can change dramatically for reasons beyond the control of developers, it is difficult to predict not only developers, but also banks, explains Vladislav Preobrazhensky, executive director of the Moscow Investors Club. He considers the reduction of the volume for sale to be logical. Pavel Lepish, commercial director of MIC Group, calls the current approach of developers more rational, noting that they take into account the current exposure in the location.

Vice-President of the Strana Development Group of Companies Alexander Gutovoy calls overstocking a problem: “The game of prices and discounts occurs at the slightest decrease in demand.” Vladimir Kolesnikov, Deputy Commercial Director of A101 Group of Companies, says that in the context of a large choice on the market and stable demand, it is not advisable to withdraw significant volumes of new lots. But he doubts that oversupply could help lower house prices by more than 4% to 5%. Project financing obligations limit the ability of developers to regulate prices, Mr. Kolesnikov noted. Ekaterina Berezhnova, Chief Analyst at Miel Group of Companies, recalls that even if it is necessary to reduce prices, developers try to do it behind the scenes, avoiding direct discounts.

Ruslan Syrtsov doubts that the problem of overstocking can be solved only by changing the strategy of developers. According to him, we need a steady increase in the activity of buyers. Mr. Syrtsov considers the current trend positive, pointing to a 2% increase in demand in the first half of the year compared to last year. Elizaveta Rodina, head of marketing research and analytics at Glavstroy, expects that the volume of supply will continue to decrease due to more active sales, which can be warmed up by the weakening of the ruble, since during such periods people begin to “shift” money into real estate.

Alexandra Mertsalova