The volume of new housing projects is declining after an increase in sales of apartments in new buildings

After a noticeable increase in sales of apartments in new buildings, developers are preparing for a decrease in demand. In October, the share of companies that reduced the introduction of new projects to the market reached 33% – this is the maximum value since the beginning of 2023, Dom.RF found out. The developers themselves have prepared for the duration of this trend, citing the main reasons for the decrease in the availability of development sites and the increase in the central bank’s down payment to 20%. The regulator took this measure to cool overheated prices in the primary housing market.

As the results of the Dom.RF survey among top managers of 90 construction industry companies showed, in October across Russia, 33% of housing developers reduced the introduction of new projects to the market – this is 10 percentage points (pp.) more than in September. and 11 percentage points more than in August. This figure turned out to be the highest since the beginning of 2023. 20% of respondents named one of the main reasons for the decline in new projects as deteriorating conditions for the purchase of development sites.

“Kommersant”, having compared similar surveys conducted by “Dom.RF” in previous months, noted that previously most developers cited the significant rise in price of building materials as the main obstacle to the start of new construction projects.

But now the share of such companies has dropped to 56%, which is 16 percentage points less month on month, notes Mikhail Goldberg, head of the Dom.RF analytical center. According to Glavgosexpertiza, prices for building materials began to decline from the end of summer and growth almost slowed down in November, when, for example, the cost of fittings fell by 11% compared to October.

The majority of market participants interviewed by Kommersant expect that the trend of reducing the commissioning of new projects will continue due to the difficult situation in the economy. According to the head of the Unified Resource for Developers, Kirill Kholopik, demand fell in October-November, which negatively affected the developers’ fulfillment of the housing sales plan. Stenoy managing partner Ilya Frolov says that his company’s actual sales at the end of 2023 will be 10–15% less than planned.

Sales are falling in many regional primary housing markets, as noted in the monthly Dom.RF review. Thus, in Moscow in November, developers sold 7.72 thousand apartments, which is 26.4% less than in October; in St. Petersburg – 4.7 thousand (a drop of 16.8%); in the Krasnodar Territory – 4.12 thousand (a decrease of 21.7%).

According to the commercial director of A101 Group of Companies Anna Boim, “the further configuration of housing construction” will be determined by mortgages, which in a number of regions account for up to 90% of all transactions. However, according to Frank RG estimates, already in October, the volume of soft loans issued throughout the country for new buildings decreased by 22% month-on-month, to 212 billion rubles, although since the beginning of 2023 this figure has been growing monthly.

Experts say the main reason is the increase from October to 20% of the minimum down payment threshold. The Central Bank did this, fearing the growth of high levels of debt among the population. The peak volume of mortgages was observed before the increase in the premium – in September, when 273 billion rubles were issued, which is 22.3% more than the month before.

Demand for new buildings is falling not only due to increased down payment requirements, but also due to rising prices for apartments. The Central Bank has also repeatedly stated that prices for new buildings are overheated. Frank RG analysts give the example of a standard one-room apartment, the average cost of which in the country is now 4.6 million rubles, which is 64% more expensive than in 2020, when the preferential mortgage program was launched.

The return of demand to the level that was in January-September 2023 (then in Moscow alone, Rosreestr registered almost 114 thousand transactions in new buildings, which is 20% more year-on-year), is still unlikely, developers admit. The possible abolition of preferential mortgages for a wide range of buyers could lead to a decrease in demand by 20-25% in 2024, Ms. Boim believes. This will also cause a cooling of the mortgage market, which in 2024, according to Frank RG forecasts, will decrease by 22% year-on-year, to RUB 6.2 trillion.

In anticipation of a possible sharp decline in demand, developers managed to provide themselves with a financial cushion. According to Mikhail Goldberg, from January to October, developers, after opening escrow accounts where shareholders’ funds are accumulated until construction is completed, received 2.5 trillion rubles, which is 1.7 times more than in the same period last year.

Khalil Aminov, Daria Andrianova