What should Moscow realtors expect in the new season?
The holiday season is over, and the real estate market traditionally expects some buoyancy around now. Even prices for a square meter can grow, as they say. However, the majority of analysts agree that such an increase will not do realtors any good in the current conditions, but may in fact push the market into stagnation lasting several months - and it might be revived after that only by a greater price decrease.
Price increase will cause stagnation
Specialists working on the capital’s real estate market gathered recently at the annual analytical conference: “The realty market: condition, tendencies, forecasts”, sponsored by the Moscow Realtors Association to discuss what is going on on the market and what to prepare for.
Unfortunately, many pessimistic prognoses were voiced at the meeting.
— Prices will be raised in the autumn, the Head of the IRN.RU analytical center, Oleg Repchenko, thinks. — Somebody wants to add a symbolic 1,000 roubles, others are going to raise their prices significantly. The question is, will the market adopt this price rise?
According to the analyst, if sellers try to raise prices, the scenario seen at the end of 2014 and the beginning of 2015 is most likely to repeat itself. At that time, the rush on the market (due to different reasons) served as a signal to realtors to raise prices. Prices grew, but in January 2015 the market froze and did not move for several months.
Considering the current situation, realtors have every right not to agree with the respectful specialist: sales do not stop even in summer, and everybody reports that their volumes grow. According to Oleg Repchenko, this happens because even the declared realty prices are 10% lower than last year, and taking into consideration that the majority of sellers propose discounts, it is quite possible to buy a flat 20% cheaper than before.
Analyzing the sales structure, one may see that the main volumes are sold at 3—5m roubles for a flat, which was not so within the MRR even two years ago. This forms an illusion of wealth: sales are going on, and the volume of bargains is no lower than in 2013—2014. But it is all down to dumping: the decrease of either the price or the metric area of a flat. Such sales make statistics.
In the photo: Sales office
Offices are empty
Almost the same picture can be seen on the commercial realty market, Dmitry Roschin, Head of the “RESKOR” Corporation Investment Consulting and Evaluation Department, thinks. As compared with 2015, prices for office and commercial realty have decreased by 10—25%. The volume of vacant offices is 17.5%, and for trade centers 10%, although 5—6% is normal.
These figures could have been 40% for class A offices, if it were not for three deals: “Tatneft” bought the “Evolution” tower, the Moscow city administration bought the “Oko” (“Eye”) tower, and the “Eurasia” business center pass into VTB Bank’s ownership. So, about 210,000 square meters has left the market, and the rate of vacant areas has decreased.
— According to our forecasts, vacant spaces are steady, at about 15—17%, which means that prices will gradually go down, the analyst is sure. — As far as trade centers are concerned, business volumes have decreased by approximately 15% during the current crisis, but new areas have been put into operation at the same rate as before. This year, for example, about 500,000 sq. meters will be put into operation, which won’t help normalize the situation.
According to Mr Roschin, 16m sq. meters of commercial realty abounds. It means that customers will move to more modern offices, and if an office center is more than half full, tenants are trying to move in. If not, they are not interested.
Has the market hit bottom?
— The market for secondary housing reached rock bottom in July, 2015. The way it behaves now does not influence prices anyway, thinks Dmitry Taganov, Head of the “INKOM-Realty” analytical center.
According to this specialist, more than 80% of all deals are made with discounts of 10%—20%. That is why the analyst does not expect any surprises in the autumn.
— There is no escaping the crisis. Prices will go on decreasing slowly, but we do not expect a fall, the expert said.
However, Oleg Repchenko does not agree that the market has hit bottom. According to him, we should speak not of the bottom, but of steps for the prices to slowly crawl down.
— If the market participants try to raise prices this autumn, we will see stagnation sooner, by New Year’s Eve, the expert continued. — The market will demand further discounts and bidding wars, and prices will fall by another 10—15%. It will allow for continued sales and will add another layer of purchasing power.
Such downward steps, according to the expert, will go on for a year or two, and maybe longer, taking into account that Moscow prices are almost twice as high as the norm. Besides, a vast vacuum has formed on the market.
— Take oil as an example: it cost up to $150 a barrel, and now it has fallen to $50 and is not going to grow again, the analyst said. — The same will happen with a square meter, but with smaller dynamics.
Strategies and game rules are needed
The main reasons for what is going on with the realty markets are the absence of strategy and efficient institutes for market development, as well as weak lobbyists, Alexander Krapin, Director General of the «RWAY» analytical agency, is sure.
— In our opinion, small volumes of housing being put in operation, high costs of same and the market’s opacity as for taking investment decisions and carrying out research will remain constant in the near future, the analyst forecasts. — Besides, the tax load will grow due to the introduction of the institute of the state cadastral evaluation, and as a consequence, social tension will also grow.
According to Mr Krapin, the degree of the Russian economy’s monetization is 2.8 times lower than the worldwide mean. Business cannot be competitive in such conditions.
Besides, in many countries, average monthly household income approximately equals the cost of a square meter. In Russia this index is worse: to earn the price of 1 sq. m, an average household has to work 2.5—3 months, depending on the region.
The system of key indices is unbalanced on the market, starting with housing availability. On the whole, this index is 1.4 times lower in Russia than around the world.
And last but not least, the Russian housing market is famous for its ‘grey’ rent and ever-changing rules of the game. More than 6,000 laws have been adopted in Russia, including about 1,000 regulating the realty market. Even a very good lawyer may get lost in this maelstrom.
You cannot put a crisis in the bank
As we see, the majority of analysts are very careful about their forecasts. Almost all of them are sure that prices are not going to grow, but rather will go on decreasing without any really sharp falls.
It may be not so bad, at least for us, the customers. The more entities are involved in the process of housing purchase and sale, the more available it will become. Taking into consideration that the CB rates tend to decrease, and a number of specialists think that next year they will be 8%, mortgage loan availability will increase.
It will give developers the opportunity to construct, and realtors to sell. Business efficiency will not be as high as in the wealthy years, but the best sellers will have butter for their bread.