The real estate market would have had a rough time if the Government had not taken unheard-of measures to support developers. What are they?
How is the real estate market now the crisis is raging? What is to be expected in 2016? These issues were discussed at the “The results of the real estate market in 2015” conference, organized by the Kommersant publishing house at the Mariott Grand Hotel in Moscow.
What has been done: the Minister of construction accounted for 2015
— Many experts forecast disastrous falls in the volume of housing commissions in 2015. They had even named figures: the construction market would decrease three- or four-fold. Luckily, it did not happen, - said Mikhail Menn, Minister of Construction, Housing and Utilities at the conference. According to him, last year’s work results have already been summed up.
— Today we may say that in March the construction complex will achieve the same figure as for the same period last year. By now, 83.8m m2 of housing has been commissioned, and it is success.
How did they manage to avoid a more negative scenario? The minister thinks the Government developed and adopted a program of subsidies for the mortgage loan rate just in time. In April 2015, the preferential mortgage loan rate was 12% a year. And this, of course, helped keep housing construction rates of progress at a rather high level.
Another important achievement: the commissioned housing volumes were tilted in favour of economy-class housing – the most in-demand segment on the market. In 2015, the volume of cheap housing grew by 18% as compared with the previous year.
An interesting thing: 8.2% more flats were sold in 2015, though the number of commissioned square meters remained the same. What does it mean? It means that developers have understood their present task well: to provide a customer with housing at realistic price.
Smaller flats were put on sale, though the total number of square meters remained the same.
— We are told that the successful ending of the year is the result of inertia from the previous year, — Mikhail Menn shared his opinion. — But no inertia would have helped if the Government had not taken unheard-of measures for supporting developers.
More than that, a serious back-log has been created for this year. As the minister reported, permits for the construction of 113m square meters of housing were issued in 2015, 8% more than in 2014.
Mortgage loan preference rate: name the figure
Authorities, representatives, developers, realtors – everybody remarked upon the success of the program for a subsidized mortgage loan rate initiated by the RF Ministry of Construction, Housing and Utilities. Every third flat was purchased within the program.
After vivid governmental discussions, the decision was taken to prolong the program of preferential mortgage loan credit, Mikhail Menn said.
The news pleased those present because the construction community was going to say farewell to the state’s bonus, as the Ministry of Finance was against it. And now the initiative will be prolonged, at least until the end of 2016.
— Of course, there will be discussions, the initiative will be improved, but the principal decision has already been taken, — Mikhail Menn said.
That means that the Minister of Construction has managed to convince, as we have suggested, the Minister of Finance, Anton Siluanov.
One fifth of all office space in Moscow is vacant
While the housing market is doing rather well, the commercial real estate market is worrying. In 2014 1.5m m2 of new office areas were put in operation, whereas in 2015 the figure is only half that.
— This can be explained by the fact that the commercial real estate market has become less profitable, — Roman Tkachenko, Head of RD Group in Russia, shared his opinion. — Developers switch over to the housing real estate sector, which is more commercially viable.
Mr. Tkachenko mentioned some sensational figures: out of 16m m2 of office areas in Moscow, 3m m2 are vacant. Mostly they are B-class, as there is no demand deficit in class A.
— It is explained by the fact, the expert remarked, that the rent prices in the B segment have started growing, and many companies prefer to work in higher quality space. The main problem of commercial real estate is that it is devoid of state support.
Developers’ bankruptcy and unemployment growth
The developers taking part in the conference positively assessed the Ministry’s of Construction’s efforts in the promotion of the subsidized mortgage loan rate, but sharply criticized some other aspects.
— The industry is alive more than dead, but the developers are far from being pleased. The situation is really rather worrying, the Chair of the Board of “Granel” GC, Andrei Nazarov, remarked. — Last year 30 large developers went bankrupt, including 6 in the Moscow region.
According to the developer, the reason is very prosaic: the population’s purchasing capability has decreased, and correspondingly, the construction freeze has started.
Mr. Nazarov also said that a logical result of companies’ bankruptcy is the unemployment growth in the industry. According to him, by 2015 the number of people employed in the construction industry totaled 1,826,593. By the beginning of 2016 the figure had decreased to 1,755,249. Thus, during 2015 the total number of those employed in the construction industry decrease by 4% - more than 70,000 people, Nazarov concluded.
— And these are only those who work directly in construction, he stressed, and added that the figures would be much bigger if we consider related branches: one job in the construction industry provides for up to nine jobs in related sectors (construction materials production, repair, etc.). Besides, from Andrei Nazarov’s standpoint, constant novelties and changes amended in legislation regulations impact the market negatively, in particular, 214-FL.
Rather a lot of companies have got permits for construction, but to receive a permit doesn’t mean you construct. At the end of his speech Andrei Nazarov’s statement that the mortgage loan rate should be decreased to 7% struck everybody, and caused both approving and negative comments.
Mikhail Menn answered that he is not against the rate decrease but “we should be realists”. Now the state’s expenditures on the program are not too large, but in 2016 more people will borrow preferential mortgage loans and so on. And the state’s expenditures will grow as the credits are paid back over dozens of years. And it is a long-term load for the budget. It will not withstand the cardinal decrease of the rate…
Mortgage loans are mostly used by officials
The Chair of the Board of “NDV Group”, Alexander Khrustalev, represented the realtors’ community.
— A great problem in the current situation is the closing of small- and medium-sized enterprises, he complained. — 400,000 small and medium-sized companies have closed during the last year in Russia. And they used to be our major buyers.
According to him, the realty business in Russia has been somewhat redirected: those who work in state corporations mainly borrow mortgage loans now – that is those who are sure of the future.
Alexander Khrustalev forecast the growth of prices for apartments in the near future. When the oil price starts rising, the price for housing will grow.
So, it may be reasonable to buy a flat now, as Mikhail Menn recommends…