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«    May 2017    »

Buying with a practiced eye irrespective of a developer’s reputation

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Buying with a practiced eye irrespective of a developer’s reputation

Dmitry GORDOV, Director General of the Landwerk real estate development company

Much is spoken about the crisis, including the one in countryside real estate construction, particularly in realty for leisure. Many developers apparently started chasing clients. In our, countryside real estate sector this actually began in 2008. Both the city and countryside real estate sectors began to reduce production then.  Flats were cut to 25—30 sq. m, and the same occurred with summer cottages. Furthermore, contract-less action areas appeared. When the reduction became abundant the market put itself out with searching for attractive formats and approaches to regain liquidity. It is necessary to pat special attention to today’s clients due to this.

Presently, 70—80% of the market, according to different evaluations, are plots without any compulsory contracts: meaning that a developer sells a land plot with laid engineering networks. Despite this, however, the consumer prices of some participants in the market dropped to 10,000 roub. for one hundred square metres.

It is clear that such price pressure arose because life is not a bed of roses: consumers’ financial capabilities are being reduced. Especially in such a secondary matter as realty for leisure. At the same time, the buyer has become very demanding, especially as far as comfort and reasonable land use are concerned.

The basic trend in sales is worded very simply: “I want it here and now”. Formerly, to sell something, it was enough to show customers a 3D-picture on a website. Presently, they want to see all the beauty with their own eyes – and the project, a company’s experience or reputation have no sense.

In other words, if you do not arrange a high-quality picture and an improved environment then the sale will be prevented. Regarding countryside realty, it is usually a small budget project, and it is not very easy to provide for such infrastructure. 

Large companies dealing with multifamily housing construction are not interested in this sector and do not enter it.  Consequently, the market has frozen in the condition where there are no large investments.

Another complication is that the land is to be involved in turnover, but there are rather few specialists who can do it both in a qualified manner and systematically.

People need rest, their children need fresh air, and these are the factors supporting the demand. Another stimulating factor is that having a rest abroad has grown twice as expensive since 2014. As a result, one might afford a land plot for the price of a fortnight’s holiday in Greece or Cyprus. Taking onto account the general decrease of demand the projects with better promotion and positioning have gained more customers.  

When considering the situation as a whole, there are fewer customers, and it is more difficult to work. There are almost no people with small budgets among our customers: their money has gone on cheap flats (1.5—2m roubles) with zero mortgage rate.

People with larger budgets, who are ready to spend 5—10 m roubles, are interested in real estate for leisure. And our customers have become more rational and understand that a land plot as large as 30—40 ares is difficult to operate and manage.

As a rule, they prefer to buy a land plot of 8—10 ares with electric and water supply networks. Besides, customers would like to see the projects where great attention is paid to the creation of public spaces and land improvement. The earlier a developer includes these in a project, the more potential the ground will have. The most demanded house is a 4 bedroom one.

A customer knows the value of time. That is why both the distance to the house and the way you might get there are important. Projects worth millions get stuck on transport infrastructure. 

As far as prospects are concerned, according to our forecasts, price pressure will continue for quite a long time due to a large number of objects on the market which are bought out rather slowly. We shall feel the consequences of the market glut for at least 3—5 years.

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