The end of the wild party
New trends are forming in the Moscow housing market. Due to “overheated” prices, the difficult economic situation and the winding down of the preferential mortgage program, the number of new projects will continue to decline. How and how soon the reduction in supply will affect price tags on the primary and secondary housing markets, MK was looking into.
Last year An unusual excitement reigned in the primary housing market in Moscow. It was especially hot in early autumn, when many private investors who had invested in new buildings panicked amid the tightening of the Central Bank's monetary policy. Fearing a decline in demand for new housing, they rushed to put new apartments up for sale. The activity of buyers was also fueled by rumors about the termination of preferential mortgages.
As reported by «MK» Managing Director of the company «Metrium» Ruslan Syrtsov, if at the end of 2022 the average cost of 1 sq. m of Moscow new buildings increased by about 4%, then in 2023 one “square” increased in price by 12%. At the same time, the volume of supply in 2022 increased by 25%, and in 2023 decreased by almost 5%.
Due to high demand, new buildings in the capital rose in price at a rate outpacing inflation. “Average price of 1 sq. m in December 2023 reached 453.8 thousand rubles,” — noted the director of the residential real estate sales department of the Summa Elements Group of Companies Svetlana Bardina. According to her, in 2023 the share of mortgage transactions reached 77%, which is 10 percentage points higher. higher than a year earlier. The rushed demand for concessional loans was caused by the Central Bank's policy, which implies a sharp increase in the key rate.
Buyers of new buildings are accustomed to the fact that in any location of the capital the social, transport, and entertainment infrastructure is actively developing. Experts have recorded a surge of interest in houses built next to green parks and ponds. “Interest in such residential complexes is always 30–40% higher than in similar ones. In the urban concrete jungle, proximity to a reservoir raises the cost of housing by 20–25%, — emphasized the director of the “New buildings” direction; «INCOM-Real Estate» Valery Kochetkov. In his opinion, weak demand is observed for apartments located on the first two residential floors, housing with views of industrial zones, railway tracks, power lines, landfills, etc. Today, less attention is paid to apartments of non-market areas. For example, a 1-room apartment of 52 sq. m will not be included in filters when searching, because like 90% of potential buyers of “one-room apartments” They will set a limit on the area to 35-40 sq. m. The same applies to objects of other formats. Thus, 2-room apartments with dimensions of more than 80 square meters are considered illiquid. m with good demand for lots with an area of 50–60 sq. m.
The area of apartments in new buildings continued to decline. To sell low-demand lots in a project, developers provide discounts on them — the declared one can reach up to 20-30%, but in fact on the market the difference between the media price and the cost of the transaction is no more than 15%, experts say.
As Valery Kochetkov believes, tightening lending under preferential programs will lead to a shift in demand from high-budget and multi-room apartments towards budget 1- and 2-room properties. Also, the attention of buyers will shift beyond the Moscow Ring Road, which will contribute to the growth of the Moscow region market. Tightening mortgage conditions, unlike the secondary housing market, will not lead to a decrease in prices for new buildings, because in this segment, the final cost of lots is influenced not only by demand, but also by the cost of construction. Accordingly, prices in Moscow will stagnate or slightly adjust downwards — up to 5–7% in the segment of 3- and 4-room apartments. “The budget supply will begin to actively decline, there will be a hunt for such objects, and the price will increase by 10-15%. In the Moscow region, following demand, the price increase may be plus 5-10%, — Kochetkov is confident.
It is already obvious that the authorities are preparing a “soft landing” for the construction industry. “It is expensive for the state to finance the difference between the key rate of 15-17% and preferential loans at 6-8% per annum, especially considering the increase in other expenses. In this regard, the preferential mortgage program in its current form is likely to be revised. Perhaps we will see an increase in preferential rates to a level closer to the market (say, up to 12-13% per annum),” — added commercial director of Optima Development Dmitry Golev.
According to realtors, the wild party on the Moscow residential real estate market is coming to an end.
“Most likely, until the end of the election cycle, the authorities will not make radical decisions regarding the mortgage subsidy program,” — noted Syrtsov.
Interesting changes are also taking place in the neighboring segment. Director of the Est-a-Tet resale real estate sales office Yulia Dymova noted three important factors: flipping (an investment strategy that involves purchasing a home in a “dead” state, with the goal of quickly renovating it and resell it at a higher cost. —), home staging ( a method of decorating a home to improve its appearance and increase its market value when selling. — Ed.), the influence of a formed community of a house on the purchase of an apartment in it. All of these trends are related to current buyer needs.
— Today's generation chooses life “here and now”, the most ready-made options — apartments with already completed finishing, — says Dymova. — The preference for format has changed: the most popular have become Euro-«two-room apartments», which are gradually replacing the demand for studios. Another trend — increase in the cost of 1 sq. m of secondary housing. This is largely due to the renewal of the housing stock, improving the quality of housing, and the implementation of the renovation program.
Prices, of course, will be influenced by the policy taken by the authorities to curtail preferential mortgages. “If current mortgage rates remain the same, and even more so taking into account their possible increase, a weakening of demand is inevitable: in 2024, the market will operate at 70% of its normal level. Accordingly, there will be an increase in the number of objects on display and a gradual decrease in prices,” — says the director of the “Secondary Market” department «INCOM-Real Estate» Sergei Shloma. According to his forecast, the price reduction will be approximately 10%, and it will happen no earlier than the second quarter of 2024.
At the same time, Shloma does not expect a massive outflow of buyers of Moscow “squares”, because most transactions — alternative, when a person sells one apartment and buys another with the proceeds. According to his estimates, 40% of owners — sellers of secondary apartments also purchase secondary housing in return, 30% buy properties in new buildings and only 30% of the market is pure sales. “Buyers were not put off by 17% interest rates as we expected, as they usually only need mortgage funds for additional payments. And these are not huge amounts,” — added by the analyst.
Svetlana Bardina recommends that potential buyers of new buildings enter into a deal at the initial stage of construction, as this in the future allows them not only to save, but also to increase funds. It is desirable that projects have developed infrastructure, high-quality landscaping, good views and ergonomic layouts.
In the secondary market, in addition to the characteristics of a house and apartment, transport accessibility is especially valued. Residents should find it convenient to get to work or school, so it’s worth analyzing all possible routes and travel times in advance, recalls Yulia Dymova.
— Universal advice for home buyers — choose the most liquid projects with an eye to the fact that under certain circumstances you will want to resell or rent out the apartment, — Ruslan Syrtsov noted. — Look at the property you are purchasing (even for yourself) a little like an investor: is there a school, kindergarten, clinic, shops nearby, if you have to look for apartment buyers among families; how far is it to walk to the metro and go to the center, which is important for a potential tenant; Will an apartment without a dressing room, a second bathroom, a balcony, or a storage room be in demand?