The May launch volumes of new apartment building projects exceeded both April and last year’s figures. It is important that the most active growth rates are demonstrated by regions that are not in the top 10 in terms of housing construction
In the first five months of 2024, Russian developers were more than actively launching new projects: the total amount of withdrawn space was 19.3 million square meters, +17% compared to the same period last year. In May, for example, 3.9 million new-built squares were launched, which is almost a third more than a year earlier, according to the analytical center Dom.RF*. If we consider the entire multi-family housing construction portfolio, then since the beginning of the year it has grown by 7%, to 113 million square meters, almost coming close to the record value of 118 million squares in 2019, experts emphasize.
The portal “Unified Resource of developers” also shared its calculations*. In short, according to ERZ statistics, since the beginning of the year, 2307 objects have appeared on the Russian market (22.2% more than in the same period of 2023), or 401.7 thousand apartments with a total area of 19.63 million squares. Specifically, in May, developers brought out 454 new MCD projects for 81.3 thousand apartments with a total area of 3.97 million square meters, which is 24% higher than in May last year. Most of the facilities were launched in the Sverdlovsk (33), Novosibirsk (30) and Tyumen (29) regions, and the market area of apartments in May-2024 increased by 29% compared to May-2023.
According to the research “House.Russia”, the launches accumulated from January to May exceed last year’s level largely due to the high pace of construction work outside the regions included in the top 10 in terms of housing construction. So, as of June 1, 43% of new housing was built outside the leading group.
“We see that in the regional context, the structure of housing construction is changing towards an increase in supply in those regions of the Russian Federation where development activity was previously low. In January — May, 9.7 million square meters of new projects were launched in the top 10 regions (+12% year-on-year). Outside the top ten, the volume of launches is comparable (9.6 million square meters), but the growth rate here is almost twice as high (+23% year on year). Taking into account the targeted expansion of family mortgages in favor of residents of regions with a low volume of housing construction and cities with a population of less than 50 thousand inhabitants, this trend will only intensify,” said the head of the analytical center “Dom.Russian Federation” Mikhail Goldberg.
When comparing the dynamics of launching new projects in Moscow and in other regions, “class differences” are striking. In the capital, according to estimates by experts of the Development Institute, almost all the growth of new projects in the five months of 2024 (2.4 million square meters, +33% year-on-year) fell on the segment of standard housing and comfort class (+55% year-on-year): The capital’s developers sought to put on sale the maximum volume of new buildings in the mass segment before July 1 — the date of disconnection of preferential mortgages, they say in Dom.RF.
In other regions, developers have been most actively increasing the launches of new business and elite class buildings (+59% compared to the five months of 2023). The leaders in growth here are Sochi, Simferopol, Vladivostok, Krasnodar and Kazan. Although the share of this segment in the total volume of launches remains low and at a distance of January — May 2023 is only 10%.
By the way, as for the aspirations of Moscow developers and in general the current state of affairs in the new-build segment, which is flying at full speed to the “hour X” mark: according to estimates of the savings division “Domklik”*, in May 2024, 30.4 thousand transactions were concluded in the primary market, which is almost twice as high as in April, and 4.4 times higher than in March. Moreover, the indicator turned out to be even higher than the values of March — June 2023, which ranged from 25 thousand to 27 thousand transactions. In turn, the share of loans for new buildings from the total number of mortgage loans increased to 39.4% (+12.2 percentage points compared to April) and approached the record value that was recorded in December last year (39.7%).
Domclick analysts attribute a significant increase in demand in the primary market not only to the approaching completion of the state support program, but also to discussions around changing conditions for family mortgages. Recall that the proposal to raise the rate from 6% to 12% for borrowers with children over the age of six is still in play.
According to Domclick statistics, the share of the primary market has grown in all major regions. The largest increase was observed in the Voronezh Region (+18.5 percentage points), the Rostov Region (+17.5) and the Republic of Tatarstan (+16.1). In Moscow and St. Petersburg, the parameter increased by 15.1 and 12.6, respectively. “For the second month in a row, Moscow has been leading among the regions in terms of the share of the primary market in the total number of loans issued. If in April the indicator exceeded 47%, then in May it already amounted to 62.5%,” Alexey Leipi, director of the Domklik division of Sberbank, shares the data.
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Analysts add that against the background of the ban on the construction of studios and apartments with an area of less than 28 square meters, an increase in demand for small-sized housing can be expected. In recent years, such apartments have been very popular: according to Domclick, in 2023 the share of studios and studio apartments in the total number of transactions was at the level of 50%.
However, when talking about the launches of new projects and the total volume of the Russian construction portfolio, it should be mentioned that, according to most market players, after July 1, the primary market is waiting for a significant drop in sales. The optimal scenario is considered to be one in which the indicator is -30%, pessimists even talk about – 50-60%.
However, most are confident that gradually everyone — developers, financiers, and buyers — will adapt to the new conditions. So the expected drop will not be too long and is unlikely to force banks to revise the financial models of projects and give developers the go-ahead to drastically reduce prices.
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