There are fewer discounts for buyers of new buildings in Moscow, this is happening against the background of a temporary revival in demand in the last months of the state mortgage program
The prevalence and average size of discounts in the primary market of Moscow decreased in May, follows from the review provided by the editorial board of the real estate company Metrium. The trend is confirmed by other market participants interviewed by RBC-Real Estate.
According to Metrium, at the end of May, discounts are offered in 150 new buildings, for the year and relative to the first quarter, the indicator decreased by 6.3%. The average discount in the primary market is 3% compared to 7% in April-May 2023. This situation is explained in the company by an increase in demand against the background of the imminent completion of a mortgage with state support. Other experts are also observing the trend. “In the period from February to May, there were more discounts,” says an expert from Miel (Stroginskaya Floodplain office) Evgeny Brazhin. “Now that there is an incoming stream of customers closing a government mortgage or a family mortgage under the terms before July 1, 2024, developers are less willing to accept discounts.”
Dmitry Efimov, Deputy Commercial Director of PIONEER, notes that the average discount now does not exceed 3-5%. “For some projects, it has decreased, which is usually due to an increase in the construction readiness of the project,” the expert says.
At the beginning of the year, the situation was reversed — for example, in January there were even more discounts than in the New Year’s sale.
“Currently, developers of metropolitan projects in the luxury real estate segment provide, rather than discounts, but small bonuses to increase loyalty. They usually do not exceed 3%,” says Olga Zyblaya, Sales and Marketing Director of Turandot Residences & Artisan club houses. The size of marginal discounts in the high-budget segment is traditionally low, the expert notes, but over the past year it has decreased from 8% to 5%.
Glavstroy points out that the prevalence of discounts in the primary market decreased from 56% of all projects in January to 45% in May. At the same time, the prevalence of discounts of the minimum size — up to 1% — increased by 10.6 percentage points, accounting for 54.7% of all discounts provided, the company noted. On the contrary, the share of discounts in the range from 1% to 31% has decreased since the beginning of the year.
How discounts on new buildings in Moscow have changed in 2024
| The discount amount | Share, January 2024 | Share, May 2024 | Share change, percentage points |
|---|---|---|---|
| 0% and less than 1% | 44,1% | 54,7% | +10,6 |
| 1–11% | 20,2% | 14,0% | –6,2 |
| 11–21% | 28,6% | 27,8% | –0,8 |
| 21–31% | 4,6% | 3,0% | –1,5 |
| 31–41% | 2,6% | 0,0% | –2,6 |
| 41–51% | 0,0% | 0,5% | +0,5 |
Data: Glavstroy
The company draws attention to the fact that against the background of a general decrease in the prevalence of discounts, offers with a discount of more than 40% appeared on the market — a year ago they did not exist, now such conditions apply to 229 lots. “In May, the maximum discount increased, reaching above 40% (although only in one project). In January, the maximum discounts above 35% were noted in 22 projects,” says Elizaveta Rodina, head of the Marketing Research and Analytics Department at Glavstroy.
The maximum discount has increased from 30% to 40.2% since the beginning of the year, Ruslan Syrtsov, Managing Director of Metrium, also notes. “A year ago, the peak value was 34%. And the largest indicator in the history of the market was recorded in January 2023 — 63.3%,” the expert says.
Market participants note that in some cases the discounts provided are, in fact, a marketing ploy. “Discounts often become a fictitious sales tool. That is, developers raise the price first, and then reduce it,” explains Maxim Kavaryants, General Director of the ARQ CITY real estate agency. “Discount promotions are not permanent now, as they were two or three years ago. Special offers are almost always limited in time,” he adds.
Evgeny Brazhin from Miel also points out the prevalence of fictitious discounts. “It should be borne in mind that most discounts are veiled and leveled taking into account the rise in the cost of the object when choosing a tranche mortgage, a mortgage subsidized by a bank or developer, when using a mortgage with cashback or with a lack of down payment,” the expert warns.
“As for the maximum discounts, large discount values (more than 25%) are more likely marketing activity than real price reductions. These are spot offers,” emphasizes Leonid Savkov, Commercial Director of MR Group. — But the reason for such exclusivity is not necessarily in the desire to sell illiquid lots. Or, perhaps, that the developer, according to the project sales plan, just needs to increase the implementation of a given typology.”
How else do developers support sales
Despite the increased demand before the completion of the state mortgage program, developers still face the task of stimulating buyers in conditions of high market rates — with the current key rate, they are actually prohibitive, and recently several large banks have decided to further increase.
“Currently existing ways to stimulate demand from developers are most often associated with the offer of various forms of payment: installments, trade-in, subsidized and tranche mortgages,” says Dmitry Efimov, Deputy Commercial Director of PIONEER.
Now the main incentive tool for buying new buildings is installments and other tools related to payment terms, says Vera Stefan, Commercial Director of Asterus. “In the absence of an affordable mortgage, discounts of a couple of percent do not play a big role in making a decision. But the opportunity to receive comfortable monthly payments or not to look for a large amount for the first installment is exactly what buyers are in demand now,” the expert explains.
Maxim Kavaryants also calls among the ways to maintain demand actively used by developers in April-May:
What will happen to the demand and discounts on new buildings next
After the completion of the state mortgage program, demand in the primary market will inevitably cool down, the interviewed experts agree. “Discounts are likely to grow and become more widespread until the key rate is lowered,” Ruslan Syrtsov believes. “At the same time, prices for new buildings will continue to rise slowly.”
“If we talk about how the completion of the mortgage state program will affect the policy of developers on discounts, we assume that developers will, firstly, offer alternative payment methods, and secondly, subsidize the mortgage rate,” predicts Dmitry Efimov, Deputy Commercial Director of PIONEER. — You should not expect big discounts, since construction companies also use project financing at market rates. In addition, modern materials are used for the construction, purchased at current market prices, which affects the cost of the project and its final price.”
Alexandra Krzhevova, Director of Development at Best-Novostroy, also draws attention to this point. “It will take time, approximately several months, for the primary housing market to adapt to the new conditions. In any case, you should not expect significant discounts on the Moscow housing market. Developers build with credit money and must stay within the planned values of prices and cash flow,” the expert says.
Maxim Kavaryants also points out that a decline in demand in the medium term may lead to an increase in the cost of project financing for developers (according to current rules, the lending rate decreases as the escrow account is filled, which is directly related to the pace of sales). “Slow replenishment of escrow accounts will slow down the reduction of project financing rates, in the future the cost of construction will grow,” the expert notes.
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