The Ministry Of Construction Believes That The Active Phase Of Price Growth For New Buildings Is Over

According to the ministry’s forecasts, new buildings will moderately rise in price by 4-5% per year. What happens to the demand in the primary market after the cancellation of preferential mortgages and how does the secondary market feel?

The Ministry of Construction announced the completion of the active phase of price growth for new buildings. In the future, the growth rate will not exceed 4-5%, Deputy head of the department Nikita Stasishin told reporters. According to him, the pace of price increases in the primary market is slowing down after the peak that was in the third quarter of last year due to excessive demand. The price of new buildings increased by 0.6% in the second quarter, and the cost of housing in the secondary market decreased by almost a percent, Stasishin said.

Earlier, the head of the Duma Committee on the financial market, Anatoly Aksakov, said that, according to some estimates, in the second half of the year it is possible to reduce real estate prices by up to 40% due to the cancellation of preferential mortgages. The Ministry of Construction does not agree with such estimates and expects a moderate price increase of up to 5% per year in the future.

Konstantin Barsukov, General Director of the Relight-Real Estate agency, comments:

Konstantin Barsukov, CEO of the Relight-Real Estate agency, “Now we are in a situation where developers will not reduce prices. We have such a thing as project financing, and banks give money to developers, and they generally interfere in the processes. When a developer comes to them, he actually did not just come, took money from the bank and that’s it, but the bank looks at the project, including how the project will be sold, what sales forecasts and prices at which it will be sold. The developer also understands human psychology. A person who buys a new building is ready to wait, he does not need an apartment here and now, he needs it in a year or two. He calmly buys even 2026-28 and even 2029 built, apartments are bought in houses, so they are ready to wait. Now imagine that the developer has started to reduce prices, the person who comes, what will he say? He will say: “So then I will wait until prices drop further, and when they drop completely, then I will buy what I need to buy now, I don’t need an apartment today, I will buy it later.” The developer understands that if he starts to reduce prices, he will kill demand. Moreover, developers have built such a model today, when in general they should not only not reduce, but also raise prices a little so that demand is more active. Therefore, when the Ministry of Construction tells us that the active phase of growth has passed, and now there will be a passive phase of growth, do you feel it? He did not say if there would be a drop, prices would be flat, he said: there would be an inactive growth phase, but growth, 4-5% per year. He actually gives out the aspirations of developers without fail, and, in fact, the Ministry of Construction has long been in the position of supporting developers, in fact, they support developers with such statements. And I fully trust this forecast, because in fact, in my opinion, this is not really a forecast, but a kind of consolidated opinion of construction organizations.”

The situation in the secondary market is also difficult. On the one hand, the number of buyers has decreased, and there are few deals now. On the other hand, sellers do not want to lower prices yet. Dmitry Taganov, Head of the INCOM-Real Estate analytical Center, continues:

Dmitry Taganov, head of the INCOM-Real Estate Analytical Center, “The demand for secondary goods is about a quarter lower than last year, we record. But at the same time, as if for liquid objects, that is, for the main part of the objects that we deal with, we record the lack of dynamics in terms of exposure time. This suggests that in fact liquid objects have been sold and are still being sold. That is, for 60 days on average, objects in our company hang in the database, after that they are sold. Probably, you can find different situations on the market when apartments hang up and so on, because there really are fewer buyers, it is noticeable. But where the price is adequate to the qualitative characteristics of the object, according to them, the exposure period is about 60 days on average, as it was a year ago, so it remains now. Why don’t sellers in the secondary market reduce prices? This is because the specifics of the secondary market are such that it is a kind of mass of people who act based on what they see around them. That is, while they do not see any general price movement in open databases, they think that they can probably stand for a little longer, suddenly they will sell out. And such indicators as the exposure period for the apartments actually sold, the number of calls for the objects being sold, are not available to an ordinary seller on the secondary market, so, of course, they do not understand what to do. But in fact, of course, the situation has been such for a long time that it is required to reduce prices and somehow meet the buyer halfway if there is really a task to sell the apartment, and not stand with it for a year, but many sellers do not understand this.”

The Ministry of Construction also reported that the commissioning of housing in Russia this year will amount to about 100 million square meters.