One of the most painful topics for home buyers remains the issue of affordability. Moreover, it is relevant both for Russia and for other states — and for many Western countries it is often the most acute. The situation is also unfavorable for the construction sector: the fewer people have the opportunity to purchase housing, the less it needs to be built. As a result, a huge sphere can gradually go into stagnation, if not into a minus.
It is logical that against this background, a lot of attempts are being made to find a way to make the purchase of real estate easier and more profitable for the maximum number of residents. Konstantin Zlobin, Director of Development at Asterra, told us about the options in question.
Is everything in the black?
The trend towards increasing housing affordability is global, and it has been actively discussed for several years. There are several main aspects that the authorities of different states and businesses pay attention to.
Firstly, social ones. Of course, it is beneficial for any country to have as many of its citizens as possible living in comfortable conditions. This is both an incentive for the general development of society, and an increase in well—being, and a decrease in criminogenic danger – in a conditional poor “ghetto” crime will be higher than in a calm, prosperous area. The same social advantages include leveling difficulties for migrants: if they can get access to high-quality housing, then there are fewer reasons for domestic conflicts, as well as the risk of an influx of homeless people from among the arrivals.
All these aspects are directly reflected in the second group of factors — economic. The relationship is simple: the more affordable housing is, the more actively it is being built — that is, the faster the development market is growing. This also includes a parallel increase in demand for goods in related industries — from furniture and repair goods to logistics and building materials. Thus, housing affordability is beneficial to all parties.
Only in theory
However, in practice, the situation is less positive. In many countries, people’s well-being, and with it the opportunity to purchase new high-quality housing, is growing much slower than the cost of real estate.
For example, in Russia (as in other countries), according to experts, a massive preferential mortgage played a negative role. According to the Central Bank, over the 4 years of these programs, the average cost of 1 sq. m. The cost of housing in new buildings has doubled on average, and the income of the population has increased by a maximum of 1.5 times, and this is excluding inflation. As a result, the purchase of an apartment in Russia is becoming almost unattainable for an increasing number of residents.
As the possibilities of buyers in terms of “squares” decrease, the moment of stagnation of the entire market necessarily comes: without solid demand, it makes no sense to build new facilities.
With the world by a thread
The authorities of many countries are considering their own options on how to prevent the separation of housing prices from adequate indicators. There are many ways to support the availability of real estate — let’s evaluate the most popular ones.
1. Financial
The main goal is to reduce the economic burden on potential buyers. There are many ways: for example, a joint mortgage. Unlike conventional housing loans, here it is not the spouses who get the opportunity to purchase an apartment or a house, but friends, relatives, colleagues or neighbors. Accordingly, the group’s capabilities are wider, so they have more purchase options. Plus, the payment can be divided between borrowers, depending on their share.
Another option is a proposed mortgage sold in the United States. So, loan rates are historically high, as is the cost of housing, and there are many people who want to move to a new apartment — but only if expenses are minimized. The essence of the offer: the buyer agrees to pay the mortgage of the real estate seller — on the terms under which he received it. For example, instead of 5% per annum, for which the loan will be issued now, it will be possible to pay at the old rates — for example, 3%. It is beneficial to everyone, although it is associated with legal risks.
A similar way is to analyze the benefits provided to the buyer and choose the most profitable option for him. It is not the borrower who makes the calculations, but a real estate company or a bank — this is how they build up their own customer base.
A separate area is direct support for certain projects. An example is the construction of modular housing or buildings made of house kits. The state stimulates the chosen niche — most often, it is quite cheap and allows you to build an object quickly. Many countries, including Russia, use such projects.
2. Organizational
There are also many options to ease the situation for home buyers here, they vary from one country to another. In some US states, the principle of limiting the resale value of real estate purchased on the primary market applies. That is, there are significantly fewer opportunities for speculation when an apartment or house goes to the “secondary market”.
In Detroit, they went the other way: the land tax was reduced on part of the real estate, which is intended for socially vulnerable citizens. As a result, many families got the opportunity to purchase more modern facilities.
The alternative is financing the construction of social housing. There are many examples of such projects, they are being implemented in different countries. It is worth adding here direct support for housing loans for borrowers from certain groups. In Russia, we note the IT mortgage, a program for the purchase of housing in the Far East and in rural areas. Separately, we will also note the program of integrated development of territories, which allows the construction of modern houses on sites freed from old facilities.
3. Technical
They are associated with the ability to build easier and faster, with the involvement of fewer workers and highly qualified specialists.
There are many ways to increase the pace of construction of facilities: the use of artificial intelligence in the design and analysis of the site itself, and special materials (from mobile 3D construction printers to fast-drying concrete grades), and even an emphasis on volumetric block, wooden or modular housing construction (there are many such examples in our country). All options are designed to make the construction of housing more expeditious and less costly.
Thus, the government, the banking sector and builders are more than interested in finding the best options to make the purchase of new housing affordable for residents. Demand provides developers with a stable, predictable future, and the authorities minimize social discontent. Attractive, isn’t it?
Author
Yulia Yanukovych Editor-in-Chief
I am responsible for the work of the editorial office. I write expert interviews and guides.
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