Experts: Residential Bubble Could Burst

Experts: Residential Bubble Could Burst
Experts: Residential Bubble Could Burst
14 September, 15:53Photo:
The mortgage market in Moscow and the region is breaking all records: by the end of 2021 it will grow to 1.8 trillion rubles. This is a quarter more than last year. This forecast was given today by VTB Bank.

Really people will have to put up with the growing prices for real estate and apartments of 15 sq.m. in the "people"?

So far, the situation on the real estate market is in favor of developers and allows, by rewriting price tags, to compensate for all additional costs for the building materials that have risen in price. In Moscow, just over the past 12 months, a square meter has risen on average by 26% - to almost 233 thousand rubles. It is not surprising that developers are literally bathed in money: the developer Samolet in the first half of 2021 increased its net profit under IFRS 4.6 times higher compared to the same period last year to 3.2 billion rubles, Ingrad increased its net profit in 16 times - up to 690 million rubles, LSR - 2.2 times - up to 5.7 billion rubles, and the king of Moscow renovation PIK group earned 4.9 times more - 69.4 billion rubles! So all the words that real estate is becoming more expensive because of building materials contain a fair amount of guile.

However, experts believe that the best days of developers will soon be left behind - the real estate bubble is about to burst. There will soon be no one to buy new buildings at current prices. The situation is changing as quickly as possible, and similar trends are already being traced. In July-August this year, the share of secondary housing in the metropolitan area amounted to more than 50% of all real estate transactions. People have emptied their stash, got into loans, but there is still not enough money for new buildings. As a result, a square meter in primary housing in Moscow fell in price in August, according to the service "Square Meter", by 3% - to 280 thousand rubles, and according to "Metrium", it stopped growth altogether. Not a disaster for developers yet, but these are the first signals.

The change in demand is most evident in the regions. It is in Moscow that a constant flow of people allows you to sell anything you want, and in the regions, developers have to listen more closely to the needs of consumers. So, in the Urals over the past six months, the format of the offered real estate has changed significantly: instead of spacious "three rubles", the market has been flooded with compact studios - all for the sake of economy. The rise in prices has also stopped in Tula, where the deficit of new buildings, according to experts, will be able to be compensated for in five years at best.

As a result, realtors expect that by the end of autumn the demand for real estate in Russia will fall by 10% -15%. The situation is aggravated by the recent decision of the Central Bank to raise the key rate by 0.25 percentage points. - up to 6.75% with the prospect of increasing to 7%. Banks do not immediately react to such changes - after a couple of months, the weighted average mortgage rate may rise symmetrically by 0.5 percentage points. up to 8.8% for the primary market and up to 9% for the secondary market. Add to this also voluntary-compulsory life, health and income insurance, and you get a completely uninteresting and overwhelming offer for millions of people.

In July 2021, banks in Russia, according to the Central Bank, issued 151.7 thousand mortgage loans - 15.3% less than in June. Another effect was the revision of the preferential mortgage with an increase in the rate from 6.5% to 7% and a limitation of the maximum amount of 3 million rubles for all regions, including Moscow, St. Petersburg, Moscow and Leningrad regions. Along with the increase in the key rate, mortgages will again become an unbearable luxury.

The authorities have driven themselves into a dead end. Subsidy programs have inflated a bubble in the real estate market, and the curtailment of the market support program leads to the fact that the bubble bursts, influential developers and people who bought apartments at exorbitant prices are unhappy, and the implementation of the national housing project is thwarted. Haste and ill-considered decisions led to a chain reaction with an unpleasant outcome. The authorities are trying to come up with something new, for example, the Accounts Chamber proposes once again to expand the preferential mortgage, but with the rule that one borrower can take only one preferential loan. In the foreseeable future, this looks like tying people to one single dwelling without the possibility of changing it, which strongly contradicts global trends towards increasing population mobility.

In any case, one thing is clear: the real estate market will shake, and developers will have to rewrite the price tags downward if they do not want to stay with unsold apartments.

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