Construction market experts expect a collapse of prices for real estate after a long period of dynamic growth.
So far the prices for objects are fixed around the peak and they are likely to keep on creeping upwards for some time. For example, in Yekaterinburg alone, the price per square meter increased by 4.3% in the first two months of 2022.
In the future, as analysts expect, there will be a sharp decline in demand with an ever-increasing supply, which will significantly adjust the market.
Experts predict a drop in real estate prices. Photo: Yandex
Such forecasts are connected with mortgages rates, as well as with the reduction of the purchasing power of the population due to rising inflation and devaluation of the ruble
.
According to the Ural Real Estate Chamber, as of the end of February 2022, the average offer price in the secondary housing market of Ekaterinburg amounted to 97,712 rubles. Thus, the price index increased by 0.3% for a week, by 1.6% for a month, and by 4.3% YTD. Experts point out that the current price has once again become a record for “secondary market”.
Thus, the cost of objects in the city center increased by 0.8% and reached an average of 124,672 rubles per “square meter”. Apartments in the first and second price brackets rose in price by 1.2% and 3.0%, respectively. Now their price ranges from 91,458 to 104,777 rubles. Objects of the third and fourth price brackets follow with tangible growth – 81,456 and 64,547 rubles.
UPN analysts point out that prices rose against a background of record supply. By the end of 2021, the Yekaterinburg housing market remained very active thanks to low mortgage rates in a situation of growing inflation, which supported demand and allowed sellers to raise prices despite increased supply.
“At the end of Q4 2021 the volume of construction increased to 3.4 million square meters. The number of unsold new buildings on the Yekaterinburg market remains at the level of 30 thousand apartments. The current prices on the primary market are 22% higher than they were in Q4 2020, and the annual price growth on the deficit secondary market accelerated to 19%”, – they say in the UPN.
However, according to Sergey Zaitsev, head of the center of new buildings of the federal company “Etazhi”, in the current reality of growing mortgage rates and decreasing purchasing power the further prospects of the real estate market will depend on the government support measures.
“For our market 17% is a defensive mortgage rate, which leads to stagnant demand in the secondary housing market. And in these conditions, it should be understood that demand will decrease and supply will grow, including the entry into the market of mortgage apartments, the owners of which will decide to sell them because of a decrease in their income.
So in the short term we do not exclude the possibility of growing discounts for sale of secondary housing at 10-15%, and if the current situation is prolonged and mortgage rates remain high, some objects may lose in price up to 25-30% by the end of the year,” – said Sergey Zaitsev.
For the housing market this phenomenon is temporary and stagnation in prices was also observed in 2014-2015, when the key rate rose sharply to 17%, but after the stabilization of the situation, real estate prices not only won back the fall, but also exceeded the level of inflation
.
As for the new construction market, experts believe that everything will depend on state support measures, both for mortgage rates and loan rates for developers, as well as the regulation of prices for basic construction materials and effective and prompt measures for import substitution in construction.
Since July 1, 2019, developers can only build housing with bank loans, or with their own funds, if they have them. Citizens’ money will be placed in a special account, an escrow account. There they will remain until the company fully receives a permit to commission the house.
In fact now for the implementation of new projects developers will have to take loans on substantially less favorable terms, which means that service bank loans again will fall within the cost per square meter. In addition, the price of new buildings will probably be imposed on the collapse of the market of construction materials, which occurred last year. On average their prices went up by 30%, and for some important items – by 60-100%.
“Builders are now in a difficult situation, when the cost of construction is growing, but further growth in the cost per square meter is limited by the purchasing power of most of the population. If the state support measures are taken, including the ability to curb the rise in the cost of construction materials and eliminate their deficit, it is likely that prices for new buildings will stabilize at current levels in order to maintain demand.
If the measures fail to produce the desired effect and the growth of prices for construction materials continues, the reduction of new projects entering the market, the reduction of supply and further growth of the price per square meter cannot be excluded, but it is the most pessimistic scenario for the market,” summarized Sergey Zaitsev.
Market participants have already formed their requests to the government. In this situation, may help pass a bill on a temporary phased disclosure of escrow accounts, as well as provide cheap loans to developers, these measures will minimize the risks for both small and large developers and support the operation of the industry in the current environment.
Author: Nikita Svetlov
