‘We are restraining prices for now, but up to a certain point’ — a rise in price awaits market of new buildings in Kazan

Moscow developers, due to a failure with imports, are withdrawing apartments with a fine finish from sale, while in Tatarstan they are preparing to rewrite all price tags

Developers in Moscow have faced difficulties in the supply of imported finishing and construction materials. In Tatarstan, as Realnoe Vremya found out, the main problem is a noticeable increase in prices for such products. The more expensive materials will drag the prices of apartments with them, and with finishing — especially. How the housing market in the republic is reacting to changes, what trends can affect the cost of apartments — read in our material.

Good news for the new buildings market of Kazan

In Russia, at the instruction of the president, the interest rate on preferential mortgages is reduced to 9%, and the loan ceiling is increased to 30 million rubles in the capitals and up to 15 million in the regions. The preferential rate will still be applied up to the amount of 12 million and 6 million, respectively, but now one can add a loan at the market rate to it. Thirty million and 15 million are the maximum size of the total loan.

“So that people are not limited only to these amounts and have the opportunity to maneuver in choosing housing, the government has increased the maximum loan size for preferential and family mortgages, respectively, to 30 million and 15 million rubles," explained the head of the government, Mikhail Mishustin.

Tatarstan has assessed this news in different ways. The head of Briz construction company, Andrey Belyakov, believes that the strongest impact on the real estate market will be a reduction in the interest rate, and the effect of raising the ceiling of loans will not be so noticeable.

Antonina Darchinova, a real estate market expert, is nevertheless confident that this is good news for the Kazan new construction market:

“In the city, we have an average purchase amount of a new building for a long time over 6 million rubles, and since February 2022 it has increased to 7-8 million rubles. With a limit of the loan amount of 6 million, only buyers of one-room apartments and studios had the opportunity to use the rate on a preferential or family mortgage. Larger apartments or business class apartments are completely left without support, as a result, there has been a decrease in demand in this segment.”

At the same time, according to her, it should be noted that the rate of 12% per annum makes the mortgage available only to customers who are able to pay large monthly payments. Besides, the secondary housing market still remains without support, which is also directly linked to the mortgage and new construction market.

The head of Reagentstvo real estate agency, Yury Chikirov, believes that the reduction in the interest rate on preferential mortgage is primarily aimed at new buildings.

“But the key factor for the real estate market (including commercial areas) is to revive the market of secondary housing and commercial facilities. Even the possibility of purchasing with a mortgage at reasonable interest dramatically increases the liquidity and investment attractiveness of real estate in general. So while we are seeing the support of developers with new buildings, but the trend is already good," he said.

“But the key factor for the real estate market (including commercial areas) is to revive the market of secondary housing and commercial facilities. Even the possibility of purchasing with a mortgage at reasonable interest dramatically increases the liquidity and investment attractiveness of real estate in general. So while we are seeing the support of developers with new buildings, but the trend is already good," he said.

“We don't know at what price we will be able to build”

In the meantime, other trends in the real estate market lead to an increase in prices for a square metre of housing. So, according to CIAN, Moscow developers began to withdraw apartments with finishing from sales, as interruptions in the supply of imported building materials have begun.

According to a study, the share of real estate with finishing in the primary market of Moscow Oblast has decreased against the background of international sanctions from 64,9% to 59,6%. According to the company, finished housing, which is on average by 9% more expensive than real estate without repairs, is available for sale in 160 projects in Moscow Oblast. But at the same time, three large development companies have already completely or partially abandoned the sale of apartments with finishing.

The situation in Tatarstan is somewhat different. For example, Antonina Darchinova notes that the specifics of the supply in the republic and Kazan differ from Moscow.

“It can be seen from the CIAN article that the decrease in the supply of apartments with finishing has been by 5%, which is statistically not very significant. In the market of Kazan, a very small percentage of projects were already available in the basic version with finishing from the developer. Developers in Kazan are more likely to use the offer of adding the cost of finishing to the cost of the apartment. For the developer, this service is more of a service that increases customer loyalty, which does not bring profit, but significantly complicates the process of transferring an apartment. In the current situation, when customers are focused more on the price when choosing real estate than on quality and service, it is likely that developers will refuse it," she said.

The most popular option among Tatarstan residents, according to the expert, is apartments with pre-finishing, when the developer plasters the walls, wiring electrics, and finishing finishing materials are already selected and laid by the client himself. Nevertheless, the expert suggests that even pre-fine finish offers may rise in price:

“As it is also noted in the article of CIAN, there is no formed cost price for some positions necessary for construction yet. That is, we do not know at what price we will be able to build, which means at what price we can already offer to the client. Plus, the credit burden on developers within the framework of project financing is growing. Now many are trying to restrain prices in order to maintain demand, but by the end of the year they may grow by another 20-30%.

Share of apartments with a fine finish in Kazan is low

Iskander Yusupov, the deputy director general of Unistroy company, in turn, draws attention to that not only the materials themselves are becoming more expensive, the cost of work is also increasing:

“If we talk about finishing, then there are problems not so much in imported materials (there are analogues), but in the workforce, with contractors. Because if the volumes are large, then in some places they are simply not enough. And the cost of work has increased significantly recently. But if we talk specifically about tiles, laminate and so on, then there are no strong difficulties. Yes, some brands have disappeared from sale, but this is not such a highly specialised market as, for example, high-tech electronics, there is still an alternative here.”

According to the expert, the volume of offers with a fine finish in Kazan is much more modest than in Moscow, so its sharp reduction is not expected:

“We have objects with a fine finish, but it is not as massive as, for example, in Moscow. There, the share of apartments with ready-made repairs is about 55%. This is not the case in Kazan yet. We don't have such large volumes, but we also feel that implementation has become more difficult here. I can't say for the whole of Kazan, but in our projects it is about 15-18%.”

New buildings will become more expensive, and secondary housing may become cheaper

Developers also have problems with imported equipment. Sometimes partners from unfriendly countries simply refuse to supply it, for example, Finnish elevators. “But there are Turkish and Chinese analogues, in principle they are no worse in terms of technical characteristics, they just don't have such big names," Yusupov noted. Import substitution and building new logistics will inevitably raise prices for new buildings. The delivery of equipment and materials through third countries is much more expensive. But secondary housing may become cheaper.

“New buildings will certainly rise in price. Even those analogues that we are going to purchase now are no cheaper than European ones. Apparently, there are elements of speculation, this time. And secondly, logistics has become more difficult. Now sometimes, to deliver something from a country with which we have strained relations, the supplier has to send it through other countries, through Armenia, Turkey, for example, or somewhere else. Because of this, transportation becomes much more expensive. Therefore, all factors add up in favour of that housing will become more expensive. This applies to new buildings. Secondary housing does not depend on the cost price, lives according to completely different laws. The secondary housing right now has the prospect of a decline, because the mortgage for it is not subsidised by the state, and there is a decline there now, because the mortgage for secondary housing is expensive, and most of the transactions in the country are still mortgages. Therefore, people do not want to take such a percentage and postpone," the interlocutor of the publication believes.

“The cost of building materials is growing and does not stop”

Director General of ZHIK GC Emil Khusnutdinov outlined similar problems with equipment and rising prices for building materials:

“There are problems with imported equipment, in particular with pumps, elevators. For the decoration of common areas, we use domestic materials, and they are no worse than foreign ones in terms of quality. The Tatarstan market is dominated by pre-finishing and rough finishing. I don't think that the problems of developers in Moscow are critical, most likely they just promised something that they can't fulfill. It seems to me that now there are enough finishing materials that are produced here.”

According to Olga Volchkova, the deputy director general of Gran construction company, developers will definitely not be able to save money due to import substitution. Major players will not risk their reputation at the expense of lower-quality materials. And with the increase in the costs of developers, apartments will eventually become more expensive.

“We make design projects taking into account domestic industrial and construction materials. We do not rent our apartments with a fine finish from sales and will continue to work with them. Decisions have been made that transform into support for our manufacturers. Some materials are more difficult to replace, some are easier. What concerns tiles, domestic producers have learned to do. The cost of building materials is growing and does not stop while we keep prices down, but this is up to a certain point. It all depends on the cost price," Volchkova explained.

According to her, the company will not use materials of the worst quality in order to preserve the quality of work. “In fact, high-quality GOST building materials are now expensive on the market. Since we have full warranty obligations for 5 years as a developer, taking into account the finishing, this applies, the costs increase," she added.

“We do not withdraw from sales, we do not plan, we know that this is in demand”

Deputy CEO of #Suvarstroit Elvira Galyautdinova said that now the company mainly works with Russian partners and this made it possible not to deviate from the original plans for offers with finishing.

“Our company works mainly with domestic suppliers and uses Russian-made materials in construction. We promptly found a replacement for foreign suppliers and use domestic building materials that have replaced imported ones that have left the market," she said.

The increase in prices for new buildings, according to Galyautdinova, depends more on the general rise in price of building materials and inflation. At the same time, there are no plans to remove new projects in finishing from sale.

“Our plans for the sale of apartments with finishing remained unchanged. Such ready-made solutions are in demand. In addition, 30% of buyers are nonresidents who find it convenient to buy a house and immediately move into an apartment with repairs. It remains only to deliver the furniture," said Galyautdinova.

As for prices, apartments in finishing are becoming more expensive due to general inflation, which has affected the entire building materials market as a whole, the interlocutor of the publication stressed. “Developers do not regulate this issue and depend on the conditions of production and supply of materials," she concluded.

Emil Ziyangirov

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