‘Housing prices certainly aren’t going to rise in the next six months’
Prices for existing homes aren’t going to change till the end of March — the market is in stagnation, Russian real estate experts believe. At the same time, old home prices dropped by 20% last year. As analysts think, low demand and big supply are the reason — the country’s population refocused its interests, started to save more money than spend and invest. The picture is almost the same in the new housing market too. How was 2022 for the real estate market of Tatarstan and Kazan in particular? Should one buy a flat today and what trends have appeared in commercial property? Vice President of the Tatarstan Guild of Realtors, Director of NLB-Real Estate Andrey Saveleyev answers these questions in an op-ed column for Realnoe Vremya.
New housing deals reduce 10 times
The last 2022 year turned out to be tough enough for the real estate market: the demand was extremely low, moreover, prices for existing homes significantly dropped — by 15-20%. The new housing market, in turn, almost stagnated — there were almost 10 times fewer deals here than in 2021.
Such a state of affairs directly impacted the activity of real estate agencies. Small realtor companies with mostly two or workers didn’t withstand competition first of all — their number was about 5% in percentage and some 20-30 organisations across Tatarstan in quantitative terms.
Some considerably reduced the amount of services and staff — mainly those companies that have been in the market for 20-25 years but haven’t managed to switch to new formats of operation over these years. They got used to working according to an old, classical scheme, don’t stay up to date and don’t develop their technologies — such agencies were the first to be in the firing line. Those companies that readapted to requirements of the times and the market on time and have introduced some new instruments and methods of work in the last few years felt somewhat fine.
Secondly, mortgage. When the Central Bank had to raise the key rate last April, the mortgage rate surged to 20% after that and made it unaffordable for the population in general. Of course, it repeatedly decreased later, but in any case, the combination of high prices and not really interesting mortgage offers led to serious slowdown in growth, which means demand too. Lower purchasing power played a role here too — people started to spend less and buying a home took a back seat.
A special state mortgage programme for employees of the IT sector didn’t play a big role either. It didn’t heat up the demand for housing, though, of course, it was popular. The percentage of those willing to buy a house with it is obviously insignificant. The number must be at least 10-15%, preferably 20%, to have some impact on the market, but today this indicator is below 5%. We don’t have 50,000 IT workers here in Kazan or in the republic in general who would up and take out this mortgage. This is why we see the IT mortgage doesn’t influence the market though provides this cluster of the economy good support.
Interestingly, despite all the tendencies, developers didn’t start building less houses, in contrast, housing volumes went up: a record high amount of housing was delivered last year. But as a result, we see about 60% of unsold flats in the market. It is good the demand for them is starting to gradually increase.
As for buying flats as investment with a big number of deals sealed in 2021 totalling about 60% of all new flats that were purchased, now the amount of new investment flats suddenly shrank — almost to 10% if not less. Today the market doesn’t almost have investors buying flats for their resale or rent or to save money in the future investing bank deposits in real estate and so on.
Countryside real estate is our everything today
Countryside real estate was the only segment of the realty market to demonstrate growth in several indicators at once (price, demand and delivery). By the way, demand for country houses constantly grows, has been adding 10-15% a year for four years now. This is why, as people say it, self-builds are our everything even if this sphere has its own drawbacks — often due to underdeveloped infrastructure, transport logistics in countryside settlements. But given that purchasing a countryside real estate property is almost 40% cheaper than flats in the city, country houses are in great demand.
A 100-120sq-m house with 0.5-0.6ha of land on average cost 4-8 million rubles on average, depending on the district. Laishevo District where such houses will cost 7-8 million rubles on average is considered the most expensive here. Pestretsy District unexpectedly soared thanks to improved transport logistics after the highway was expanded — now such houses cost around 5-6 million rubles there. Then it is Vysokaya Gora District with the approximately same price tag, and Zelenodolsk District with poor transport logistics is last on the list. After a relief road is built, Gorkovskoye Shosse highway is expanded, I think the situation will improve for the good.
Construction boom in Almetyevsk and almost no new builds in Nizhnekamsk
At the same time, the real estate market in different Tatarstan cities behaves absolutely different. Let’s take four biggest cities — Kazan, Naberezhnye Chelny, Nizhnekamsk and Almetyevsk. For instance, Nizhnekamsk doesn’t almost have new builds. Just one or two blocks of flats are offered there, and it is unclear — big federal developers either enter the marker or do not enter. In Almetyevsk, in contrast, large-scale development is underway. But it is necessary to understand that it is a city with low-rises, but anyway in the last few years Almetyevsk has globally expanded, developed, a lot of blocks of flats are built and we see a real construction boom. But here one should consider the high purchasing power of residents of the republic’s oil-rich district.
Though there has been active housing development in Naberezhnye Chelny in the last years and the situation in the city is similar to Kazan. There aren’t those factors here like in Nizhnekamsk with almost no new builds or like in Almetyevsk where we see injections in the city, in its development. We can say the situation is stable in Chelny — there aren’t abrupt bad or good strongly pronounced factors. This is why, as we see, every city has its own face of the realty market.
Of course, the capital of Tatarstan has been the leader in the realty market in the last 7-10 years. Kazan grows in all the indicators, and not only because residents of other districts of the republic try to move here. The city’s investment attractiveness is plain to see. Moreover, two-thirds of the city’s population need to improve their living conditions, so that market will absorb all the housing built.
Commercial real estate’s future lies with re-development
We won’t pass the segment of commercial real estate by either. Here we have to say that the situation is very complicated. Firstly, it is noteworthy that the political or economic events haven’t impacted it seriously. Commercial real estate is seen to have such a trend that the so-called middle level has started to wane.
Prices and demand for transferable, interesting facilities increase whereas the demand for unsaleable areas, for instance, office without parking or on the ground floor of a block of flats is falling very much and the exposition term is from a year to a year and a half.
However, the demand for shopping outlets are at hand where groceries or stores selling industrial goods can be located is going up. So today it is almost impossible to find office premises with parking in the centre of Kazan as well as first-line areas with stained glasses, big traffic and a separate entrance on the first floor. This is why the demand and the price tag for such areas dramatically grow. By the way, premises for cafes and restaurants illustrate growth too. But warehouses, on the contrary, cheapen, though there is a significant deficit of good warehouses.
This is why this segment has a very unclear tendency and it is impossible to single out a common trend except for what I have said above. Here, I think, it is necessary to pay attention to the trend of the future in commercial realty — re-development. This area is already starting to come into the spotlight. For instance, an interesting office area and a mini-hotel, a kind of apartment hotel, was created the ground and first floors in a building on Bulak Street — a Soviet heritage. And I think commercial realty’s future lies with such stories or, more precisely, the unmarketable segment when uninteresting premises from a perspective of its sale will turn into what the market needs thanks to this movement.
Kazan outruns Yekaterinburg in price for square metre
The housing market in Tatarstan doesn’t look very good in the rating of other Russian regions in new housing sales. Considering the fall in the number of deals, this segment remarkably plummeted in 2022. Developers sold on average as much per month as they did in a day (!) in 2021. Meanwhile, in the Volga Federal District, our republic is a leader in construction volumes, while Kazan is in housing price. We even outran Yekaterinburg that had always been pricier than Kazan but we demonstrated serious growth in 2021-2022 — prices for a square metre in the capital of Tatarstan have risen by nearly 50% in the last two years. Talking about the country in general, we were far beyond the top 3.
Prices in Moscow, Sochi, Saint Petersburg and even Yakutsk are higher than in Kazan. But here it is necessary to take into account that the prime cost of housing development in Yakutsk is very high — it tops 100,000 rubles per square metre. Prices in Kazan are approximately 10th across the country in general.
Moreover, quite a big percentage of buyers of Kazan real estate are residents of other Russian regions, including neighbours — Mari El, Chuvashia, Udmurtia or citizens from different districts of our republic, there is also some demand from Siberian and Far Eastern regions.
Rented housing on the rise
Rented housing is another segment of the real estate market. The price tag remained unchanged for a long time but has increased in the last few years. First of all, because some people willing to buy a flat because price growth started to rent. As a result, the rent rate has increased by 2-3,000 rubles on average, about 5,000 rubles.
However, the monthly rent as usual depends on Kazan’s district: Novo-Savinovsky and Vakhitovsky districts are the most popular, they are followed by Sovetsky, Privolzhsky, Kirovsky and Aviastroitelny. For example, renting a second-hand one-bedroom flat in Vakhitovsky District will be 18-20,000 rubles without utility bills, one will have to pa 13-15,000 rubles a month for such a flat in Kirovsky District. Renting a new comfortable flat in Vakhitovsky District will cost 25-30,000 rubles and more and 20-25,000 in Kirovsky District.
A way hard to the level of 2021
It is hard to predict how the market will perform this year. The only thing we can say now is that prices for real estate have stopped falling, but prices certainly aren’t going to grow in the next six months, perhaps even longer. The demand is starting to slowly offset, but it is a way hard to reach to the level of 2021.
I am sure countryside real estate is the only segment that will appreciate. This is why if one wants and can buy a house in nature, this should be done now not putting this on the back burner.
If you still plan to buy a flat — in a new build or an existing flat — it won’t really matter if you will do it today or in a month. Here it is important to look at conditions: if you sell your flat for a bigger one, this should better be done today because the market is now well traded. Good discounts can be obtained — even 150-200,000 rubles for existing homes, while in the new housing market, developers too have very good offers, discounts, even cashback appeared. Most importantly, the country still has an almost zero-interest mortgage, which will likely end in May, moreover, the Central Bank already claimed it would fight such a type of mortgage but it is still in force in Kazan.
Talking about the construction housing market, the appearance of new federal developers should be expected in Kazan. It already won the status of investment attractive city that actively develops and expands, whose infrastructure is invested huge money. There are requests from three federal construction companies now from the Urals and the Southern District whose goal is to enter Kazan. If nobody was interested in our city 10 years ago and the only federal developer occupied the niche for a long time whom we considered as local, YUIT, four or five Russian companies have arrived in the city in the last five years.
The same tendency was seen in real estate agencies — there used to be local monopoly in this segment. Many federal agencies tried to cement positions in this market in the 2000s but didn’t manage to stay. Now, in the last three or four years, we have seen a myriad of federal franchises — about eight companies operate in Tatarstan. The competition in this market grows rapidly.