Multi-apartment Tatarstan: republic again commissions a record volume of housing
Share of individual housing construction has begun to decline for the first time in five years
Despite the overstocking in the housing market, Tatarstan continues to set new records for its commissioning. In just three months of 2023, the volume of housing commissioning in the republic reached 1,2 million square metres. This is by 31% more than the same period last year and almost by 40% more than 5 years ago. At the same time, for the first time in the last 5 years, after a period of rapid growth, the share of individual housing construction has begun to decline. Whether this situation will affect prices in the real estate market and what is happening in the residential housing segment — in the review of the analytical service of Realnoe Vremya.
Tatarstan is a record holder in construction
In January-March 2023, Tatarstan again introduced a record number of housing — 1,198 million square metres. This is by 283,8 thousand more than in the same period last year.
At the same time, the share of individual housing construction (IHC) has begun to decline for the first time since 2018. In three months of 2023, 494,9 thousand square metres were commissioned in Tatarstan in the individual housing segment. This is only 41,3% of the total housing commissioning. And this is by 161,2 thousand square metres less than in 2022 but still by 55,2 thousand square metres more than in 2020.
The increased demand for suburban real estate was formed during the pandemic. But the share of residential housing in the total volume of construction in Tatarstan began to grow earlier — from a modest 34,9% in 2018 to 71,7% in 2022. The developers called the records of individual housing commissioning in 2022 an echo of the pandemic. In fact, the volumes of construction and sales in the residential housing segment last year did not reach the levels of 2021, which is reflected in the current statistics.
In 2021, Tatarstan commissioned 3,09 million square metres of housing, by 2,5% more than the record of 2021. The republic ranks first in the Volga Federal District and sixth in the country.
The market is overstocked
Tatarstan is commissioning record-breaking volumes of housing in the falling real estate market. The overstocking in the housing market in Russia in April was indicated by President Vladimir Putin: “Certain imbalances are beginning to arise in the real estate market, the so-called overstocking is taking place, which in the future may lead to a reduction in construction. Of course, it is necessary to reduce these risks," he said during the meeting.
According to Dom.RF, the volumes of unsold housing in Russia reached 70% of the number of real estate under construction in April 2023.
“I want to ask some developers the question: would you lower prices a little so that it sells?" Minister of Construction and Housing of the Russian Federation Irek Fayzulin asked a rhetorical question. Developers, bound by contracts with banks, are not yet ready to declare a reduction in prices.
According to Rosreestr statistics, the number of contracts for the purchase and sale of housing and land plots shows a positive trend for the first three months of 2023. For example, the number of contracts for the purchase and sale of housing increased from 5,728 in January to 7,868 in March 2023, land sales — from 5,251 in January to 6,602 in March, and mortgage registration — from 5,930 in January to 7,370 in March.
But if we compare the figures of 2023 with last year, it is clear that the market as a whole has sunk. For example, in March 2022, Rosreestr registered 14,201 contracts for the purchase and sale of housing and 11,517 contracts for the sale of land plots. The number of mortgages in March 2022 was 9,553.
Decline of individual housing market began in 2022
“It's no secret that the purchasing power has fallen very much. Due to that part of the population has moved, someone is selling their real estate quickly and cheaper, the market has sunk. Our houses, which were built two years ago, are still being sold. Not everyone is at risk to dive into a mortgage," Ilyas Gimadov, the owner of Khanskiy Dom construction company, vice-president of the Association of Developers of Housing and Communal Services, told Realnoe Vremya.
In 2022, we saw an increase in the input of residential housing volumes, but in fact, the market was already declining, he notes: “There was a registration of houses built in 2021, and this affected the statistics.”
The development of the market, in his opinion, today will depend on external factors, and not only on the purchasing power of people.
Therefore, now, according to Gimadov, it's time to buy suburban real estate: “It is undervalued, but it will not always be so. Today, banks, major players are entering this market, globalisation is underway. House prices will rise and become like apartments. There will not be such a strong difference as now," he believes. “If you remember, a few years ago, only wealthy people had their own house. Now it is the opposite. Houses have become very affordable.”
House prices will remain at the level of 2022, and apartments may become cheaper
The residential housing segment has huge potential, including deferred demand due to the geopolitical situation, he is convinced. “If we focus on numerous surveys and studies, about 70% of the population wants to live in their own house with a plot of land, but at the same time, they now live in an apartment. Modern trends of remote work, thinking about a four-day working week, and in general, the mood of the state, of course, support the demand," says Khafizov. “The residential housing market is gradually becoming more civilised, for example, in our residential complex there is a children's and sports playground and a workout area, which are in no way inferior to similar infrastructure in multi-apartment residential complexes. So, the demand for individual housing will not only recover, but also take new heights.”
According to his forecast, prices in the primary residential housing market in finishing in 2023 will remain at the same level as in the past. “We are now seeing a decline in prices for basic building materials — wood, metal, stone. But at the same time, prices for construction services are rising due to a shortage of labour. Prices for imported materials have also increased due to the specifics of logistics and sanctions," he explained. “Therefore, we expect prices to remain at the same level for now. But with the growth of demand for individual housing (and the prerequisites for this are already tangible), prices will begin to catch up to apartment housing. The prices for apartments are a little overheated, so it is possible to reduce and approach the prices for individual housing.”
“Not all the gold that an apartment”
If we take Kazan relative to other million-plus cities, then we are not building so much relative to them, she believes. “It seems to us that Kazan is a solid construction site. Nizhny Novgorod, Samara and even Ufa can overtake us. The question is that we are in the top 3 million-plus cities, in second place, in terms of overstocking new buildings," Gizatova stressed.
According to her, construction is able to live for some time regardless of the solvency of the population, without being tied to economic and political factors. “There was a time when there were low mortgage rates, low cost per square metre, in such cases, real estate becomes an investment tool, more effective than deposits and the securities market," she notes. “Now construction has ceased to be an investment tool. We see that the objects at the beginning of construction are more expensive by at least one million of the object that has already been commissioned. Then the question arises, why climb into an unreleased house when you can take a rented one?"
In fact, individual housing construction last year pulled the commissioning of square metres of housing in Tatarstan: “Thanks to it, we stayed afloat for the five-year plan. But records cannot be permanent. Any spikes are always followed by a slight decline," she reminded. “By the way, there are a lot of unregistered houses in these statistics last year, which went under the dacha amnesty.”
In addition, individual housing construction were also very strongly pushed by the rural mortgage: “When it appeared, it was wow," recalls Anastasia Gizatova. “This is really a very good, working programme. It's a pity that it doesn't work all the time. After some time, we will see new records for individual housing construction: banks turned their faces to such real estate, they realised that not everything is gold that an apartment. Therefore, the potential of individual housing construction is very large.”