Anastasia Golyashyova: ‘If a house is delivered with some unsold flats, this doesn’t mean the market is down’
The number of mortgages in the first half of the year is forecasted to top the record of 2021
Kazan’s real estate market is starting to revive after a temporary dull, market players say. Demand is growing both for flats in new-builds and existing houses. Banks predict the amount of mortgages granted in the first half of the year will exceed the numbers of 2021 experts named record-high. What changes to expect from the real estate market this year, what harm the near-zero mortgage can do and what pushes consumer demand — President of the Tatarstan Guild of Realtors Anastasia Golyashyova explains in an op-ed column for Realnoe Vremya.
Failures in new housing sales
I have recently read that flat sales in Kazan new-builds has suddenly fallen in the first quarter of the year compared to last year’s period. To start with, the real estate market has never faced such events that took place in 2022. It goes without saying, that the sudden rise in the interest rate to 20% and the fear of devaluating ruble forced Russian to invest in cement by buying up almost everything. The first four months of the last year became record-high in sales among many developers. Compared to previous years of the same period, we can conclude the real estate market didn’t experience serious shock.
It will be wrong to deny failures in new housing sales. The second half of 2022 was the transformation stage for developers. They had to look for analogues to foreign equipment and materials. Amid this uncertainty, many companies simply withdrew some flats from sales because it was hard to fix prices for them. At this moment, thanks to the state’s stricter control, developers have solved problems with construction materials.
The transition from new-builds to self-builds is another factor that has an impact on sales. Yes, this trend shouldn’t be denied or ignored. It increases its market share year after year. I think some time later country real estate will reach a certain share and the correct balance will be struck then.
I will note the existing housing — it will never stay idle. People have always got married, bought real estate, moved, divorced or, on the contrary, united and this will never change.
This segment of the real estate market doesn’t fear any economic or political crises, existing houses have always been sold and purchased, this is the driver of realtors’ business.
To compare, I will put an example of results of one of the real estate agencies: if the demand for new-builds this February was nearly 70%, in March it notable decreased — to 14%, since very big discounts were offered in the existing market. Today new-builds and existing homes are almost in line — 46% in the first segment and 54% in second-hand housing.
0.1% mortgage raised flat price to 65%
doubt, with the appearance of the 0.1% rate, especially for the whole term, there was a surge in housing prices. Due to low mortgage monthly payments, this product became mass, absolutely everybody took it out. But this programme wasn’t imposed by the developer, every client perfectly understood they were buying a flat for a much higher basic price. The appreciation at the same time reached 65% of the home price.
But homebuyers consciously accepted these terms. Judge yourself, buy a flat paying 2 million rubles more but pay 100,000 rubles extra in 30 years or buy a flat for a usual price paying about 7 million rubles of interest to the bank. Now there is no 0.1% mortgage, consequently there is no price rise. Flats are sold for usual prices. They haven’t fallen — they are back to the market prices considering inflation.
Today many developers, not only our republican but also many federal operating in the housing market in Tatarstan are actively selling flats in new-builds, moreover, with good offers, and these offers are now the trendiest. By the way, a lot of flats were purchased within the ongoing family mortgage. And if there isn’t any force majeure this year, 2023 can be record-high in the number of mortgages, including family loans.
Besides the family mortgage, other sectoral programmes are gaining momentum too. The military mortgage is one of them. Nowadays support measures for public spheres, defence enterprises are created. The mortgage becomes more targeted covering a greater part of the population.
Developers, in turn, are also actively using this instrument — there are a lot of opportunities now, like never before. Some are already launching the option of buying a core and shell flat with furniture.
Hard times forced developers to work on the product improving their residential complexes.
By the way, some banks have already started to claim since 1 June that they planned to increase the first instalment to 20%. I think this is right for banks issuing loans — the security will now be somehow justified.
However, there is a question — for how long one will have to postpone home buying to be able to save this 20%.
And here, to attract and keep buyers at their construction site, developers should play the main role making them some offers like subsidisation of the first instalment, repair or a lower interest rate.
New home sale term is up
What to expect from the real estate market this year? I think while the family mortgage, various state support measures are in force, there is no public and political turmoil, the market will be alive and active. Developers, in turn, are preparing to open new residential complexes, and this, of course, wouldn’t happen if they had no money, or if they weren’t happy with the amount and pace of new-build sales.
I should explain that when a develop builds a block of flats, there is a period it has to be sold. For instance, a block of flat on average takes two or three years to be built depending on the company, its team and sale pace. The block can be delivered quickly if its flats are already sold, while this can be dragged, within declaration terms.
This is why when the construction isn’t yet over, and flats are still sold, they have a very good sale rate — about 20-30% of all flats in the block. But this doesn’t mean that the houses must be a hundred per cent sold before the block is delivered. This means that there is a period when they would like to sell these square metres. And if a house is delivered with some unsold flats, it doesn’t mean the developer is feeling bad or the market is down. This means the market is at a stage when potential real estate buyers have big choice, including new-builds.
Yes, flat sale terms in new-builds are increasing a bit today, but, I will stress, insignificantly.
Today Kazan is a very attractive city for relocation. Not only people from districts of the republic or neighbouring regions are coming here, there are a lot of deals signed with home certificates from Kherson Oblast. This is why demand for real estate in the Kazan urban agglomeration doesn’t decrease.
A new format can become popular — delivery of finished new-builds, not shell and core, with renovation from the developer. This option won’t influence the monthly instalment when buying such a flat with mortgage. I am sure this option when one doesn’t have to invest another 2-3 million in the new home’s renovation will only raise the demand for housing making it more affordable for the population.
Besides the Tatarstan capital, Naberezhnye Chelny is an active market where a lot of new residential complexes have been delivered in the last years and consumer demand doesn’t fall. Zelenodolsk started to make itself known, the housing market here is also going up towards new-builds: earlier, the development was targeted, today they plan comprehensive development of the city — the projects are very interesting. But it is yet hard to say what sales will be like.
The author’s opinion does not necessarily coincide with the position of Realnoe Vremya’s editorial board.