‘Everybody’s trying not to miss the boat’: demand for new-builds is up in Tatarstan

‘Everybody’s trying not to miss the boat’: demand for new-builds is up in Tatarstan
Photo: realnoevremya.ru

A rise in the key rate to 12% provoked a commotion in the real estate market. Everybody is rushing to buy flats via mortgage with old rates. The first half of 2023 was already record-high in mortgage approval and issue even without the manoeuvre of the Russian Central Bank, which was unexpected for the market. The registration of home purchase and sale deals in July alone rose by more than 40% compared to the same period last year. Read if price correction should be expected or buy a home now in a traditional review of Realnoe Vremya’s analytic staff.

The patient is likely to be alive

The Russian real estate market was predicted to decline since late February 2022, and following slow stagnation amid lower purchase activity and savings of the population. However, the real estate market turned out to be resilient — the number of home purchase and sale contracts in Tatarstan rose by 40.9% in July 2023 (to 10,062) compared to the same period last year. Last year, the number of purchase and sale agreements collapsed by 46.2%.

Comparing the current digits with previous periods (excluding 2021, which, as market players say, was anomalously successful), 2023 is successful enough for the market despite the tough economic situation.

Positive tendencies are seen in the segment of land parcels. The registration of land parcel purchase and sale agreements in July 2023 rose by 18.4% compared to the same period last year. However, the amount is above both the indicators in 2019 and 2020.

According to the Russian State Register, over 67,000 mortgages have been registered in Tatarstan in early August, 32% more than last year. Tatarstan residents took out home loans more often, over 32,500 mortgages have been registered this year, the growth is 36%, more than 22,500 mortgages have been registered for land parcels (+27%), 1,437 (+29%) for non-residential areas.

There is a record growth in mortgage: the number of mortgage contracts in July 2023 increased by 125.7% compared to July 2022, this even surpasses indicators of 2021.

Fruitful first half of 2023

The Tatarstan State Register registered more than 713,000 titles in the first half of 2023, 34% more than during the same period last year. The growth for homes is 15% (around 170,000 titles registered), 6% for land parcels (119,500 titles).

At the same time, the demand in the new housing market in the first half decreased by 19%: 8,793 co-investment agreements. Nevertheless, if we have a look month by month, this May and June, the demand for new-builds rose nearly 2.5 times compared to the same months last year: 1,408 and 3,392 respectively, reads data of the state registry.

The demand in the existing real estate market in the first half, in contrast, rose by 8.2%. Here, the number of deals totalled 102,826, of which 42,521 are residential areas (+19.7%), 48,077 (+1.8) for land parcels, 4,678 (+5.1%) for non-residential areas.

We are going to see a buzz for a month or two”

“I think the first half of the year successful for the real estate market. Our company, if we compare periods, has had 60% more deals and gross revenue than in 2022,” Marat Gallyamov, founder and director of Etazhi-Kazan real estate agency, assesses the situation. “We are going to see a buzz both in the existing and new housing market for a month or two because the approvals clients received in July and August are still valid, people are buying flats with old rates. And then there will be new-builds because there is still state support for them.”

“Now our clients are actively starting to buy flats in new-builds because they fear the price will go up. Nobody has cancelled market laws. This is why if there is big demand, the price will change too. Now everybody is very interested in new-builds, they are also taking out mortgages in banks not to miss the boat with today’s price.”

The mortgage rate in the existing market is already high, but it isn’t exorbitant, it isn’t 20% a year, but the number of deals in the existing market can reduce after the key rate was raised. In Gallyamov’s opinion, the market will regulate this by reducing the price for existing homes. “If the price for existing homes goes down, people will take out mortgages at 12-14%. We have already seen this,” he recalls. “Then one can refinance one’s loan. And in fact, they are at an advantage in general.”

Marat Gallyamov doesn’t dare to forecast the second half of 2023 but hopes that it will be calm: “If something else doesn’t happen. The season will back the demand: the third and fourth quarters are traditionally high for real estate. “It is hard for me to say what will happen in the first and second quarters. We’ll see,” he admits.

Prices in the existing market to fall

“The first half of 2023 was successful. The demand gradually rose. A more or less stable situation and a low key rate favoured this,” agrees Director of Flat real estate agency Ruslan Khabibrakhmanov. “Both the first instalment and the rate could be lowered as much as possible before 1 May with state support. The rate was raised in May but sale terms for new-builds remained very good.”

“The rise in the key rate to 12% is a very high rise, and this will a hundred per cent cool the existing housing market,” he thinks. “I think then the demand will shrink considering this most people buy flats through a mortgage. Prices for existing homes will reduce after a lower demand. Moreover, the Central Bank is threatening to raise the rate.”

The forecast for new-builds stays same — everything will be quite stable, and the demand will be stable unless the state provides support. “In case state support is cancelled, there will be a total collapse in the real estate market, this is why I don’t even consider such a scenario,” says Khabibrakhmanov.

“The key rate raise will have only a positive impact on the market so far”

“The first half of 2023 was one of the most successful in the history of the real estate market. At least in the last seven years for sure,” thinks Anastasia Gizatova, real estate expert, head of Happy Home real estate agency. “I wouldn’t take 2021 into account, the demand was speculative there. And this was caused by rates with state support that pushed the market and led to the price for a square metre we see now.”

“The key rate raise will have only a positive impact on the market so far. Developers opened champagne that day because existing homes became uncompetitive given the higher rate. The mortgage will double in price for those who will decide to buy a home from natural persons,” explains Gizatova. “Developers had the momentum. Those who will buy a home with a mortgage will certainly opt for new-builds because the mortgage pay will be smaller.”

Those who received an approval to take out a mortgage for an existing home are now trying not to miss the boat. The buzz will stay in September too when old terms in approval loans are still valid. Then a decline and stagnation are expected.”

Yulia Garayeva

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