What awaits the Moscow residential real estate market in 2012

Recommendation points

• What will happen to housing prices
• Waiting for a new wave of the crisis
• Conclusion

The year ended 2011 is considered by most experts to be successful for the Russian and, in particular, for the Moscow real estate market. Throughout the year, there was a slow and not very significant rise in prices, about 8-12% in rubles, as well as an increase in the activity of buyers, mainly due to the appearance of affordable mortgage programs.

However, some negative moments await us. Due to fears of a recurrence of the economic crisis in the coming year, the Russian real estate market may again begin to experience some difficulties. The situation can be mainly influenced by the curtailment of mortgage programs. Experts suggest that in the first quarter banks may significantly reduce the number of issued mortgage loans due to fears that borrowers may not fulfill their obligations and banks will again, as in 2008, have to deal with debt restructuring, which is unprofitable. This was announced last fall by Anatoly Aksakov, President of the Association of Regional Banks.

In addition, now, due to the instability observed in the global financial markets, it has become quite difficult and risky for Russian developers to attract foreign currency loans. The construction sector may also be negatively affected by the authorities’ plans to reduce ineffective public spending, including the reduction of unnecessary construction projects..

What will happen to housing prices

The past year has been very stable in terms of changes in housing prices. If in 2010 housing in the capital rose in price by an average of 14%, then in 2011 this growth corresponded to the observed increase in inflation and amounted to about 10%. Only apartments on the territory of “New Moscow” were able to overcome this price barrier. Here the cost per square meter has grown by 20%. According to most experts, a similar price trend will continue in the first half of 2012. There are currently no prospects for a fall in house prices. Towards the end of the year, the class gap is expected to widen: the rise in prices for affordable housing should stabilize, while the value of business and premium class properties will continue to gain weight. This dynamics will be supported by a decrease in the number of new housing introduced to the market. According to analysts, the bottom has not yet been passed: in the first half of 2012, a record low volume of housing commissioned is expected.

However, according to official data, they promise to build about 3 million square meters of housing in Moscow. But it is difficult to say what the indicator will be at the end of the year. Last year it was planned to build 2.2 million square meters. m of new housing, but on December 27 at the final meeting of the Moscow government, Sergei Sobyanin said that housing will be commissioned only about 2 million square meters.

Sokolov M.N. Moscow is under construction. 1956

Nevertheless, the total supply of residential real estate in the capital market in the coming year may, on the contrary, increase significantly due to the withdrawal of several previously announced projects. If last year in Moscow, developers and realtors offered for sale 1.4 million square meters. m of housing, then in the coming this figure is predicted to exceed 2 million square meters. m.

Experts: Most affordable housing may rise in price this year.

As for housing prices, in 2012 a moderate rise in prices is expected on the Russian market. In particular, apartments in the capital will rise in price by about 8% on average. It is unlikely that the growth in the average price of housing in Moscow will exceed inflation. In the primary housing market in Moscow, according to forecasts, relatively high demand in the economy class segment will remain. Given the lack of supply in this segment, developers will be able to dictate prices. According to some experts, the most affordable housing may rise in price in the coming year. Thus, according to some forecasts, prices for economy-class housing may rise by 25%. The first examples of price increases were noted at the end of December last year. For example, the company “Don-Stroy Invest” announced the revision of its pricing policy for 2012. The message said that already in January 2012 the apartments offered by the developer will rise in price by 10%.

A rise in prices exceeding the level of expected inflation is also possible for properties located in the center of Moscow. The reason is the lack of quality supply. It is assumed that housing prices within the third transport ring may increase in the coming year by 15%.

In turn, the most conservative market participants do not advise developers and realtors to sharply raise prices. The fact is that the primary real estate market last year has already exhausted the potential for further price growth. Despite last year’s optimistic expectations of a repeat of the 2001 scenario, when house prices rose sharply, sellers’ mood was spoiled by anxious sentiments due to the expectation of a new wave of the crisis. Already in September 2011, many realtors noted a decline in demand for apartments that was not typical of this period, which led to a drop in prices.

Waiting for a new wave of the crisis

In Russia, as in many other countries, a repeat of the financial crisis is expected. As we have already noted above, in 2012 this circumstance will have a rather strong impact on the situation on the real estate market. In this regard, those who want to buy housing are increasingly thinking about whether to buy now or wait?

There is no one general solution. In any case, there are many factors to consider. We will try to give a number of recommendations.

Rashad Alakbarov. A crisis

For those who desperately need to improve their living conditions and want to buy an apartment through a mortgage, it is definitely better to buy now. At the moment, prices are stable, there are a lot of offers in the sector of affordable housing ($ 3-5 thousand per 1 sq. M.). In addition, you can still find a profitable and affordable loan program. But in the event of a crisis with the purchase, problems may arise, since banks will seriously reduce the supply of loans and tighten conditions.

The purchase of an apartment as an investment object is also beneficial. Even if you fail to make serious money, it will help to save money. Obviously, the cost of housing is rising along with inflation.

You can earn money by buying business class real estate or luxury housing. In these segments, the entry to the market of new objects has decreased significantly, and, consequently, the supply is rather limited. This makes this property a profitable investment tool..

However, there are some peculiarities here. Luxury offers (cost per sq. M. Exceeds $ 15 thousand) compete with overseas real estate. Many investors prefer to buy a house by the sea or an apartment in central London for the same money. Therefore, the most promising in the domestic market, according to experts, is still housing in the price segment from $ 6.5 to $ 14 thousand per 1 sq. m. The most active buyers are observed here. In addition, you can take a closer look at a new type of housing for the capital market – loft apartments. Their yield in a couple of years can reach 30%.

Conclusion

Currently, residential real estate attracts more than half of the investments of individuals. The unstable economic and political situation in the country, as well as the deficit of high-quality supply observed in the capital market, will keep residential real estate and in 2012 the status of one of the most attractive investment instruments.

Even during the 2008 crisis, there was no serious collapse of prices in the housing market. At the same time, economy-class housing turned out to be the most resistant to market fluctuations. This sector will remain the most stable and predictable in 2012.

As for the price, all experts agree that no price drop is expected. In the event of a new crisis, the capital’s real estate is unlikely to significantly lose in value. Now the market is in a balanced state, for prices to fall, a significant increase in supply or a sharp drop in demand is necessary. And this will not happen anyway.

However, one should not expect a large rise in prices either. According to experts, the active growth in the value of residential real estate in the world is a thing of the past. Thus, at the end of 2011 as a whole, housing prices in the world market rose by 1.5-2%. In Moscow in 2012, in most sectors, a gradual and insignificant increase in housing prices is expected within the inflationary dynamics.

Based on these forecasts, we can say that the beginning of the year is the best time to buy a home.