Why a sharp increase in the pace of new housing construction is not beneficial for Russia

Recommendation points

• And the prices are getting higher and higher
• What can the imbalance of supply and demand in the domestic market lead to?
• Conclusion

In the past few years, the construction industry in Russia has been actively developing. According to the government, the growth rate of construction outstrips the rate of GDP growth. It is currently one of the most dynamically developing sectors of Russian industry..

Along with other segments, the development of the residential real estate market is also proceeding at a fairly high rate. The country is actively building new housing. According to experts, last year developers have almost reached the pre-crisis level.

It would seem that this is good: more supply means more affordable housing for the population. However, this is where the big problem lies..

Unfortunately, demand does not keep pace with the growth of supply, and the authorities for some reason forgot or decided to ignore this fact. The government is actively implementing a program to increase the volume of construction of residential buildings in the country, but does not take measures to stimulate demand. As a result, fewer and fewer people can afford to buy housing offered on the market..

The authorities plan by 2015 to increase the volume of housing construction to 90 million square meters per year

The volume of housing construction in Russia is significantly increasing, in fact, developers were able to recover from the crisis and began to work actively. If the maximum indicator for the commissioning of residential real estate was recorded in 2008 and amounted to 64.1 million square meters, then last year the builders managed to bring to the market 62.3 million square meters. This is 6.6% more than the indicator recorded in 2010.

In 2012, according to the Minister of Regional Development of the Russian Federation Viktor Basargin, another 67 million square meters will be commissioned in Russia. housing. That is, the growth in construction volumes will be 7.5% compared to 2011.

The minister confirmed that permits have already been issued for the construction of new apartment buildings with an area of ​​over 55 million square meters. The remaining volume will be obtained from individual housing projects, taking into account which, according to the official, the building stock is about 82 million square meters..

In addition, for another three years, the authorities set themselves the goal of ensuring an increase in the volume of residential real estate construction in the Russian Federation to 90 million square meters. m per year.

If we consider the indicators of construction in the regions of the country, then the Moscow region is unconditionally in the lead, where, according to the results of 2011, 13.2% of all domestic housing put into operation was built. The second place is occupied by the Krasnodar Territory (5.9%), the third – by St. Petersburg (4.3%). Moscow ranks only 8th on this list. The top ten also includes Tatarstan, Bashkortostan, Tyumen, Rostov, Sverdlovsk, Nizhny Novgorod and Novosibirsk regions.

Rating of Russian regions by the volume of housing commissioned in 2011

However, there are a number of major challenges in the industry. First of all, this concerns bureaucratization and a large number of administrative barriers. For example, in order to register a land plot and obtain a permit to build a new house, a developer company must go through 53 approval procedures. Sometimes it takes builders more than a year to get all the necessary documents.

For example, in the Doing Business rating, Russia ranks 178 among all countries in the world in terms of the ease of doing business in the construction industry..

It is by simplifying and making the approval procedure cheaper that the Russian authorities plan to increase the volume of new housing construction in the coming years..

And the prices are getting higher and higher

By the end of the first quarter of 2012, following the results of 12 months, Russia entered the top 10 leading countries in terms of the rate of increase in housing prices. Knight Frank analysts have awarded Russia the 8th place in their official rating of the Global House Price Index, which includes the countries in which the highest rate of growth in the value of residential real estate is noted. In total this year, analysts examined the indicators of 53 countries.

Knight Frank calculated that the average price of one square meter of housing on the Russian primary market was 44,956 rubles.

According to experts, over the year, housing in our country has risen in price by more than 8%. This is the maximum figure for the last 3 years. It is noteworthy that earlier our country did not rise above the 30th position in this rating. A year ago, Russia was in 49th place out of 50 countries.

Rio de Janeiro

According to Knight Frank, the three world leaders in housing prices growth are as follows:

• 1st place – Brazil (+ 23.5%);
• 2nd place – Estonia (+ 13.9%);
• 3rd place – India (+ 12%).

Also more than in Russia, prices for residential real estate rose over the year in Germany, Austria, Turkey and Colombia..

Knight Frank’s research also notes that an even more impressive dynamics of price growth in Russia is observed in comparison with the levels of 6 and 3 months ago. For example, if we compare prices with the III quarter of 2011, then residential real estate in the country has risen in price by 4.8% (6th result in the world). When compared with the IV quarter of 2011 – prices increased by 2.9% (5th in the world).

In the world ranking of Lloyds TSB International, Russia ranks second out of 32 countries in the world in terms of growth in residential property prices over the past 10 years. Experts’ calculations show that housing prices in our country for the period from 2001 to 2011 increased by 209%. Note that when calculating price dynamics, inflation was taken into account.

The top three in the ranking are as follows:

• 1st place – India (+ 284%);
• 2nd place – Russia (+ 209%);
• 3rd place – South Africa (+ 161%).

Lloyds analysts noted that the largest increases in house prices are observed in those countries where there is the highest GDP growth. For example, the impressive growth in prices for apartments and residential buildings in India naturally reflects an increase in GDP over the past 10 years by 280% (an average of 14.3% per year).

The aggregate GDP of the top ten leaders in the rating, which also included: Lithuania, Hong Kong, Bulgaria, France, New Zealand, Australia and Norway, grew by 155% in the period under review.

At the same time, housing prices in Russia and in the second quarter of 2012 continue to grow.

According to a report published by the Ministry of Regional Development, at the end of May 2012, the top ten regions leading in terms of housing costs are as follows:

The table shows that prices are growing in all regions in different ways, but the positive dynamics, according to experts’ forecasts, will continue throughout the country in the near future..

What can the imbalance of supply and demand in the domestic market lead to?

The authorities are confident that the more new apartments are built and enter the market, the more people will be able to buy them..

It is planned to stimulate the implementation of new projects and attract new investors in housing construction by sharing the costs of building infrastructure. This is beneficial for developers, for example, a company builds a residential building or a village and the necessary social infrastructure facilities, and the state allocates funds for the construction of a road or compensates the developer for part of the costs of building infrastructure.

Of course, the government is trying by any means to solve the problem of the shortage of housing in the first place. Indeed, according to statistics, the average provision of the population with housing in Russia at the moment is about 21 square meters. m per person. Moreover, even of these square meters, approximately 40% falls on dilapidated and emergency housing. For comparison, in China, this figure is 23 square meters. m per capita, in the USA – 65 sq. m., in Holland – 74 sq. m.

However, solving the problem of insufficient quality housing, the authorities did not take into account the need to stimulate demand. No matter how hard they try to make housing more affordable, so far, unfortunately, the opposite picture is being observed. Due to rising prices, many simply cannot afford the luxury of a new apartment..

Yes, there is more supply, but effective demand does not keep up with it. As a result, many experts agree that in a few years (perhaps even in 1.5-2 years), if the policy does not change and additional measures are not taken, effective demand will be exhausted. This problem will be especially acute in Moscow, the Moscow region and a number of other large cities..

And here the market faces another problem. In case of oversaturation, prices will naturally go down, and, according to some analysts, in this situation, Russia may already face a collapse of the residential real estate market, the ruin of many developers, freezing of construction and other negative consequences.

The authorities need to take this into account and pursue an effective policy that will help maintain a balance in the market. In the meantime, unfortunately, only one-sided decisions are being made that are not able to comprehensively solve the existing problem..

Conclusion

In conclusion, I would like to say that the problem of lack of housing in our country is still one of the main ones. The government has repeatedly said that the solution of this issue is one of the priority areas of state policy, millions of budget funds are allocated for this..

However, it is not enough to build many houses. It is necessary to make sure that citizens in need of new housing or better housing conditions can purchase a new apartment. In the meantime, the market is not seeing a very favorable picture, when fewer people can afford such a luxury..

Along with the implementation of the program to increase the volume of construction, federal and regional authorities should pay special attention to how to make new housing more affordable.

On the one hand, this can be done due to the fact that more economy class houses will be built. Currently, there is a great need for small-sized housing in the country. Many citizens are ready to buy a small new apartment at a minimal price. Once the “Khrushchevs” helped to solve the housing problem of millions of people. Everything goes to the fact that in modern conditions it is inexpensive small-sized housing that will be in high demand. Many people want to have their own separate apartment. Albeit small, but new and your own.

On the other hand, it is necessary to use additional measures to subsidize the population. We already have quite good experience in implementing a program to provide housing for young families. In addition, the implementation of the federal program “Affordable Housing for a Young Family”, which provides for the issuance of cheap mortgage loans, continues to this day. Of course, in order to take part in such a program, one must meet certain conditions and collect quite a lot of documents, but this gives few families a certain chance to buy their own home.

Further, it is necessary to continue to work in this direction, as well as to develop new mechanisms of assistance to the population..

Unfortunately, the market situation is such that without direct financial support from the state, it will not be possible to make housing affordable in Russia. Only strict control, competent policy and state support can solve this problem.

Anna Belova, rmnt.ru