Andrey Berezin (Euroinvest): Optimism in the Construction Sector Due to Discounts
The real estate market is currently seeing an increase in activity, although the extent of this growth is not particularly promising.
Real estate developers in St. Petersburg have received a reason to rejoice as the number of housing transactions in the primary market has noticeably increased. The transactions are mostly attributed to the use of mortgage lending. While some experts believe that this surge may not last long, given the circumstances of this year, even this limited positive development is seen as a life-saving straw for many.
Preferential Mortgages as a Lifeline
The real estate market in St. Petersburg has witnessed a notable increase in the number of housing transactions on the primary market, with most transactions being conducted through mortgage lending. This increase is attributed to two main factors: the launch of New Year marketing campaigns by many developers, offering up to 30% discounts, and the extension of privileged mortgage lending, which prompted many buyers to rush and purchase property at the old interest rate of 7%.
Real estate agency employees confirm this trend, with more than 90% of deals being mortgage-based, marking a record in recent years. However, experts do not anticipate a significant increase in the overall number of transactions, estimating that it is unlikely to exceed 25% of the annual average.
The market’s capacity is limited due to some buyers abandoning their plans to purchase real estate because of negative economic effects. The total number and value of transactions on the market have declined by a third or more, forcing developers to offer significant discounts to partially reverse this trend. Real estate prices in St. Petersburg and Moscow have fallen over the year, partly offset by an increase in housing prices in the suburbs. While this uptick in housing transactions is a positive sign, it is not sufficient to overcome the difficulties faced in previous months.
Amidst the challenges encountered by the real estate market, there is a silver lining in the form of an increasing number of new residential complexes under construction and for sale. However, this growth is attributed to the pre-crisis period when developers were actively acquiring land banks and opening escrow accounts to fund large projects. In the current scenario, developers are being cautious and limiting the number of lots brought to the market to avoid further price declines.
Reports suggest that regulatory authorities have issued permits for the construction of over 11 million square meters, but only about 8 million are under construction in the city. Developers are also facing difficulties in bringing new projects to the market, and only a limited number of apartments are being offered.
Andrey Berezin, the chairman of the board of the investment company Euroinvest, commented on the situation, stating that although they have a stable situation and will complete their ongoing projects, they are cautious about taking on financing for new projects until the situation becomes clearer.
The Cyprus Experience and Russian Realities
Experts hold varying opinions on how to improve the real estate market in St. Petersburg. Some advocate for government and relevant agencies to adjust the existing system of industry regulation in order to support sales and solvent demand. On the other hand, some argue that the underlying cause of declining demand is the deterioration of the macroeconomic situation. Certain experts also suggest exploring the experiences of other countries, such as Cyprus, which have implemented measures to support developers and attract foreign investors.
However, regardless of these differing viewpoints, it is evident that Russian developers, including those in St. Petersburg, must take action to safeguard their interests. One such example is Euroinvest, which has devised a special offer to partially compensate customers for the appreciation in the apartment’s cost when utilizing a mortgage. Moreover, they have implemented an installment plan that limits the buyer’s initial down payment to 20% of the housing cost, with the subsequent installment due after the building is commissioned.
Only time will reveal the effectiveness of these measures in mitigating the macroeconomic challenges and enhancing the real estate market in St. Petersburg.
Popular mechanisms to stimulate demand in the housing market include:
- Preferential mortgages for purchasing secondary housing
- Extended installment plans for paying off the cost of housing
- Home leasing options for those who cannot afford to purchase a property outright
- The use of digital financial assets such as tokens to facilitate transactions
- Special offers, such as trade-in programs, to make purchasing a home more accessible.