6.6.2. Price Situation on the Housing Market In 2009, the price downfall on the housing market was ubiquitous. In 2010, the city of Moscow saw the beginning of a gradual price rise (up by 10%), while most cities in the sample were experiencing an oscillating price stability. Price increases in nominal terms were noted everywhere, except for Nizhny Novgorod, Stavropol and Shakhty; however, in real terms they were down practically everywhere, except Moscow and Novosibirsk.
In 2011, the dynamic of nominal housing prices across the sample of 20 cities and Moscow oblast was as follows (Table 30):
All calculations were made on the basis of monthly data on the average specific housing offer price in Russian cities provided by certified by RGR real estate market analysts Sternik S.G. (Sterniks Consulting Ltd.), Beketov A.G (all from Moscow and Moscow oblast), Bobashev S.Â., Bent Ì.À., GK «Real Estate Bulletin» (St. Petersburg), Khorkov Ì.À. Antasyuk À.À., Tukhashvili G.Ò. (all from RITS UPN, Ekaterinburg), Sosnitsky Å.G., Titul (Rostov-on-Don), Chemodanov À.L., “Indicators of Nizhny Novgorod Real Estate” (Nizhny Novgorod), Ermolaeva Å.À., Salmina Ê.À., RID Analitics (Novosibirsk, Kemerovo, Barnaul, Krasnoyarsk), Molodkina Ñ., ALCO Association (Tyumen), Epishina E.D., Epishina Yu.V., GK “Kama Valley” (Perm), Khairullina N.À., “United Regions (Ufa), Zyranova G.N., «KuzbassInvest Stroy» (Kemerovo), Moskalev À.À., «InvestOtsenka» (Voronezh), Kovalchuk N.I., RK «Sluzhba nedvizhimosti» (Chelyabinsk), Savina M.Yu., «Agentstvo pechati i informatsii», Kazakov R., «Ryazan Real Estate» newspaper (all from Ryazan), A.M. Cheremnykh, UK «ASSOStroy» (Izhevsk), Trofimov A.S., “Ilecta” center (Stavropol), E.R. Gamova., «Real Estate» Center (Ulyanovsk), Trushnikov À.V., «B.I.N.-Expert» (Sterlitamak), Eydlin G.Yu., «Realty» (Shakhty).
Section Institutional Issues Table Dynamic of the Average Specific Apartment Offer Price on the Secondary Housing Market Òûñ. ðóá./êâ. ì Index relative to Moscow Increase to 2010, % City (region) December December December December December Nominal Real 2009 2010 2011 2010 Moscow 153.0 168.5 185.5 1 1 10.1 3.St. Petersburg 81.1 82.3 88.3 0.488 0.476 7.3 1.Moscow oblast 71.5 73.0 80.0 0.433 0.431 9.6 3.Ekaterinburg 53.0 55.5 63.8 0.329 0.344 15.0 8.Rostov-on-Don 48.4 50.5 55.8 0.300 0.300 10.5 4.Nizhny Novgorod 46.4 45.8 49.58 0.272 0.267 8.3 2.Novosibirsk 45.5 49.7 50.8 0.295 0.274 2.2 –3.Tyumen 43.1 45.4 53.0 0.269 0.286 16.7 10.Perm 42.4 44.1 48.4 0.262 0.261 9.8 3.Krasnoyarsk 40.3 43.5 48.8 0.258 0.263 12.2 5.Ufa 41.0 43.9 49.2 0.261 0.265 12.1 5.Kemerovo 40.3 40.6 44.4 0.241 0.239 9.4 3.Voronezh Í/ä 35.8 41.3 0.212 0.223 15.4 8.Chelyabinsk 36.8 37.2 39.9 0.221 0.215 7.3 1.Ryazan 35.4 37.7 40.8 0.224 0.220 8.2 2.Barnaul 34.4 35.1 40.2 0.208 0.217 14.5 7.Izhevsk 33.3 34.9 39.6 0.207 0.213 13.5 6.Stavropol 32.1 30.5 31.6 0.181 0.170 3.6 –2.Ulyanovsk 31.0 31.8 34.2 0.188 0.184 7.5 1.Shakhty (Rostov 27.0 26.3 27.6 0.156 0.149 4.9 –1.oblast) Sterlitamak (Bash- 22.9 23.7 28.5 0.141 0.154 20.3 13.kortostan) In 2011, nominal prices were on the rise in all the cities of the sample, with the range of the increase being a broad one: from 2.2% in Novosibirsk to more than 20% in Sterlitamak. In Moscow, the price rise accounted roughly for 10%, like a year ago. It mostly was Ural and Siberian cities (Tyumen, Ekaterinburg, Barnaul, Izhevsk, Krasnoyarsk, Ufa), as well as Voronezh and Rostov-on-Don, where the price increases were greater than in Moscow.
By contrast, the group of cities where price increases were lower than in Moscow is located largely in the European part of Russia (Moscow oblast, Nizhny Novgorod, Ryazan, Ulyanovsk, St. Petersburg, Shakhty, Stavropol), as well as Perm, Kemerovo and Chelyabinsk.
Quite notably, like Moscow oblast, Perm and Kemerovo’s price increases were just slightly below Moscow’s.
The Russian capital remained an absolute leader in terms of the price level for housing. In more than a half of the cities of the sample housing prices were at a level of 20 to 30% of Moscow’s. The gap was somewhat narrower in Ekaterinburg (0.344), Moscow oblast (0.431) and St. Petersburg (0.476) prices. Meanwhile, at the bottom of the list (15-20% of Moscow’s price level) were Ulyanovsk, Stavropol, Sterlitamak, and Shakhty.
In most cities of the sample the December 2011 price level vis--vis Moscow’s one was less than in December 2010, except for a few cities in the Urals and Siberia (Ekaterinburg, Ufa, Izhevsk, Sterlitamak, Krasnoyarsk, Barnaul), and Voronezh, albeit all those changes were quite negligible.
RUSSIAN ECONOMY IN trends and outlooks Unlike the prior year, the 2011 the housing prices in real terms (less the 6.1% annualized inflation on the consumer market) (the IGS index)1 were on the upsurge in most of the cities in question, except for Novosibirsk, Stavropol and Shakhty, where real prices were down (1– 4%). Atop the leading group in terms of increase in real housing prices were Sterlitamak (13.3%), Tyumen (10%), Voronezh, Ekaterinburg, Barnaul, Izhevsk, Krasnoyarsk, Ufa (between 5 and 9%).
As to the correlation between prices on the primary and secondary markets, it is worthwhile to note Moscow, with the specific price on the secondary market being lower than that on the primary one (in 2011 – at 12–17%) (Fig. 22).
Correlation Rb/m 250 1,Primary Secondary Correlation 200 1,150 1,100 1,50 1,0 Fig. 22. Price Correlation between the Primary and Secondary Markets in Moscow By contrast, prices in most other cities, as a rule, were higher on the secondary market: the gap was: in Izhevsk – 2–7%, Ryazan – 5–15%, St. Petersburg – 13–16,3%, Stavropol – 16,5– 20%, Perm – 13–21%, Moscow oblast – 15–20%, Novosibirsk – 17–25.5%, Tyumen – 22– 27%.
In this context, mavericks became Chelyabinsk and Ufa, where the gap proved pretty narrow, and Nizhny Novgorod where through most of 2011 prices on the secondary market have been following the trend noted in other cities, but by the fall they had caught up with or exceeded those on the secondary market.
The main driver of such differences is the differentiation of the quantitative-qualitative structure of housing on the markets concerned. In Moscow, roughly a half of the offer on the primary market is formed by residential property of advanced quality (business and elite class housing). By contrast, in the other cities, the absolute bulk of offer concentrates in the economy-class and middle-class segment. Plus, the quality of newly built housing differs across the cities with regard to the presence/absence of interior works and their quality, and stages of construction (and, accordingly, the cost) as of the moment of payment of the co-investment contract. The price correlation also changes in time, due both to changes in the quality of housing under construction and the state of the market determined by developers’ price differences in response to change in demand during the crisis.
The IGS index is calculated using the following formula: IGS=Ipr/Icp, where Ipr is the housing price index in Rb. equivalent, Icp – consumer price index.
Jun-Jun-Jun-Jun-Jun-Sep-Sep-Sep-Sep-Sep-Dec-Dec-Dec-Dec-Dec-Dec-Mar-Mar-Mar-Mar-Mar-Section Institutional Issues 6.6.3. Revitalization on the Real Estate Market Revitalization of the real estate market started yet in late 2009. In 2010, with the deferred demand back to the market, it bounced back to the pre-crisis level. The distinctive feature of the 2011 housing market became its expansion, which was fueled both by the deferred demand and deferred offer (“investment” apartments, collaterized housing, etc.), which resulted in a considerable increase of offer and secured a lack of shortages on the housing market.
Data on Moscow serves a perfect illustration of the trend. Back in 2009, the number of apartment sales accounted for 55,680 deals, thus being at its record lows over the whole postSoviet history of the market. By contrast, in 2010 the volume of deals added 54% and hit 85,700, thus having caught up with the all-time pick of 2003. In 2011, the number of deals cleared a new height by having added another 6.4% and accounting for 91,200 deals (Fig. 23).
% 91,87,85,84,80,79,77,53 77,87 77,76,76,74,70,82 71,69,65,63,55,-Volume of sales Increase, % Fig. 23. Annual Volume of Apartment Sales on Moscow’s Secondary Market Such a combination of dynamics of the market indicators (moderate price rise rates under a rally on the market) shows that the market has found itself in the phase of revitalization with a tendency to transition to the phase of growth: with demand having renewed, offer now matches demand and, should the population’s incomes continue growing, the price rise rates may accelerate.
In 2011, Moscow saw continuation of the rise in the volume of mortgages – they accounted for 24,000 vs. 20,000 a year before. The increase (roughly by 20%) of course is no match to a nearly 4-fold one in 2010, but at the time, we noted a post-crisis bounce back of the mortgage mechanism from a very low 2010 benchmark.
Increase in the proportion of mortgage deals in the aggregate number of housing deals slowed down in 2010–2011 at the level of 23–26% (26–29% in individual months of 2011), which roughly corresponds to the share of direct apartment purchases (with the rest of the deals being alternative ones, which are financed at the expense of sales of the existing apartments).
RUSSIAN ECONOMY IN trends and outlooks % 12000 Deals, pcs Mortgages, pcs Share of mortgages, % 6000 0 Fig. 24. Dynamics of Turnover of Housing and Mortgage Markets in Moscow 6.6.4. Dynamic of Placement of new Housing in Operation and Prospects for Institutional Development of Housing Provision Mechanisms In 2011, volumes of placement of new housing in operation have posted growth for the first time since the start of the financial crisis (by 6.6% on a year-on-year basis). The volume of such housing accounted for 788,200 apartments with the total area of 62.3m m (Table 31), with the increase being noticed only since H2.
Table Placement of Housing in Operation in Russia in 1999–Increase rates, % Year M m of total area to the prior year to 2000.
Jun-Jun-Jun-Jun-Jun-Sep-Sep-Sep-Sep-Sep-Dec-Dec-Dec-Dec-Dec-Dec-Mar-Mar-Mar-Mar-Mar-s c p Section Institutional Issues So, the year 2011 saw the record-breaking figures of placement of new housing in operation, well in excess of the pre-crisis 2007 figures, which in turn were twice as big as the ones. This creates good preconditions for hitting the historic peak for the 2000s already reported once in 2008 (despite the rise of a sharp phase of crisis in the fall of the year, effects from the investment collapse echoed in the house-building sector only in 2009).
The proportion of individual house construction in the aggregate area of housing completed in 2011 accounted across Russia for 42.9%. In terms of the rate of placement of housing in operation (4.6%) individual house construction roughly corresponded to the 2009 figures, while in terms of its specific weight –the 2008 figures. Individual house construction prevailed in a number of regions (Altay Republic, Bashkortostan, Ingushetia, Dagestan, Tyva, Kabardino-Balkaria, Karachaevo-Cherkessia, Chechnya, Astrakhan and Belgorod oblasts) and accounted for between 73.3 and 94.5% of the total area of completed housing construction projects.
Positive dynamics of housing construction was noted in the overwhelming majority of Russian regions, including those where the aggregate volumes of placement of housing in operation exceeded 1m m (Table 32).
Table Dynamics of Placement of Housing in Operation in Russian Regions in 2011 (Adjusted by Housing Placement Rates) Region Housing Placement Rates, as % to 2010.
Samara oblast 127.Chelyabinsk oblast 122.Tatarstan 118.Stavropol krai 115.Tyumen oblast 113.Kemerovo oblast 108.Dagestan 107.Krasnoyarsk krai 106.Bashkortostan 105.Belgorod oblast 104.Rostov oblast 104.Moscow oblast 103.Leningrad oblast 103.Sverdlovsk oblast 102.Krasnodar krai 102.Moscow 102.Saratov oblast 102.St Petersburg 101.Nizhny Novgorod oblast 101.Source: On housing construction in 2011, www.gks.ru.
As evidenced by Table 32, Samara. Chelyabinsk, Tyumen (including Khanty-Mansy and Yamal-Nenetsky autonomous okrugs1), Tatarstan and Stavropol krai reported the dynamics of placement of new housing in operation be in excess of the average national figures (over 10%). Meanwhile, the increase in volumes of housing construction in the city of Moscow and St. Petersburg roughly made up a meager 2%. Moscow oblast posted a higher increase rate (3.5%), which was nearly twice as low as the national averages nonetheless.
That said, it should be remembered that since 2004 Moscow oblast has been the leading region nationwide in terms of absolute figures of placement of new housing in operation, That said, Yamal-Nenetsky Autonomous Okrug proved one of 13 regions where volumes of placement of new housing in operations were in decline.
RUSSIAN ECONOMY IN trends and outlooks while the city of Moscow started sinking along the respective ranking in the course of the last crisis and has plunged below a whole range of regions, including – for the second straight year – St. Petersburg. The specific weight of the capital region in the aggregate volume of the nationwide housing construction accounted just for 16.1% (16.4% in 2010), of which the lion’s share (13.2%) fell on Moscow oblast’s, while the share of the city of Moscow was 2.9%1.
Such a situation seems quite logical. Throughout the whole 2011, the newly appointed City Hall has been busy reviewing earlier concluded 1,000-plus investment development contracts, including those in the housing construction sector. As a result, as many as 200 out of some 600 contracts were terminated. The canceled contracts mostly concerned downtown and infill development. The fact of the revision of the contracts of course has affected construction expansion rates in the city2..