Optimism in Construction with 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 seen a notable increase in the number of housing transactions on the primary market, with most transactions being conducted through mortgage lending. This increase is being 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 led many buyers to hurry 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, which is a record in recent years. However, experts do not expect a significant increase in the overall number of transactions, estimating that it is unlikely to be more than 25% of the annual average.
The market’s capacity is limited due to some buyers giving up their plans to purchase real estate due to negative economic effects. The total number and value of transactions on the market have decreased by a third or more, and developers have had to take significant discounts to partially reverse this trend. Real estate prices in St. Petersburg and Moscow have fallen over the year, partially compensated for by an increase in housing prices in the suburbs. While this increase in housing transactions is a positive sign, it is not enough to overcome the difficulties faced in the previous months.
Amidst the difficulties faced by the real estate market, there is a silver lining in the form of increasing numbers 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 the 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 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 the Russian Realities
Experts have differing opinions on how the real estate market can be improved in St. Petersburg. Some believe that the government and relevant agencies should adjust the existing system of industry regulation to support sales and solvent demand, while others point out that the fundamental reason for the decline in demand is the deterioration of the macroeconomic situation. Some experts suggest looking at the relevant experience of other countries, such as Cyprus, which adopted measures to support developers and attract foreign investors.
However, regardless of these differing opinions, it is clear that Russian developers themselves, including those in St. Petersburg, must take measures to save themselves. One example of this is Euroinvest, which has formulated a special offer to partially compensate customers for the appreciation of the cost of the apartment when using a mortgage. Additionally, they have implemented an installment plan to limit the down payment from the buyer to 20% of the cost of housing, with the next installment due after the building is commissioned.
Only time will tell how effective these measures will be in compensating for the macroeconomic difficulties and improving 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.