Economic science / 8.
Mathematical methods in Economics
Lubianitskii Pavel Yurievich
Rostov State University of Economics
Transformation of Real Estate Market in
Current Economic Conditions
In the current conditions of
development the national market is undergoing major changes. The price of oil
falls, the foreign currency is growing, making food more expensive, but the
population has not still fully realized how the residential real estate market
will behave in these conditions. The definition of "immovable thing," "immovable property," or
"real estate" is set out in Article 130 of the Civil Code of the
Russian Federation, according to which: "Immovable things (immovable property, or real
estate) include plots of land, subsoil, isolated water bodies and everything
firmly connected with the land, i.e., objects, the movement of which without
disproportionate damage to their purpose is impossible, including forests,
perennial plantings, buildings, and structures."
To analyze trends in the market segment we selected, we carried out the
analysis of the state and dynamics of the the primary and secondary housing market in the
Russian Federation for the period of 2009-2014. In the current economic
conditions, this market segment takes on particular urgency as the availability
of quality properties, to some extent, characterizes the standard of living of
the population.
The most important factor in
the state of the modern real estate market is the so-called sanctions regime
imposed on the Russian Federation by the Western countries and the part of
foreign partners from the European Union. In connection with this, local
experts have the definite opinion that the imposition of international
sanctions on Russia will affect the dynamics of the domestic real estate
market, mainly the markets of primary and secondary housing of average, improved
and elite quality. Analysts say that in general,
despite the presence of a number of risks, the real estate market in Russia
remains relatively stable. However, in the first half of 2014, the volume of
investments in real estate in Russia decreased by 59 % as compared with the same period in 2013. Analysts of
the International consulting firm Jones Lang la Salle estimated the amount
investments in the property of the Russian Federation of 1.4 billion US
dollars.
In the process of studying the
state and dynamics of the market of the primary and secondary housing of
average, improved and elite quality, as well as the mortgage market, we had the
following tasks: find out the trends that can arise in the near future in the
housing market segments mentioned above.
The
information forming the analysis basis was obtained from the official website
of the Federal Service of State Statistics (Rosstat). We also used official
information resources of agencies for housing mortgage lending (AIZHK) of the
Russian Federation and the Central Bank of the Russian Federation.
The first stage of
our study was to compare the dynamics of population per capita income growth
rate in the Russian Federation and the dynamics of the interest rate on Central
Bank loans. The rate of income growth remained consistently positive and showed
a year-by-year increase by 7.1% to 12.6%, which is not true of the rate of
growth of the interest rate on the Central Bank loans. Since 2010-2011, the
lending rate has been falling by 38.7% in 2010 and 3.4% in 2011, respectively.
In 2012, the interest rate on loans increased by 15.5% compared with the
previous year, and sharply fell in 2013 by 10.3%. During the new conditions
there has been the highest jump in the interest rate on loans. Thus, in 2014,
the interest rate increased by 17.2% compared with 2013.
Based on the above,
it can be concluded that the per capita income growth rate in the Russian
Federation in 2010 and 2011 exceeded the growth rate of the Central Bank
interest rates and amounted to 51.3% in 2010 and 13.0% in 2011, respectively.
Then followed a small decline in the economy, which in turn reflected in the
Central Bank interest rate growth exceeding the average per capita income of
the population in the Russian Federation by 4.5%. In 2013, there was a rise and
the second index exceeded the first one by 22.0%. The period of new economic
conditions sharply slowed growth of both indicators; moreover, the growth rate
of the Central Bank interest rates on loans were higher than the growth rate of
per capita income in the Russian Federation by 10.1%, which had been the most
significant excess over the last 5 years.
The second stage of
the study was to analyze the dynamics of the apartment one square meter average
price growth rate in the primary and secondary housing market in rubles. The
growth rate of the primary and secondary housing market have had mostly
positive direction over the past 5 years, except for 2010. In general, the
trend shows that the primary and secondary market housing tends towards the
growth in each of the above mentioned segments.
The third stage of the study
was the analysis of the so-called "panic" in the housing market in
2014. The entire 2014 the Russian real estate
market was under the pressure from geopolitical and macroeconomic factors. The
conflict over Ukraine, worsening relations with the West, the imposition of
sanctions, the capital flight, the fall in oil prices and the devaluation of
the ruble - all these factors have affected the real estate in two ways. On the
one hand, their effects can be summarily described as a "money has become
less," and on the other - as a "real estate has again become the
subject of heightened interest." Many people invested in the real estate,
since it can not just disappear or be reduced in size. In early September,
after the next round of sanctions, there was a sharp increase in the number of
mortgage loans, and the situation peaked in October and November.
The
consequence of the above was the massive purchase of housing at any price and
of any quality, which led to an increase in the rate of sales to 50%. In the
current conditions, the fall of the national currency has become a catalyst for
interest in the residential property market. This situation can be compared
with the last two crises of 1998 and 2008.
It is noteworthy that during both crises, in 1998 and in
2008, the residential real estate market behaved almost identically. Consequently, the dynamics of ruble
prices will determine the depth of the domestic currency fall relative to the
US dollar, not in a moment of panic, but on the basis of the situation in the
economy.
Based
on the experience of past crises, if dollar prices decrease by 35% average, the
price reduction range is 20% to 50% depending on the segment and the
characteristics of the facility itself. The most liquid market segments in US
dollars will drop by no more than 20%, and the drawdown of prices in rubles
will not happen at all, since, apparently, on the basis of the current
situation, the ruble exchange rate against the dollar will fall at least and
not less than in 2008-2009. The best prospects are for new buildings, which
over the time of construction traditionally become more expensive in
rubles by 10-20%. Of course, we are talking about facilities that will not be
frozen. The cost of the least liquid residential property will do drop in dollars and rubles, and the depth of
the dollar prices fall could reach 50.0%.
In
summary, it can be noted that the market of primary residential real estate of
all categories will overcome the crisis earlier than the secondary housing
market. However, prices in all segments of the market will continue to grow.
Russia has already experienced similar situations and dealt with them, and if
we believe the 2016 budget, all the negative trends in the housing market will
terminate by 2017.
References
1.
http://base.garant.ru/10164072/
2.
http://realty.rbc.ru/articles/29/07/2014/562949992007356.shtml
3.
http://www.irn.ru/articles/38194.html
4.
http://news.ners.ru/prognoz-rynka-nedvizhimosti-na-2015-god.html
5.
http://forum.bn.ru/index.php?showtopic=66037