Recent months have seen a slowdown of the Moscow real estate sector, with volumes down, but average prices up in August, but remaining unchanged in September.
According to the Federal State Statistics Service, the number of direct sales and mortgage related sales fell from 8592 in August to September 8080. Analysts say a key factor is the State Duma approving the third reading of new laws allowing early repayment of loans without consent of the lender and additional fines, through amendments to Article 809 and 810 of the Civil Code. Banks claim the changes will add to the costs incurred by banks in lending and is open to abuse.
Invest Café analyst, Yuri Kochetkov, says the reduction in mortgages coupled with increasing pessimism about the economic outlook accounts for slowing volumes.
“Apparently, people prefer to hold off on buying apartments or any real estate objects due to rising prices. Above all the number of mortgage deals fell since the law came into force. A month ago it was 1852 deal, but in September, fell below 1471. This indicates a rising pessimism among citizens in the evaluation of the future (including financial).”
Russia’s capital outflow issues have continued on the back of negative global economic date during August and September, which has seen the Central bank of Russia acknowledge an $8 billion intervention in the markets to buttress the Russian currency in September. The Central bank also noted that 9M 2011 capital outflows had reached $49.3 billion.
According to online real estate expert source IRN.RU, the cost of housing index in September rose by 0.6%, while analytical center GdeEtotDom.Ru reported a 0.3% increase in rouble denominated prices, after a 1.7% increase in August. Alexander Pypin, Director of the analysis at GdeEtotDom.Ru, says the unstable economic outlook, coupled with political uncertainty, and the rouble depreciation, which reached 15% after the start of August, had eroded real estate demand.
“Both sellers and buyers of residential real estate are afraid to make deals because they do not know what will happen in the short run,”
Kochetkov, from InvestCafe says that despite this there is still considerable demand for Moscow real estate, and that money coming out of stock markets in Russia could be directed towards real estate investment.
“In terms of investment, real estate projects are always given special attention, and appearance of new facilities in Moscow is a favorable sign for those who cash in on the stock market and didn’t plan to divert them from the country.”
But Pypin of GdeEtotDom.Ru highlight that global uncertainty is causing buyers and sellers to hold off with investors still a minor part of the real estate market.
“The share of investors on the residential real estate market is not more than 10-15%. Most people now came to a standstill in anticipation of what will happen with the global economy, and are not ready to make a big deal.”
Analaysts say the shift towards smaller numbers of deals, but with higher prices, could mark the beginning of a trend, with Kochetkov looking at market stagnation.
“In 2012 the result of today’s overpricing will give a negative effect with the real estate market shift into stagnation with the cyclical inevitability.”