TODAY IS THE BEST TIME TO OBTAIN REAL ESTATE
Yossef Fridman, CEO of the Svitland in Belarus and Lithuania, summarized the results of 2013 and talked about the prospects of development of the residential real estate market in 2014.
magazine “Delo”, №12 (233) 2013
The results of 2013 have not been surprising for the residential real estate market: the first six months, the prices continued their growth, which began in the end of 2011. Demand for real estate has remained high due to the relative availability of mortgage credits. Another trend has become clearer - lack of the plots of land in Minsk. I guess that we shouldn’t wait for any major changes in the market before the end of the year.
One of the burning questions which everyone has been concerned about during the year is the dynamics of changes in the cost of a square meter.
In the first half of the year the price has been rising , continuing a last year trend, but in the second half of 2013 we can observe stagnation. Then why have the prices crept upward within six months?
There have been a few reasons of such growth. At first it is the shortage of the plots of land in Minsk. Virtually, two types of land are available for construction today: areas with encumbrance or land where a serious lack of infrastructure exists. In both cases, land development would increase the cost of the square meter, and thus increase the value of the real estate for the clients.
Secondly, the dynamics of the prices is affected by the cost of construction, which is now too high, partly because of the lack of construction workers: there are a lot of ongoing projects in Minsk, but the number of the builders is rather low. We experience a great shortage of workers, so some international players bring their builders, for example, from Ukraine and Turkey.
Probably in 2014, the situation will change, because many construction objects being built in connection with the World Hockey Championship, will be put into service the next year, and there will not be so massive and large-scale construction both state-owned and with private investments. Let’s see how the dynamics of labor costs will changе.
Thirdly, if we talk about the dynamics of demand, so it has also significantly grown in the first half of the year. In the first half of 2013, we could observe the relative availability of credit instruments to the public. And I must say that a lot of our clients have used the mortgage credits. Now, however, some clients have adopted a wait and see approach - the decline in demand has been largely caused by unavailability of crediting. This has been especially notable to smaller developers who make deals on the prepayment basis and can not afford to sell the residential accommodations on the installment plan. However, I expect that crediting will be available again at the beginning of the next year.
Along with the absence of crediting a macroeconomic factor has become evident. If at the beginning of the year the optimistic mood prevailed among the population, now the situation has changed because of the uncertainty of the financial policy and expectations of devaluation.
However, it is too early to talk about satisfied demand - there is still a lack of residential accommodations in the capital. In addition, the regular families have no alternative for investment of their own accumulated funds today. Some bankers I know point out that people are wary of bank deposits: they are afraid of the Cypriot effect. Moreover, the belief that investments in the real estate are the most reliable exists.
If we talk about the quality of offers in 2013, so, unfortunately, it does not change as rapidly as we would like. Under quality I mean a few positions – it is the finished product and the level of service rendered. We must understand that for many people the real estate acquisition is the most significant purchase in life. We have recently rented out a building, and after that have arranged a meeting of the tenants and the management of the company. We were approached by the clients with the words of gratitude, because many of them have avoided purchasing for a long time only because they have not seen a reliable partner and have been afraid of deceit. When a client comes to the sales department, he should feel confident that he can get the best product on the market for his money.
The quality of the finished residential accommodations is not always consistent with what has been originally stated in the project. So, not everything that is called a "business" and "elite" class today is such. Such situation, which, unfortunately, has lingered in Belarus because of the large and still not satisfied demand, is typical for the post-Soviet countries. However, changes occur when competition intensifies. Hopefully we will feel it soon.
What should we expect for in 2014? The dynamics of the prices in the first few months will be about the same as now. The projects that are behind on the location, quality or design of the residential accommodations, probably will slightly reduce the cost of the square meter. In more thoughtful projects stagnation or insignificant price increase are possible. I think that in general, the cost of the real estate will go up gradually until the end of the next year, but I hesitate to predict the rate of its growth. This will depend on many factors, primarily – on the availability of credits for construction or purchase of an apartment.
The price will also be affected by scarcity of the plots of land in the capital. Also you shouldn’t expect a large number of new projects beyond the Minsk ring road: the macroeconomic situation in the country is difficult, and significant funds will hardly be allocated for the improvement of infrastructure, which is necessary for activation both suburban construction and construction in the satellite towns.
We hope that in the near future the change at the legislative level will be made. The President has stated repeatedly that it’s time for the construction industry to switch to the European standards. And the sooner it happens, the better, because these changes will directly affect the pricing and the quality of housing. The design process can be accelerated, and the requirements, which do not comply with common sense today, can be reduced.
In general, the Belarusian real estate market moves forward confidently - we will see the projects of higher quality and improved customer service more often. If we talk about the ten-year perspective, the districts, where old residential accommodations will be replaced with a new one, will appear in the city. This happens in the big cities of Russia, in Israel, where the entire neighborhoods of dilapidated dwellings are demolished, and in their place the skyscrapers are built. However in Belarus this will be possible only when the cost of the square meter reaches a certain level and the construction with the encumbrance will be profitable. For example, in the center of Israel the cost of the square meter is held today at the level of $4 - 6 thousands, and in some cases even reaches $ 10 thousands! The markets in many countries develop under this scheme, and Belarus will be no exception. Of course, we won’t reach such prices after two or three years. Nevertheless, today is the best time to obtain the real estate!