Yossef Fridman, CEO of the Svitland in Belarus and Lithuania, shared his opinion regarding the development of the real estate market in the capital.
magazine “Delo”, №9 (230) 2013
I think that the growth of the prices on residential real estate is not a coincidence, but a trend. More likely the cost of a square meter will not fall, and probably will continue to grow at different rates. There are four main reasons for this.
Firstly , the lack of the plots of land in Minsk. Vacant land is intended only for a point construction now, the remaining option is construction with demolition and resettlement. Naturally, additional costs appear in such case, costs that will be borne by the buyers.
Perhaps in such situation the satellite towns will start developing. But everything will depend on the demand, because the cost of construction there will be comparable to the cost of construction in Minsk. It means that the selling price will be the same. What is important for demand formation is the development of infrastructure, which is entirely dependent on the state. How convenient the transportation will be, how environmentally friendly these towns will be. Now, everyone wants to live comfortably and away from large industrial enterprises. By the way, in Israel I live in the satellite town, and I know that I can get into the car and reach the center of Tel Aviv in 40 minutes. I’d like to note that the development of the satellite towns is a global trend that somehow will be implemented in Belarus too.
Secondly , the growth of the cost of construction influences on the growth of the cost of the square meter. This is caused by the rise in price of the construction materials, as well as in salaries in the construction industry. Nowadays the workforce has an alternative - anyone can go to Russia or other countries and earn more. We experience the lack of the builders. The same can be said about the contractors. There were cases when we wanted to address to some experts, but found out that they were already working in Russia, where working conditions were more interesting.
Thirdly , the rise in the real estate prices forms a lack of alternatives of investment for the middle class. People hardly believe in deposits, and there are not too many other sources of profitable investment of money.
Fourthly , the very slow change of the legislative basis also leads to higher prices of the residential real estate to some extent. Today such rules of construction and design exist in Belarus, which simply shall not be applied in the XXI century. They entail longer terms of construction and more expensive projects. The norms change slowly, we have to face great bureaucracy.
As long as all these factors still exist, the real estate prices will increase in the long term prospect. But it will be wrong to talk about any specific figures. The following may happen: there are few vacant plots of land in Minsk, so they will be sold for a higher price, but at the same time the quality of construction will become higher. For example, our project "Lebyazhy", where we work using technologies which are new for Belarus. Naturally, the square meter in those buildings will cost more.
If the quality of the residential accommodations grows, the value of the real estate will also grow. But various economic factors shall facilitate to this, such as rise in wages. As an economist, I love to use the following rule – a family with an average level of income shall be able to buy an apartment for 60-70 standard monthly incomes (including income from the property rent, social assistance and additional earnings). For example, if the income of the family of two working adults is, say, $ 2 thousands per month, according to the rule stated by me, the average cost of a standard 3-room apartment for such family should be $ 120 thousands. If this is the average cost of the 3-room apartment, then the market is in equilibrium. If not, then we should expect changes of the market one way or another.