What will happen to property prices in 2020

2024 Author: James Gerald | [email protected]. Last modified: 2023-12-17 14:00

Against the background of the current situation with a sharp drop in oil prices and the exchange rate of the national currency, combined with a pandemic, many are thinking about investing in real estate. Is it worth it, and what will happen to house prices in 2020 - find out the expert opinion.

Prices will fall

According to Ildar Khusainov, director of the largest company Etazhi, the fall in the economic model in the coming year will have more serious consequences than the economic downturn in 2008 and 2014. This is explained by the uniqueness of the current situation, when two negative factors simultaneously manifested themselves - the collapse of oil prices and the epidemic that spread throughout the world.

In this regard, in the coming months, the expert expects quite significant drawdowns in the real estate market. Against the background of the pandemic and the unstable situation in the country, which may be complicated by an increase in mortgage rates and tougher requirements for borrowers, a significant decrease in consumer demand for square meters is expected in the next 3-4 months.

How deep the Russian real estate market will sink and what will happen to housing prices depends on how the state can control the situation with the coronavirus and how long it will take to stabilize the economy.

A fall in prices is also predicted by Andrey Kolochinsky, managing partner of VectorStroyFinance. According to the expert, in March 2020, there was a glut of the real estate market, after which there will invariably be a decrease in demand, and therefore prices.

The expert explains the current situation as follows: “A buyer entered the market who has savings and, fearing their depreciation, begins to invest in real estate. Likewise, enterprising Russians strive not only to preserve their accumulated capital, but also to increase it. For example, lease the purchased meters or sell them at a higher price in the future. But there were not very many such clients, given that the income of the population began to grow only in 2019. While their decline continued for five years (since 2014)."

According to the expert, the current economic situation is likely to contribute to a decrease in the standard of living of the population. In the long term, we should expect some decline in property sales.

According to the forecast published on the website of the analytical center IRN ("Real Estate Market Indicators"), the current economic situation contributes to the decline in real estate prices at least to the level of 2018.

Experts admit that the quarantine and the actual halt of economic processes against the background of the devaluation of the ruble, combined with the collapse of oil prices, will entail a rapid decline in the welfare of Russians, and therefore in demand.

But, according to experts, there will still not be a total impoverishment of the population in 2020, since the state has enough money to support the economy for several years. Now there is some lull in the real estate market, and developers are forced to hold back prices in order to maintain consumer demand.

The price per square meter will rise

But Kirill Kholopik, head of NOZA (National Association of Housing Developers), has a completely opposite point of view. He sees no reason to reduce the cost of square meters in 2020. According to the expert, the collapse of oil prices and the subsequent jump of the dollar upwards does not contribute in any way to the decline in property prices.

The cost of any goods (including apartments in new buildings) decreases or increases under the influence of supply and demand. If there is underproduction (demand significantly exceeds supply), the cost per square meter increases. Overproduction (excess of supply over demand) leads to a decrease in prices. An increase in prices can also be observed during overproduction, if they have reached the cost price, which is also growing (for example, with an increase in the cost of building materials).

In the period from 2014 to 2018, a significant overproduction of new apartments was recorded on the market, which led to a decrease in prices in 2015-16. In 2017, housing prices began to rise again, as they "ran into" the cost price.

In 2019, growth accelerated, but the reason for this was already underproduction - for the first time in the past few years, demand exceeded supply twice. The monitoring carried out by NOZA showed a decrease in offers in 2019 by 14.5%, due to which prices increased by an average of 12%.

In 2019, the state adopts a new model for financing housing construction, which denies the appearance of defrauded equity holders. From July 1, the construction industry is fully switched over to project financing. The number of new projects is significantly decreasing, and stress testing has become one of the main reasons for this.

Now banks are checking each new project for the anticipated crisis, that is, "what happens when prices drop by 20%." If, after the calculations, the project remains profitable, the loan will be approved, if unprofitable, respectively, the borrower will be refused.

The result was not long in coming. The ratio of supply and demand has changed radically. Fewer square meters began to enter the market, which accelerated the rise in property prices.

In 2020, mortgages are becoming more affordable, and the Central Bank does not plan to set an exorbitant key rate, as it was at the end of 2014. Moreover, new mechanisms for obtaining maternity capital are now involved, the amount of which has increased significantly, and this will certainly spur demand on the market for new buildings.

“The underproduction of square meters will continue in the near future, so housing prices will continue to grow,” Kirill Kholopik is sure.

Summarize

1. Experts' opinions on the cost of square meters in 2020 are ambiguous. Housing prices will be determined depending on the state of the economy as a whole and the epidemiological situation.
2. Analysts believe that the main reason for the decline in demand for real estate is the fall in the standard of living of the population due to the pandemic and forced vacations.
3. The state is introducing additional measures to support the economy, business and the well-being of citizens, which will contribute to the preservation and, possibly, growth of demand for square meters in 2020.