4 September 2020
Mechanism launched: how the real estate market is changing after the pandemic
The COVID-19 pandemic has taken the world by surprise: virus-containing restrictions have stopped entire industries, and the economic impact of these measures will be felt for several years to come.
The impact of the pandemic on the housing market turned out to be so significant that, although it resisted, developers will have to implement projects in a completely new way in the near future. People trapped in their apartments will now make new demands on housing.
The housing market has held out
Statistics don't lie. Development activity against the background of the pandemic has significantly decreased. In the first half of the year alone, Russian construction companies have commissioned 11% less square meters than a year earlier. The reason is the forced downtime at construction sites during the coronavirus restrictions. It is not for nothing that the issue of resuming work on construction sites in Moscow and the Moscow region was on the daily news agenda of the federal media.
The coronavirus has also paralyzed the activity of people in the housing market. Rosreestr for the first half of the year noted a decrease in the number of transactions in the primary market by 40% compared to 2019 and by 65% in the secondary market. Moreover, even in the premium segment, which is the least prone to crisis phenomena, there was also a decline.
However, after a couple of months, it became clear that the Russians retained their intention to buy real estate. Demand for mortgages quickly recovered, and by the end of June (when restrictions were lifted in most regions and in Moscow), the number of loans issued exceeded the same indicator last year: 116.4 thousand compared to 96.3 thousand.
We, developers, had to quickly respond to the new challenge so as not to lose our business and clients, given the fact that the number of mortgage transactions in the primary market in the Moscow region fell by almost 20% compared to the first half of 2019. In my opinion, in this situation, the most important thing was to support people and their demand. We did not freeze construction sites and did not abandon our projects, but went along the path of subsidizing mortgages for buyers. Moreover, we have increased the period of the interest-free installment plan from two to three years. As a result, the pace of sales for our projects did not change, and by the end of June and July, over fulfillment of sales plans was recorded in all indicators: both in the number of lots and in sold square meters.
Space: personal and public
Due to the pandemic, thousands of people around the world were literally locked in their apartments for several months. This situation has become a challenge for developers, as it is obvious that it has changed the attitude of buyers towards the product. When choosing a home, it was not the area of the apartment that came to the fore (“bigger is better”), but a competent layout of the space. Many were forced to work remotely and, moreover, will continue to work in this format. What is the use of having a large living room with a kitchen if you cannot retire during work hours and calmly chat with colleagues?
I believe that in the near future, apartments will be in demand, allowing you to find an area for a separate office or workplace. Working remotely, family members who are quarantined in the same apartment should be able to retire and go about their business.
We can also expect an increase in the share of finished apartments. This process began earlier: according to realtors, in five months of 2020, finished apartments in the capital accounted for 39% of lots sold, compared with 33% a year earlier. According to our forecasts, this figure will grow: the prospect of being quarantined again in a rented apartment with an unfinished concrete box in the property is still real. And the savings that people usually count on when buying houses without finishing are questionable in the current conditions. After all, an experienced developer does not just carry out high-quality finishing for a particular apartment, saving time and nerves of the buyer - he buys finishing materials for the entire project from trusted suppliers, which makes it possible to make repairs cheaper, better and faster. For a reliable developer, this is primarily not an item of additional income, but an opportunity to increase the demand for a project by improving its quality.
Along with quality personal space after self-isolation at a special price and public functions. This trend is also not new, developers have been trying to fill their projects with a variety of infrastructure for several years. When all public areas are closed or have a lot of restrictions when visiting, the availability of their own infrastructure is an advantage. It is time for home developers to follow the path of versatility and implement business lounges, restaurants, a fitness center, spa, hotel zones and coworking spaces in their projects, which would be available to residents of the complexes. Thus, people, literally going down the elevator, will be able to conduct business negotiations and meet friends. In this matter, Ant Development relies on the long-term international experience of our holding. We felt this trend and implemented it in our projects long before the pandemic. Now, this trend will be seen in all developers, as demand has obviously changed.
Manual control
The next trend follows from the previous one. Given the multifunctionality of residential complexes and developed residential areas, the developer can no longer afford to withdraw from the project upon completion of construction. To prevent the constructed infrastructure from starting to live its own life after being handed over to management organizations, the declared boutiques did not turn into mini-markets, and the protected area - into a concierge grandmother, the participation of developers in servicing projects should be strengthened, and by our example, we will set this trend. The optimal solution, which I see, is the need for developers to continue to manage independently already commissioned residential complexes, maintaining the declared standard of living, and this will form the reputation of developers. It is this approach that will create long-term relationships between the client and the developer, and will further ensure customer loyalty. After all, it is a good reputation that ensures the future of any company, including a development company, unless, of course, it is a developer of one project. But with the introduction of project financing, there are fewer such players.
Safe investment
And finally, it was during the pandemic that people remembered that real estate at all times remains a reliable instrument for preserving and increasing savings. For example, in the UK, after a long period of self-isolation, people have become actively interested in purchasing houses with their own infrastructure, including those outside the historic center. A similar trend is now being observed in the United States. And there, and there, housing prices began to rise, and people want to preserve their savings by investing in real estate.
Russia is no exception. After a short-term decline, the demand for housing rose again. And the premium segment has an advantage in this regard: during the crisis, such real estate increases in value due to the significant foreign exchange component of construction. Therefore, if the ruble depreciates, then the dollar rises, and the object rises accordingly. Of course, in the early stages of construction, prices are most attractive. But high-quality, trend-setting projects will remain liquid for many years after being commissioned, and their prices will continue to rise. Therefore, they are suitable for investment in the later stages of construction. And our projects around the world confirm this.
If we rely solely on the internal statistics of our company, then today about a third of transactions are an investment. We forecast that this figure will remain at the same level. In general, the share of investment transactions in the market may grow. The coronavirus pandemic is an unprecedented event in modern history. She exposed many of the problems of the development market. But at the same time, the current situation is an opportunity to honestly look at the players in this market, products and see new vectors for further development.
The housing market has held out
Statistics don't lie. Development activity against the background of the pandemic has significantly decreased. In the first half of the year alone, Russian construction companies have commissioned 11% less square meters than a year earlier. The reason is the forced downtime at construction sites during the coronavirus restrictions. It is not for nothing that the issue of resuming work on construction sites in Moscow and the Moscow region was on the daily news agenda of the federal media.
The coronavirus has also paralyzed the activity of people in the housing market. Rosreestr for the first half of the year noted a decrease in the number of transactions in the primary market by 40% compared to 2019 and by 65% in the secondary market. Moreover, even in the premium segment, which is the least prone to crisis phenomena, there was also a decline.
However, after a couple of months, it became clear that the Russians retained their intention to buy real estate. Demand for mortgages quickly recovered, and by the end of June (when restrictions were lifted in most regions and in Moscow), the number of loans issued exceeded the same indicator last year: 116.4 thousand compared to 96.3 thousand.
We, developers, had to quickly respond to the new challenge so as not to lose our business and clients, given the fact that the number of mortgage transactions in the primary market in the Moscow region fell by almost 20% compared to the first half of 2019. In my opinion, in this situation, the most important thing was to support people and their demand. We did not freeze construction sites and did not abandon our projects, but went along the path of subsidizing mortgages for buyers. Moreover, we have increased the period of the interest-free installment plan from two to three years. As a result, the pace of sales for our projects did not change, and by the end of June and July, over fulfillment of sales plans was recorded in all indicators: both in the number of lots and in sold square meters.
Space: personal and public
Due to the pandemic, thousands of people around the world were literally locked in their apartments for several months. This situation has become a challenge for developers, as it is obvious that it has changed the attitude of buyers towards the product. When choosing a home, it was not the area of the apartment that came to the fore (“bigger is better”), but a competent layout of the space. Many were forced to work remotely and, moreover, will continue to work in this format. What is the use of having a large living room with a kitchen if you cannot retire during work hours and calmly chat with colleagues?
I believe that in the near future, apartments will be in demand, allowing you to find an area for a separate office or workplace. Working remotely, family members who are quarantined in the same apartment should be able to retire and go about their business.
We can also expect an increase in the share of finished apartments. This process began earlier: according to realtors, in five months of 2020, finished apartments in the capital accounted for 39% of lots sold, compared with 33% a year earlier. According to our forecasts, this figure will grow: the prospect of being quarantined again in a rented apartment with an unfinished concrete box in the property is still real. And the savings that people usually count on when buying houses without finishing are questionable in the current conditions. After all, an experienced developer does not just carry out high-quality finishing for a particular apartment, saving time and nerves of the buyer - he buys finishing materials for the entire project from trusted suppliers, which makes it possible to make repairs cheaper, better and faster. For a reliable developer, this is primarily not an item of additional income, but an opportunity to increase the demand for a project by improving its quality.
Along with quality personal space after self-isolation at a special price and public functions. This trend is also not new, developers have been trying to fill their projects with a variety of infrastructure for several years. When all public areas are closed or have a lot of restrictions when visiting, the availability of their own infrastructure is an advantage. It is time for home developers to follow the path of versatility and implement business lounges, restaurants, a fitness center, spa, hotel zones and coworking spaces in their projects, which would be available to residents of the complexes. Thus, people, literally going down the elevator, will be able to conduct business negotiations and meet friends. In this matter, Ant Development relies on the long-term international experience of our holding. We felt this trend and implemented it in our projects long before the pandemic. Now, this trend will be seen in all developers, as demand has obviously changed.
Manual control
The next trend follows from the previous one. Given the multifunctionality of residential complexes and developed residential areas, the developer can no longer afford to withdraw from the project upon completion of construction. To prevent the constructed infrastructure from starting to live its own life after being handed over to management organizations, the declared boutiques did not turn into mini-markets, and the protected area - into a concierge grandmother, the participation of developers in servicing projects should be strengthened, and by our example, we will set this trend. The optimal solution, which I see, is the need for developers to continue to manage independently already commissioned residential complexes, maintaining the declared standard of living, and this will form the reputation of developers. It is this approach that will create long-term relationships between the client and the developer, and will further ensure customer loyalty. After all, it is a good reputation that ensures the future of any company, including a development company, unless, of course, it is a developer of one project. But with the introduction of project financing, there are fewer such players.
Safe investment
And finally, it was during the pandemic that people remembered that real estate at all times remains a reliable instrument for preserving and increasing savings. For example, in the UK, after a long period of self-isolation, people have become actively interested in purchasing houses with their own infrastructure, including those outside the historic center. A similar trend is now being observed in the United States. And there, and there, housing prices began to rise, and people want to preserve their savings by investing in real estate.
Russia is no exception. After a short-term decline, the demand for housing rose again. And the premium segment has an advantage in this regard: during the crisis, such real estate increases in value due to the significant foreign exchange component of construction. Therefore, if the ruble depreciates, then the dollar rises, and the object rises accordingly. Of course, in the early stages of construction, prices are most attractive. But high-quality, trend-setting projects will remain liquid for many years after being commissioned, and their prices will continue to rise. Therefore, they are suitable for investment in the later stages of construction. And our projects around the world confirm this.
If we rely solely on the internal statistics of our company, then today about a third of transactions are an investment. We forecast that this figure will remain at the same level. In general, the share of investment transactions in the market may grow. The coronavirus pandemic is an unprecedented event in modern history. She exposed many of the problems of the development market. But at the same time, the current situation is an opportunity to honestly look at the players in this market, products and see new vectors for further development.
Source: blogs.forbes.ru