Unique opportunities in Russia's housing market
Published on 02/07/2015
Russia's housing market is, in many ways, a unique proposition. The legacy of its communist past presents numerous opportunities for building materials suppliers. Here, we take a look at those opportunities and the knock-on effect they are having on the country's growing residential property market.
The intricacies of Russia's residential property market, and their impact
Perhaps the most significant differentiator is the extremely high rate of home ownership in Russia compared to many of its European and global peers. In the final days of the Soviet Union, the communist regime took the almost unprecedented step of simply gifting apartments to the people they were registered to at the time, in a move that was potentially the biggest and most significant transfer of wealth in history.
As a result of this move, Russia has one of the highest levels of home ownership in Europe, with more than four-fifths of citizens owning a property, according to the European Mortgage Federation.
On the face of it, this statistic would suggest that demand for new property would be relatively low, with the overwhelming majority of the country already on the property ladder.
However, the reality is that many people are living in the wrong type of home: many poor pensioners now find themselves owning expensive apartments, while the new rich are often stuck in lower quality housing on the outskirts of town. A high proportion of Russians wanted to move, but the absence of a mortgage market until around a decade ago made this impossible for many.
Now, companies like Etalon allow customers to put down a ten per cent deposit on a property that is yet to be built, then pay discounted instalments over the next three years before moving into a new apartment when it is ready.
Anton Evdokimov, chief executive of Etalon, says demand for property remains "huge" across Russia.
In an interview with Business News Europe, he explained: "Despite the crisis, people are still having families.
"They still need to move to bigger apartments and want to have nicer homes. Life goes on, irrespective of whatever else is happening."
Strong start to 2015 for Russian housebuilding
These factors appear to be having a significant positive effect on rates of residential construction in Russia - despite the economic challenges facing some parts of the country - with building work surging at the start of 2015.
A new report from the state-run Agency for Housing Mortgage Lending reveals that the amount of residential property delivered in the first four months of the year climbed by almost a third when compared to the corresponding period of 2014.
The figures, reported by news website Gazeta.ru, showed that a total of 295,000 apartments entered the market between the start of January and the end of April, representing an increase of 28.4 per cent.
Residential construction growth predicted throughout 2015
Not only has the market enjoyed a positive start to 2015, but it also looks set to enjoy further growth across the year, according to a major survey of contractors carried out by the Russian Institute of Housebuilding Development (RIHD).
The poll, combined with Russian government figures, points to a five per cent year-on-year rise in housebuilding by the end of 2015.
Interestingly, it also provides some insight into the potential outlook for Russian housebuilding over the years ahead, suggesting that apartment blocks will get bigger, with the average number of apartments per new development set to almost double to 222 by 2017.
Average floor space is expected to rise by almost 90 per cent to 13,913 sqm per block, while the number of average storeys per block will increase to 12 over the next two years.