Record 65.2 million m² of residential space completed in Russia in 2012
A total of 65.2 million m² of residential space in 826,800 dwellings was put into use in Russia in 2012, exceeding the previous best levels by 1.8% for floor area and by 5.2% for number of activated homes.
According to research company PMR’s latest report entitled “The Construction Sector in Russia H1 2013 − Development Forecasts for 2013-2015”, in the last couple of years, the residential market in Russia has reached record levels several times in terms of housing completion. In 2011, 785,600 new homes were completed throughout the country, exceeding by 2.3% the record figure achieved in 2008. However, the total floor area of housing units put into use in 2011 was 2.8% short of the performance witnessed in 2008. Last year appeared to be the residential market’s most prosperous of the past two decades, both in terms of new homes built and total floor area of completed dwellings.
The upturn has been supported mainly by the increasing levels of disposable income, the decline in mortgage rates, the expansion of state-run housing development programmes, and the improving business sentiment. In addition, the progress was propelled by the completion of a large number of projects which were initially to have been put on the market in 2009-2010, added to those scheduled for 2011 and 2012 delivery.
The recent economic crisis has boosted demand for economy class dwellings as well as by more affordable mortgages, which have supported the ability of low income families to buy a new home, mostly from the economy class stock. What also helped was a government focus on prioritising the development of economy-class housing. According to the recently approved state-run programme, “Providing Russian Federation Citizens with Affordable and Comfortable Housing as well as with Utilities by 2020”, the share of economy class housing is estimated to have increased to 30% in 2012. It is planned to expand to 35% in 2013, and to continue to increase gradually to about 43% in 2015 and to 55% in 2020.
The upward trend in housing completion in the coming years will be largely supported by the development of the mortgage market, which is expected to be closely monitored by the government. In 2012, interest rates were close to the lowest level ever recorded in Russia. The average interest rate for mortgages in roubles during the period in question was 12.3%, with a figure of 9.9% for those denominated in foreign currencies. Over the year, the average interest rate for rouble denominated mortgages increased from 11.9% in January to 12.6% in November, and eased to 12.5% in December. For those denominated in foreign currencies it changed little over the year, going from 9.7% in January to 9.9% in December.
740,973 home purchase loans were granted in Russia in 2012, surpassing by 25.4% the amount recorded a year earlier. The total value of loans granted was RUB 1,072bn ($35.7bn), a 39.3% year-on-year increase, of which 98.3% is was taken in rouble-denominated loans. Mortgage loans accounted for 93.2% of the total number and for 96.0% of the total value of credits granted for home purchases over the year. The mortgage market in Russia is largely driven by Sberbank, which has a 46% market share. Currently, about 1% of Russians are able to purchase residential properties without external financial support. Another 25% of the population is thought able to buy such properties with mortgage support.
With regard to the share of residential space put into use by individuals as a proportion of the total housing space completed in Russia, it has remained relatively stable over the past decade, between 40% and 43%. Until 2006, the share was close to 40%, whereas since 2007 it has fluctuated more around the upper end. In 2009, the figure increased to 47.6%, mainly due to the freezing of many projects as a result of the crisis. In 2011, the proportion of housing construction accounted for by individuals continued to decline, reaching 43.0%. This figure changed little last year, to 43.2%.
In 2012, prices on the Russian residential property market rose once more, after declines recorded on both the primary and secondary markets. Last year, according to Rosstat, the average price for housing on the primary market rose to RUB 48,200/m², reaching RUB 56,400/m² on the secondary market.
In the coming years, the residential construction market in Russia is poised to continue its upward trend. Under the previously mentioned affordable housing programme, there are plans for annual housing construction levels to expand gradually during 2013-2020, with 71 million m² of housing space expected to be commissioned across the country in 2015 and to further increase to 92 million m² in 2020.
This press release is based on information contained in the latest PMR report entitled Construction sector in Russia H1 2013. Development Forecasts for 2013-2015.
You are welcome to contact the author of the report:
Vitalie Iambla, Construction Analyst
tel. /48/ 12 618 90 56
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development forecasts, disposable income, economic crisis, economy-class housing, home purchase loans, Mortgage rates, residential construction market, residential market, residential properties, residential space, russia, Sberbank