Comfort plus: Russia faces shortage of new economy class buildings
Affordable housing construction is falling in the country. The share of new economy-class projects in the real estate market has reached a minimum of 22%, according to data from the Central Bank, which was analyzed by Izvestia. At the same time, the percentage of the business segment is growing. The trend is also confirmed by developers. In Moscow, economy class disappears in principle, especially inside the MKAD. The situation is similar in other major cities. Developers are moving from the budget segment to more expensive ones due to the unavailability of mortgages and the possible tightening of the family program. What this means for the industry and for people is in the Izvestia article.
Why is the share of affordable housing declining
This year, the construction of new economy—class apartment buildings has fallen - their share has dropped to a minimum of 22%. This follows from the data of the Central Bank, which was analyzed by Izvestia. At the same time, the share of business and luxury housing projects increased to 17%.
This trend has been confirmed by market participants. The share of typical housing in the total construction volume has been decreasing for the third year in a row, giving way to comfort class, said Irina Pashkovskaya, head of the analysis center at the federal company Floors. Back in 2023, it was one in four new apartments (26.7%), in 2024 - only one in five (21.3%). And by November of this year, standard housing accounted for only 17.8%, she said.
This year, the share of economy class apartments has fallen most significantly in Tyumen, Samara and Volgograd, according to <url>. The lowest percentage of such housing by December was in Perm (4%), Rostov-on-Don (5%), Kazan (5%), St. Petersburg (9%) and Nizhny Novgorod (10%). In Yekaterinburg and Moscow, they are only slightly more than 10%.
This is due to the fact that the segment of budget housing is becoming more risky for developers, said Denis Zhalnin, CEO of the People development company. The main reason is the restriction of preferential mortgage programs, which affect consumer activity in the mass segment, and hence the filling of escrow accounts. In addition, competition between the secondary and primary real estate markets is expected to increase. When market rates on housing loans begin to approach preferential rates, it will be more difficult for mass housing to compete with ready-made apartments.
In addition, there are concerns about the uncertainty over the future of the family mortgage, Irina Pashkovskaya added. The authorities are discussing raising the rate from 6% to 12% for married couples with one child.
— The profitability of projects in the mass segment has been tending to zero in recent years. And in conditions of high inflation risks, rising land costs and the burden on developers, it is impossible to indefinitely "shrink" the cost of apartments in order to meet price expectations for budget housing, — Denis Zhalnin emphasized.
In recent years, the cost of land in cities, the prices of building materials, and grid connection services have changed markedly, as have the costs of design and operation, explained Mariana Merkulovich, head of the Commercial Real Estate Department at Estate Today. To this is added the growing demands on the quality of construction from regulators, which also increases costs, said Valery Tumin, Director of Markets in Russia and the CIS at fam Properties.
Economy class, at current costs, often becomes a low-margin or even risky product for developers, Mariana Merkulovich said. Therefore, many of them have changed their strategy and shifted their focus to the business segment.
Izvestia sent a request to the Central Bank and the Ministry of Construction on how the share of apartments under construction varies in different segments.
Will there be a shortage of economy class apartments
— A business class buyer is less dependent on preferential mortgages and more often uses his own funds, alternative investment instruments or installments from developers. Therefore, developers are consciously shifting their focus towards a more profitable and predictable segment," explained Mariana Merkulovich.
Developers have really shifted to the business class, because buyers in this segment are much less likely to use mortgages, agreed Valery Tumin. In Moscow, for example, the share of business class apartments exceeded half of the supply.
However, due to this trend, there is a risk that there will be a shortage of new economy-class buildings in Russia, Merkulovich warned. The downward trend in their construction is already noticeable. If it persists, the market may face a shortage of truly affordable housing in a few years. This is especially critical for young families and regions with low average salaries.
The showcase of the market is rapidly shifting towards business and premium class, the usual mass comfort class is becoming more of an exception, said the director, head of residential real estate CORE.XP Ekaterina Lomteva. Economy class in Moscow is disappearing in principle, especially inside the MKAD.
It can still be found in the Moscow region. These are apartments with ceilings of 2.6–2.7 m, Parking on the territory of the house, courtyards with cars and ordinary entrances without wheelchairs, added to CORE.XP.
There is already a shortage of economy-class housing, especially in megacities, said Evgeny Shavnev, CEO of the Flip real estate investment company. The price per square meter in such apartments is on average 15-20% cheaper than in the next segment, said Alexey Popov, chief analyst at Cyan. At the same time, the adaptation to this is a decrease in the average square footage of apartments, which allows you to stay within a comparable transaction budget.
However, the demand of the population has changed somewhat. Russians are increasingly buying non-square meters, as it was a few years ago. The concept, the walking accessibility of the infrastructure, and the availability of common areas in the lobby are becoming increasingly important, said Denis Zhalnin from the People company.
— Economy class housing is, as a rule, apartments of compact size with basic finishes, a minimal set of infrastructure in the courtyard and simple layouts. The comfort class offers a large area, well-thought-out courtyards, underground parking, and sometimes finishing. Business class means high ceilings, high-quality materials, well—developed infrastructure, and concierge service," explained Valery Tumin from fam Properties.
However, if you can buy an apartment in a savings account for 10-12 million rubles, then the business will start from 25 million at best. And if it is a historical center, then the cost may be higher than 50 million rubles, Evgeny Shavnev estimated.
In the medium term, the share of budget housing will continue to decrease by 2-3% per year, predicts Irina Pashkovskaya from the Floors company. The market alone will not fix this situation — the logic of the economy is simple: the developer builds where it is profitable, Mariana Merkulovich emphasized.
The reduction in the key rate, which has already begun, will gradually increase the availability of mortgages, Valery Tumin recalled. However, targeted government support for the industry is also important. For example, subsidizing developers who build social housing. The task is to prevent new housing from becoming unaffordable for the middle class, he stressed.
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