Having your own apartment is the dream of every young person. Do people need to buy an apartment in Moscow? We will talk about this today with our expert Evgeny Belonosov, CEO of the expert-analytical project Method 2.0.
- Why are people in our country so eager to buy an apartment? After all, in other countries, it is customary to rent housing, rent apartments for living near work, and buy only houses as property.
- As a fact, we must accept that in the United States and Europe, the stability of a citizen is guaranteed by the availability of work and in our country, the source of stability is the availability of property. Your own apartment is an indicator of success, a kind of anchor that gives you confidence in the future.
We should not forget the privatization of the early nineties, when the entire state housing stock of the USSR became the property of citizens registered on the privatized housing space. The apartment, in this case, was an asset that people got from the property of the Soviet Union.
During privatization, the number of property owners in the post-Soviet countries reached almost 80% of the population, which is the highest figure in the world. In the USSR, housing was allocated free of charge but it remained state-owned. The real estate market that has developed since then has created a new culture of attitude to property. Owning an apartment has become perceived as a necessary attribute of modernity.
- Where do such high prices for apartments come from? In China, they build entire cities of new buildings and then settle people there for free. Will this ever be possible for us?
- The price of an apartment consists of many components. If the house is new, it simply looks like this: the direct costs of the developer for the construction of a residential building, the preparation and approval of projects, related infrastructure, construction materials, the labor of employees and the profit that the developer mortgages.
If the first one in any city of the country has approximately the same cost (without taking into account the cost of the land plot) then the profit depends on the location of the house and the location of the apartment in the house itself. So the price of apartments similar in layout and square footage in the center of Moscow and, for example, Yekaterinburg, will differ significantly.
The secondary market has its own pricing system. It consists of the distance from the center, the availability of transport infrastructure, the materials from which the house is built and its deterioration, the layout of the apartment, the floor on which the apartment is located and the total number of floors of the house... The cost is affected even by what the windows face.
And the main thing that forms the price is the presence of demand and the lack of supply. The buyer has to pay for this.
China lives on a different economic model, where the planned economy with strict state control. New cities and districts are being built on territories with the prospect of industrial development. In addition, China has a well-developed transport infrastructure, including the world's longest network of high-speed railways.
As long as the current socio-political model in Russia suits the population, housing here will definitely not fall in price. Especially in Moscow.
How can you invest in an apartment if there is not enough money even for the initial payment?
In modern Russia, unfortunately, the income level of the majority of the population does not allow to improve their living conditions, especially to consider the purchase of real estate as an investment. Even according to official statistics, about 20 million people live below the poverty line in the country.
However, for working people, even with a small but stable income, buying an apartment is not a special problem. Since April 14, 2020, the interest rate on mortgage loans has been reduced, this is one of the measures to support the industry during the pandemic.
Banks actively provide loans for the purchase of housing. But due to high employment and, perhaps, self-doubt, most people do not even consider the possibility of buying an apartment in another city, and even more so in Moscow. Stereotypes that are difficult and scary to overcome.
I note that during the pandemic, the price of real estate has increased significantly. The Central Bank of the Russian Federation has repeatedly noted the overheating of the market, the cost of housing has increased, but the level of income of the population has not. This leads to late payments and can lead to an industry crisis. But the probability of such a development is low.
In this regard, the question arises: is it possible to invest in real estate to increase your income, how great is the risk and what kind of property is better to buy?
Investing money in real estate remains a profitable tool for their preservation and multiplication. Usually they buy apartments in new buildings. A whole stratum of people who can be called mortgage investors has formed, because they buy apartments using a mortgage loan at the early stages of construction and sell them before or immediately after the house is put into operation.
At the same time, the initial payment can be only 500-600 thousand rubles and another 25-35 thousand rubles monthly mortgage payment, and you can sell such an apartment in 6 months through a concession at a much higher price, and get a net profit of 400-500 thousand.
It should be noted that not all real estate has investment attractiveness. There are regions where even a very low price cannot guarantee a sale, which is a determining factor for the investor. Moscow and the Moscow region are more attractive regions. Although new buildings can also be overrated. Having bought an apartment in such a new building, you will be at a loss.
Such investments certainly have risks. But they are more related to the poor choice of real estate as an investment object. Thanks to the laws that regulate the construction industry, the risk of losing money invested in a new building due to the actions of the developer or the bank is minimized.
When you sign an Equity Participation Agreement, you do not pay the money directly to the developer, but deposit the money to the escrow account. This is a special bank account where the money is stored until the developer fulfills its obligations. All escrow accounts are insured by the Deposit Insurance Agency for up to 10 million rubles.
After the new building is put into operation, the house is under warranty for 3 years and you do not need to pay deductions to the Capital Repair Fund for 5 years. These are also the advantages of new buildings.
You said that there are risks to buy a new building and be at a loss. How can this be avoided and how to choose the right apartment, so that its value is higher when selling than when buying?
In order not to make a mistake, you need to contact professional real estate market participants, realtors. There are single realtors, there are those working in large real estate operators. Experienced specialists are well versed in real estate prices, easily identify promising objects and ensure the security of the transaction.
For example, in the United States, you will not be able to buy real estate without a realtor. But in Russia, this is possible. There are many sites that allow you to find real estate both on the secondary market and in new buildings.
But you do not need to do this because by buying a new building directly from the developer you do not save money. By contacting a realtor, you will receive qualified assistance in selecting an apartment, while you will be offered the best option according to the "price-quality" criterion or an attractive opportunity to invest and it will be absolutely free for you, since the real estate operators are reimbursed by the developer.
Developers initially put up for sale a limited number of apartments at minimum prices, then the number of apartments gradually increases as well as the price for them. This happens about once a quarter. The price increase is on average 15%. Therefore, at the start of sales, the most investment-attractive apartments are already reserved through real estate operators.
It is important to explain to the realtor for what purpose you are buying an apartment and what amount you have. You will find the options and help with the paperwork. If you have problems with the paperwork, then you will be consulted by a mortgage broker and most importantly, all serious real estate operators insure transactions, so that in the event of an unforeseen situation, you do not risk anything.
At the same time, properly placed funds with the help of a professional realtor give an average of 40% per annum. The staff of real estate operators includes not only realtors and lawyers, but also analysts.
Thus, it is enough to contact a real estate agency and all issues related to the purchase of real estate will be resolved?
If you choose the right real estate operator, your capital will increase. Therefore, it is very important to choose a good realtor. Here you need to pay attention to all aspects. For example, in the Method 2.0 project, we have our own methodology, according to which we determine the competence of real estate operators, and of course, this serves as a guarantee.
- How does political instability affect the real estate market? Have the recent protests affected the cost of housing?
- There is political stability in Russia. Especially in Moscow, where people are loyal to the government. There are very comfortable conditions for real estate investors here. There should be protests, this is normal. The government monitors the situation and corrects legal and public relations, and reacts by eliminating risks.
At least 2 years for the growth of the real estate market is. There are no prerequisites for price reduction yet. Although the Government can take measures to limit price increases but recent experience with government regulation of food prices shows that this will only lead to another increase.
Apart from investing in real estate there is no other alternative yet. This is now the simplest and most reliable tool for saving and multiplying money.
Today, it is profitable to invest money in real estate, it is necessary to work with professionals, money in a bank or in cash does not work and buying and storing large amounts in foreign currency carries much more risks, including criminal ones.
What should be emphasized is the attractiveness of the Moscow real estate market for foreigners, especially from countries with politically unstable regimes. Relatively low prices in Moscow when buying, in comparison with European capitals, and high profitability with a stable economy allow citizens of other countries to have great opportunities for investment.
- Evgeniy Alexandrovich, thank you very much for the conversation. I know that people are suspicious of intermediaries, so your opinion about realtors and their role in the selection of real estate will be a revelation for many. It was a very useful conversation, it makes you think about your personal investment project: buying an apartment in Moscow.