Real estate market in Minsk in first month of 2015
At the beginning of the year there is generally always a drop in demand for real estate due to seasonal factors. The first half of January is the slowest time of the year in the housing market followed by a gradual increase of sales in the second half of the month. In 2015 the seasonal factor has coincided with the economic factor – financial troubles in the country are killing off demand. As a result, fluctuation of market indicators was higher in January than in any other month during the previous year.
In January there was very low demand on the housing market. The total decline in home sales reached 50%. This is the biggest decline the market has seen in comparison with the previous 36 months. In January 2014 demand was higher by 10%.
However, looking at the market situation for the past 10 years, we can see that this is not the first time that demand has dropped this low. In the last 10 years demand had reached such a low mark on five other January months. Today’s situation is most often compared with that of 2009, but in January of that year only half the number of homes were sold on the secondary market in comparison with January 2015. Another bright spot is that 65% of homes were sold in the second half of the month.
The demand on the housing market has recovered quickly after the seasonal holiday drop. By the end of this first month the record in sales was broken in comparison with January 2014 and by the middle of February there were more than 8 000 homes on the market. The disequilibrium in the demand-supply of the market is growing; the increase in supply equaled 88% of the total demand.
Demand for one bedroom apartments suffered the most (-54.2%), while two and three bedroom apartments were somewhat spared (dropped by 41-42%). This resulted in January’s secondary market demand being quite different from any of the months in 2014. The demand for two bedroom apartments was substantially higher than for one bedroom apartments, while three bedroom apartments had a record high demand in January for the past 12 months.
In January most buyers preferred to purchase newer homes; 40% of the apartments which were sold were built only four years ago or less. A quarter of all sales were of homes built only a year ago. Even though not all of the apartments had been sold by real estate developers who built them a percentage over 8-12% is an abnormality for the market.
The most noticeable drop in demand (decrease by 60%-70% compared with December) is for krushchevki and brezhnevki (old homes built in Soviet times). Among the districts with the worst sale statistics is the Partyzanski raion(district) with a 74% drop since December; Savetski, Zavodski and Frunzenski districts have an average of a 60% drop in demand. The current situation in Kamenaya Gorka district illustrates this point – in January there were only 18 sales in comparison with 73 in December.
Taking into consideration the monthly average demand In 2014 the supply of homes for one month could be sold off in 7-9 months. The plummet in demand on the market in January has caused serious disproportions. At this rate it will take 15 months to sell off a monthly supply.
High supply can be compared with a mallet which hammers away at housing prices. In the second half of 2014 the anvil was the high demand, which helped sustain price levels. In January a plummet in demand was followed by a drop in prices; the average price fell by a record-high percentage of 4.3. In one month the price dropped by as much as it did in a year during 2014.
Average price (m2) of apartments in January:
- One bedroom apartments – $1698/m2 (-4.1%);
- Two bedroom apartments – $1524/m2 (-5.3%);
- Three bedroom apartments – $1476/m2 (-4.2%);
- Four bedroom apartments – $1485/m2 (-4.4%);
The difference in demand, with two and three bedroom being the most popular along with newly build apartments has caused a decrease of the average price. Nevertheless, the main reason for this unequal demand in the different housing sectors is the low prices the sellers were willing to offer. For a one bedroom apartment an average of 5% off was offered from the prices, while for two and three bedroom apartments a 11-13% off was offered by the sellers.
During the previous year old homes were dropping in price the fastest out of all the market segments, while good quality modern homes became more expensive by 1-2%. This trend seems to be taking a u-turn in 2015. The prices on modern homes were the ones to drop first in January.
The price for apartments in recently built “panel” houses (large building which use reinforced concrete panels as a base, therefore the name) has gone down by 2.9%. This is due to the fact that growth in supply is the mainly a result of new homes being built and offered on the market. New construction is dragging down prices.
The January price tendency prevails in most of the micro-raions (micro-districts) of Minsk. Only a couple of them experienced a slight price rise and even this was due to structural change of supply – in those areas buildings of higher price categories were built, which naturally made the average price go up. Prices for housing in the centre of the city are dropping faster in comparison with other areas.
In the second half of 2014 there was not a single micro-districts which experienced a 5% price drop in only one month. In January there were five districts that reached this mark: Grusheuka, Vesnianka, Mihaylovo, raion Privokzalnoy ploshadi and Kabuskina and Krupskaya Streets raion.
Minsk price trends in January correspond with the general situation in the region. In Kiev, the prices went down by 1.2% at the beginning of the year. At the beginning of February when the equilibrium exchange rate was reached an abrupt price plummet of recently completed apartments occured. In the capital cities of the Baltic countries there has been no tangible price fluctuation for several months; but, the weakening of the euro has had an effect on dollar prices. As for Moscow the free-fall of housing prices in dollars continues. The monthly percentage changes on housing reached double digits twice already.
January can hardly be called a good month: general small demand and its abnormal structure along with a high amount of new constructions have influenced the prices. The rise in demand that should happen in February will slow down the price drops but will not stop them all together. Up until now prices have been falling due to the increase in offers on the market.
In such a situation it is critically important to determine the real value of an apartment (today’s value and not the value that was set in 2014) and be ready to take action. The old strategy of “set a high price and gradually lower it” can make you lose more money and time than you would if you had initially set an attractive price.
Original text from realt.by