New Housing Supply Set to Fall

VedomostiThe volume of new housing is forecasted to drop by 15 percent in 2009.
The volume of new housing coming onto the Russian market will contract noticeably in upcoming years, a working group for the national project on housing has been told.

In 2009, new housing deliveries will fall to 52 million square meters, down 15 percent from 2008 levels, the deputy minister for regional development, Sergei Kruglik, told a meeting of the interdepartmental working group for "Accessible and Comfortable Housing for Russian Citizens," one of four official national projects. He said the 2010 figure would be 53 million square meters.

A similar forecast has also come from Nadezhda Kosareva, the president of the Institute for Urban Economics, who said there would be a reduction in the commercial construction of apartment buildings.

In the first nine months of 2008, private residential construction accounted for 51.2 percent of new housing in Russia, Kosareva said, adding that private construction would rise in the future.

Less housing will be built in 2008 than the 61 million square meters of residential space that had been forecast, which matches the figure for 2007, according to data from the State Statistics Service.

The Regional Development Ministry had earlier forecast a figure of 72 million square meters, but later adjusted it downward. Figures from the State Statistics Service show that, in the first 10 months of 2008, new housing amounted to 40 million square meters, a rise of just over 5 percent over the figure for the same period last year.

At present more than 74 million square meters of housing are under construction, of which approximately 21 million square meters will be completed this year, Kruglik said.

"Construction companies were breaking ground on large volumes, in the hope that demand would grow," Kosareva said. "Now they aren't starting new projects, but are trying to complete old ones, including with help from the state."

To assist the sector, the government has promised to buy completed housing from developers, with 32.6 billion rubles ($1.17 billion) to be spent on these purchases by year's end.

Builders appear to be adjusting to the situation and altering their plans.

Anna Zavyalov, press secretary for developer Sistema-Hals, said that the company was already changing its plans for 2009.

Dmitry Shmelyov, commercial director of developer Snegiri, said that companies that were scaling back their construction plans were those working in the standard residential sector.

"Every month they were laying down new projects, but now that is no longer possible," Shmelyov said, adding that his company is involved mostly in construction for businesses.

Glavstroi representative Ivan Sleptsov said his firm would "try to maintain 2008s levels."

Representatives at SU-155 and Inteko, two other developers, said their companies would not reduce the volume of their construction.

Another major player in the sector, Mirax Group, announced in the fall that it was halting some projects.

In his speech, Kruglik said that the credit crunch had led the country's lenders to reign in the amount of credit available for construction. Credit lines for new projects are almost impossible to attain.

"The lack of available credit for developers, coupled with the lower demand for housing, makes it possible to forecast a fall in real prices on the primary housing market in 2009," he said, without offering a projection on how far prices would fall.