'08 a Record Year for Petersburg Builders

ST. PETERSBURG — Developers built a record 3.2 million square meters of housing in St. Petersburg last year, although 2009 appears to be on track for a more modest year as many builders are putting off new projects.

The figure, provided by the city construction committee, is 500,000 square meters more than St. Petersburg City Hall planned for 2008 and 600,000 square meters more than was finished in 2007, making last year a possible landmark for the construction industry.

Of the total, 2.9 million square meters were new construction, the committee said. Reconstructed housing accounted for about 56,000 square meters ,and individual builders constructed an additional 202,000 square meters.

The St. Petersburg construction committee topped all of the city's commercial developers, with 372,000 square meters. An executive at LenspetsSMU said the company built more than 300,000 square meters of housing in the year, although the company was not able to provide an exact figure.

Stroimontazh completed seven building projects in 2008 with a total area of 286,000 square meters (in 2007, it was the sixth-biggest builder by square meter), and LEK dropped from first place last year to third place, with 280,000 square meters.

According to preliminary figures from LSR Group, subsidiaries Vozrozhdeniye Piterburga and the Gatchinsky Home-Building Factory, or GDSK, built 170,000 square meters, LSR spokeswoman Yulia Sokolova said. GDSK finished 34,861 square meters in 2008, according to the figures from the city construction committee.

Nearly half of the new housing was completed in the last month of 2008. According to figures from the local branch of the State Statistics Service, 1.8 million square meters were finished from January to November.

Real estate analyst Sergei Sebelev said it was entirely possible to complete 1.4 million square meters in December since many developers had been pushing back deadlines throughout the year.

Developers always make a big push toward the end of the year to complete as many projects as possible because the year-end results influence the company's rating and relations with possible lenders, making December their most tense month, he added.

"According to our figures, commercial developers built 2.3 million square meters in 2008, not counting reconstructed housing and individual building. It's unlikely that these companies gained resources to build additional square meters — demand fell and there wasn't even enough money to finish the projects that had been announced," said Zosya Zakharova, head of projects and analysis at real estate agency ARIN.

As a rule, apartments in already completed buildings are sold ahead of time, and in Stroimontazh's buildings buyers didn't find a single flat, spokesman Dmitry Bogolyubov said. In 2008, according to preliminary data from ARIN, about 1.9 million square meters of new housing were sold.

The results for 2009, however, will be more modest. "In the course of the next few years, we are going to be finishing no more than one project per year since we haven't started any new ones because of the crisis," Bogolyubov said.

He estimated that builders would complete at most 1 million square meters in 2009, half of which would be built by the city. In 2010, Bogolyubov added, the situation could be even worse.

Before the economic turmoil, St. Petersburg developers promised to build 2.9 million square meters of housing in 2009, Zakharova said, adding that she thought the forecast would be lowered 10 percent to 15 percent.

Sebelev, the real estate analyst, said he expected no less than 2.5 million square meters of commercial housing to be completed this year and that developers would cut supply rather than prices. He said only poorly planned projects would have to cut prices.

Even though two-thirds of the city's population either needs housing or improved living conditions, finishing stopped projects will be difficult, said Igor Zhigunov, deputy chairman of the city mortgage bank. Consumers aren't ready to buy and banks aren't prepared to lend; there are no long-term funds, interest rates are high and people's incomes are falling, he added.