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8 Jan 2013

Hoping for the better, expecting the worst

Belarus property market

Expectations of a new crisis make Belarusians to invest in property

The property market is an indicator of the economy in any country in the past year was unusually generous for Belarus for positive trends. This primarily concerns the growth of demand in the residential sector, which resulted in increase in the number of transactions. Paradox: the poorer Belarusians became, the more real estate they buy! But if you remember that a similar burst of activity was observed in 2008, it becomes apparent the real reason behind that: the intensive investment in the real estate by people was because of the threat of another financial turmoil.

"Secondary" market  sets records

One of the main trends of the past year was increase in number of sales transactions in the secondary market apartments, which occurred both in Minsk and in the country as a whole. According to records in the Unified Register transaction prices of the National Cadastral Agency as of January 3, 2013, the number of residential transactions in 2012, more than in the previous three years (2009-2011). 14-16%. And this is not the final outcome.

And for the room of the capital market last year, may be the most effective over the past 10 years. The number of contracts of sale of apartments overstepped 12,000 and only 70 trades behind the results of 2003, which is still the best.

This burst of activity in the housing market, which occurred at the same time in Minsk and regions can be attributed to more than the expectation of the next financial crisis, people's desire to protect their money from inflation losses. Other causes are less obvious.

The threat of a  price rise for apartments in 2013 is unlikely. The growth of transactions from citizens who have lost in the last year the right for state support for housing will be available, but not on the scale that claim to be the leading factor. Moreover, these scales are almost impossible to estimate even approximately.

The purchasing power of the population in the past year also has not increased, even though the official average salary is close to $500, and interest on bank loans fell by almost half compared with 2011. To the ratio of average official income Belarusians and monthly payments of interest and principal back to 2009, the income must be 3 times or more in the same amount of time should be reduced apartment prices.

However, speaking about payment, you should not ignore existence of the gray market, which in previous years was almost the main source feeding the housing market needed cash. Perhaps this source after the 2010-2011 financial problems last year acquired a second wind, which boosted purchases in the housing market. To estimate the level of the source's impact on the dynamics of transactions impossible, especially in a very short time.

A role, of course, could play even if not strong (on average $100 per square meter), but still reduce residential prices. For example, the average selling price per square meter of apartments in Minsk in 2012 ranged mostly in the range of $ 1230-1250, in 2011 (with the exception of October-December) - $ 1260-1310, in 2010 - $ 1260-1370. In regions like the price dynamics. Note also that the reduction in the sale price - the only one of these factors impact on sales activity, which can be measured and quantified.

Another feature of the secondary housing market in the past year has been to increase the difference between the offer and sale prices, which by the end of the year exceeds 10%, which is twice the traditional rate.

Positive trends include relatively high index of consumer activity, as indicated by the results of monitoring carried out by the analytical center of the group of companies "Your Capital". Thus, in 2010 and 2011 in different months, the index ranged from 0.7 to 1.5, rarely passing through 1.0. And in 2012 it changed in the range from 0.7 to 2.74, while that of 1.0 fell three times - in January, February and March, and by the end of October and November generally amounted to 1.86 and 2.74 .

Landlords benefit

Another notable trend in the real estate market last year was the pronounced growth in demand in the rental sector dwellings. This was seen more in Minsk, but partially affected and the regional centers.

After the traditional surge in demand for rental apartments, which each year by students begins in August and ends in mid-September, demand has not abated either in September or in the following months. Moreover, the ratio wishing to rent an apartment and rent an apartment has grown significantly. Exposure time offered for lease of premises (other than expensive apartments) was reduced from several days to several hours. And yourself rents in the category of economy-and business-class jumped by 20-50%.

Cause such a stir, but this and many experts do not agree, was the beginning of a campaign to clean up yesterday's series of beneficiaries - those who built housing for their loans. In late September, the President instructed the local authorities to check how to use built with state apartments, and measures up to retirement apartments if they are leased.

As a result, owners of subsidized flats started in a hurry to get rid of tenants. At the same time a third declined the offer, which was due to the apartments in new buildings, which are traditionally occupy about 30% of the market.

Deficit led to an increase in rental rates

Analyzing the causes of this phenomenon, one can not consider one more very important factor. This is significant in comparison with previous years, the growth of jobs in the labor market in Minsk and regional centers. Make up for the lack of specialists, employers among other cities, which has recently been allowed to work in Minsk without a permanent residence. Now enough of residence registration (temporary residence permit).

Apart from other cities Belarusians to work in Minsk and regional centers in recent years more and more foreigners come. Thus, the demand for rental housing market is not decreasing but increasing. And last year, accelerating this growth makes a substantial outflow of local personnel to neighboring countries, mainly to Russia.

These trends in the labor market in the future will only increase, which will provide a long term positive trend in demand and rates in the rental sector in Minsk and regional centers.

Housing bonds compete with "dolevka"

The main trend of the Minsk market residential buildings in the year resulted in little increase in prices, the relative stability of supply and demand, as well as structural changes in the financing of projects under construction.

Contrary to pessimistic forecasts of some analysts' primary market is not shrinked, prices rose, and the number of people wishing to purchase apartments under construction has not diminished.

At the moment in the commercial buildings are more than 100 multi-family homes sold by private companies. Of these, about seven dozen facilities under construction, the rest are either put into operation, or have already been introduced and implemented by developers under contracts of sale.

Changes, and notable occurred in how to implement new buildings. If at the beginning of 2011, the proportion of new buildings, realized through the purchase of housing bonds, less than 15%, by the end of 2012, this figure approached 40%.

Similar changes occurred in the structure of demand. The number of people opting for housing bonds, continues to grow. And this trend will continue in 2013.

Stability in the commercial sector

The main trend of the real estate market has become stable and there are no spikes, drops and shocks.

Stable during the year, increased demand in the sector office rental. As a result, as noted by experts of consulting and analytics group of companies "Your Capital", the total amount claimed for rent on the office space and commercial real estate in 2012 increased by more than 2-fold compared with the previous year.

Almost unchanged during the year remained rents. The average cost of renting office space Class "A" varied in different months in the range from 29 to 31 EUR / sq. m, Class "B" - 15 to 19 EUR / sq. m, a class "C" - from 14 to 16 EUR / sq. m

Average rental rates in retail stores and shopping centers increased steadily, rising from 22 EUR / sq. m in January to 27-28 EUR / sq. m in December. This growth experts explain the market entry of new facilities have a higher utility value.

A similar price dynamics observed in the secondary office market. As a result of the slow but steady growth of the average price of office space has risen from $ 2,000 to 2,300 per square meter. m

At the same time the sector share building office buildings distinguished stable prices, which during the year did not exceed a $ 1770-1870 per sq. m. m

Stability manifested in the ongoing development of almost all sectors of the commercial property market.

Speaking of the office market in Minsk, in the company of Colliers International noted the implementation of a major project in the segment of built-to-suit - the commissioning of the head office of "Belarusbank" at Prospect Dzerzhinsky area of over 35 thousand square meters. m new to the class "A" was the opening of the business center, "Wellcome" on the street. International.

Among the iconic shopping mall facilities experts call "ALL" on Dolginovsky tract where as the anchor tenant in the new for the hypermarket format placed network of "Neighbors" and the first full-length in Belarus discount center Adidas, that along with the rest of the tenant makes this project a success.

Late last year, opened up the market for such landmark projects as a multifunctional shopping and entertainment venues - bus station "Central" (working title) and "Castle".

At "Viva Consult" among the important events in the market retail outlet called on the Belarusian market of such a player, as MAXIMA, - known in the Baltic large trading network. Although the official opening of stores under this brand was not news she gives great hope for the future of the Belarusian retail property.

Developed rapidly in the past year, such retail chains as "Euroopt", "Rublevsky," "Vitalyur", "Almy."

An important event took place in the hotel real estate sector: put into operation the first in Belarus aparthotel.

Industrial real estate sector also added a number of objects. Last year we put logistics facilities near the village and the town of Rakov Zaslavl ("BelVingesLogistik" and "Vladprodimport"), as well as a smaller, but very original and equipment to address the logistic center "Minsk Kristall" near Minsk.

Not enough facilities and money

Still one of the major trends in the commercial real estate market growth remained pent-up demand for the purchase and construction of facilities, which was displayed in all market sectors. Last year, he was driven by a lack of supply, and the low purchasing power of potential buyers. Impossibly high interest rates combined with the worsened financial situation of the majority of business entities have forced many to abandon the acquisition of the property and to stay and work in rented space. It is sufficient most of the subjects attempted to change the spacious rented spaces to more modest.

Thus, the stability and calm that prevailed in commercial real estate in the last year were due to shortage of supply and the continued deterioration of the financial health of the real economy. If the Belarusian economy there has obvious growth, developments in the housing market would have developed very differently.


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