Experts: By the end of 2009 housing prices in Russia could fall by several times

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Housing prices in Russia are showing a slower decrease than the demand is doing. Such a conclusion has been made by experts of the Institute of globalization and social movements (IGSM). According to the data, received by a REGNUM correspondent from the press office of the institute, analysts of the institute note that currently houses and flats cannot find buyers. The wait-and-see policy of the sellers in the initial stage of the crisis will lead to the general volume of estate left unsold in 2009. Real-estate market players will fail in an unprecedented scale, the experts stated.

According to them, real-estate companies do underestimate consequences of the economic crisis. They are losing their last opportunity to gain whereas buyers are not yet facing complete financial failure. Current discounts for declared prices on estate are about 20-35%. Along with companies, private owners increase the supply in real-estate market, as they are trying to gain money by selling investment flats in order to save their businesses. “The growth of supply is also being observed in the rent market. It increased approximately by 30% in November. In the same time, financial position of tenants is sweepingly worsening: salaries are reducing and dismissals have mass character,” the director of IGSM, Boris Kagarlitsky, notes. According to his assessment, many tenants will not be able to pay current rent and it will happen soon. The fall will also begin in this market, where rent is 2-3 times higher than the average European level.

February 2009 will become a critical month, after which the worsening of economic situation in Russia will go more intensively, the experts of IGSM think. Demand in estate market will decrease sharply. .The current situation is the pause before a big fall. Who will not sell housing in December and January, they will have to sell it off very cheaply for to cover operating expenses. So this  price-cutting gives nothing both to sellers and buyers," the head of the Economic Research Center of IGSM, Vasily Koltashov says. According to his words, 55-65-percent price-cutting is needed to make the market more active and to sell estate presented in the market. Such modest measures will be insufficient in 2009. Lending support for building companies is extremely weak and it will not allow them to keep high prices for estate.

Despite expectations of big building companies, the State will not buy all the accumulated flats and houses at overprice. Even if its role as a buyer will stably rise, it cannot substitute people. During the economic crisis, Russian estate will continuously cheapen. It may happen that by the end of 2009 prices for housing will reduce in several times. But even such a price fall may not lead to nothing for market, because demand is risked to reduce to a greater extent, the analysts conclude.