The real estate market in the Russian Federation is one of the largest segments of the national economy. However, its development largely depends on the situation in other key sectors of the economy. The Russian real estate market is sensitive to crises, to the macroeconomic situation. How is this dependence traced at different stages of its development? What are the main periods of formation and growth of the real estate market of the Russian Federation?
The real estate market of the Russian Federation: structure
Considering the main stages of development and formation of the real estate market in Russia, it will be useful to study it in terms of the functioning of 2 rather different segments - transactions with residential properties and legal relations, the subject of which is the sale, purchase and lease of commercial property.
It can be noted that both of these areas fulfill a number of important functions for the national economy of the Russian Federation:
- stimulating demand in the lending market;
- stimulation of supply in the construction market;
- stimulating the growth of money supply in a large number of other business segments - the field of consulting in the field of real estate, the production of building materials, varnishes, paints, decoration, wallpaper;
- solving urgent social problems related to providing citizens with housing;
Thus, the real estate market is one of the most important drivers of economic growth in the country as a whole. Let us now consider how its most important segments were formed and developed.
The residential real estate market of the Russian Federation: the first years of development
In what year did the Russian real estate market emerge in the field of transactions with residential properties? There are several points of view on this score.
According to many researchers, the residential real estate market in the corresponding segment began to form in 1990, - upon the publication of the Law "On Property", which approved the institution of private property in the USSR - for the first time in a long time. Prior to this, in the Soviet Union this or that property, including apartments, was in the personal possession of citizens. But not in private ownership - the corresponding institution in the USSR was associated mainly with the capitalist system, which was ideologically opposed by socialist principles.
As soon as the Law "On Property" was adopted, at the disposal of the citizens of the USSR were houses and apartments, which by that time they had acquired in the order of the existing lending formats. I must say, these loans were quite far from the usual mortgage programs for today's average people, but to some extent similar to them. The owners were also able to sell their property in the market.
Privatization factor
In turn, since 1992, large-scale privatization of apartments received by that time from the state started. This predetermined the formation of large volumes of supply on the market, and due to the fact that the free delivery of housing from the state was minimized (except in the framework of various social programs), there was also a demand for real estate.
If we talk about when the real estate market in Russia emerged, then we can focus on the period of the beginning of the privatization of state apartments. That is, it is 1992. However, some experts believe that the Russian real estate market was formed in 1991, just after the Law "On Property" was fully operational, and the first commercial transactions for the sale of housing began to be implemented. But due to the rather small volume of supply and demand, those mechanisms that characterized the market before could not be considered as fully market ones. Only with the beginning of privatization did they begin to take shape.
Thus, the stages of the formation of the real estate market in Russia, if we talk about the residential segment, it is more legitimate to count from 1992. Another thing is that the corresponding sphere of commercial relations assumed the existence of not only the institution of private property, but also a large number of legal and financial mechanisms through which transactions for the purchase and sale of apartments could be carried out. Let's consider this aspect in more detail.
When did the legal mechanisms of the Russian real estate market take shape?
So, in what year the Russian real estate market was formed, if we talk about its residential segment, we now know - in 1992. However, in its original form, it functioned within the framework of outdated legal mechanisms that were largely oriented towards the socialist period. Needless to say - even the state’s Constitution at that time was absent. But in 1993 she appeared. Later, laws on state registration of rights to real estate were adopted and enacted in 1997, and on mortgages in 1998.
Legal and financial institutions: impact on market development
Thus, despite the fact that the Russian real estate market was formed in 1992, it took him a while to acquire the appropriate mechanisms for legitimizing purchase and sale transactions, as well as lending.
Actually, the fact that mortgage programs were approved at the legislative level predetermined the beginning of the formation of a new stage in the development of the housing market in the Russian Federation, characterized by a steady increase in demand, and as a result, real estate prices. Regarding periodization, it corresponds to the 2000s before the crisis of 2008-2009.
Consider its specifics in more detail.
The residential real estate market of the Russian Federation: from the beginning of the 2000s to the crisis of 2008-2009
Thus, the main factors in the development of the Russian real estate market in the corresponding period were mortgage programs (demand for them became especially intense in the mid-2000s), growing salaries of citizens, and also constantly high demand for housing. As a result, apartment prices rose rapidly in the 2000s. A factor in their decline could be a crisis in the economy, which would predetermine a slowdown in the mortgage market, as well as a decrease in housing demand due to a decrease in wage growth.
Similar conditions arose in the fall of 2008, when, against the backdrop of negative financial indicators of the world market, problems arose in the Russian economy. Incomes of citizens of the Russian Federation in the period until approximately 2010 stopped growing, at least at the pace that was observed before the crisis of the fall of 2008. Banks began to more rigorously assess the solvency of mortgage borrowers, in connection with which the pace of housing lending decreased.
As a result, during the crisis of 2008-2009 , property prices in the Russian Federation decreased significantly. But with the stabilization of the macroeconomic situation in Russia, the growth of citizens' incomes began to begin again, banks again intensified in terms of housing lending, and the real estate market in Russia, the formation of which has already taken place, has entered a new stage of development. We study its features.
The residential real estate market of the Russian Federation: from 2010 to the crisis of 2014
Against the background of a significant increase in the intensity of housing lending, continuing high demand in the indicated period, real estate prices began to skyrocket again in the Russian Federation. However, this trend, as analysts note, was not typical for all Russian regions. In particular, in the largest cities of the Russian Federation, primarily in Moscow, St. Petersburg, the rise in prices for residential real estate was not so noticeable in relative terms. Analysts attribute this mainly to market saturation. Despite the fact that the largest cities of the Russian Federation remained attractive for relocation, the development of the housing construction market in Moscow and St. Petersburg to some extent offset the high demand for real estate.
New crisis and real estate market
One way or another, in many other cities of the Russian Federation, due to the lack of supply, property prices have been steadily growing. A factor in their slowdown, again, could be a crisis in the economy. Those in connection with the complication of the foreign policy situation, the cheapening of oil and some structural problems in the national economy of the Russian Federation arose in 2014.
Incomes of the population again outgrew to grow. In a particularly negative way, the new crisis affected the banking sector - the Central Bank was forced to increase the refinancing rate, and commercial credit institutions, in turn, tightened loan conditions. As a result, the mortgage market has slowed significantly. These factors predetermined a new recession in the residential real estate market in the Russian Federation.
What prospects await this sphere of property and legal relations in connection with the current economic situation?
Residential real estate market of the Russian Federation: prospects
The stages of development of the real estate market in Russia that we have examined indicate that crisis phenomena for the corresponding segment are not new. During the recession of 2008-2009, the same decline in housing prices was observed as in the crisis of 2014, and the dynamics of mortgage lending decreased. But as soon as the state of affairs in the economy improved, the situation in the residential real estate segment also improved, due to the constantly high level of demand for housing.
Pending Government Action
Overcoming the crisis of 2008-2009, the Russian economy was helped by high oil prices, starting in 2011, amounting to about $ 100 per barrel. Will there be a return to them now, when “black gold” is several times cheaper - the big question. If this is so, then probably once the current driver of growth of the Russian economy will work. If not, you will probably have to wait until the programs adopted by the Russian government to stabilize the situation in the national economy, aimed at ensuring replacement of oil revenues, begin to function.
Consequently, the state of affairs in the residential real estate market depends on how successful the state policy will be in the area of adapting the Russian economy to the new conditions prevailing on the world market.
Commercial Real Estate Market in the Russian Federation: Formation and Development
So, we found out in which year the Russian real estate market was formed and how it developed in the residential segment. Let us now examine the specifics of another area, namely, commercial real estate. Sales and lease transactions here are carried out in relation to such objects as office buildings, shopping centers, hotels, warehouses, garages, industrial facilities, stadiums.
Was privatization significant in business?
At the beginning of the article, we determined that in the residential segment the Russian real estate market was formed in 1992 - when privatization began. As for commercial facilities, similar market phenomena in the relevant field, when property was transferred from the state to private owners for free, were not observed on a large scale. Therefore, the privatization of private commercial facilities, although it took place in the Russian Federation, could not become the same powerful driver of segment growth as in the case of residential real estate.
Therefore, we can conclude that in the commercial segment the Russian real estate market was formed in the year just after 1991, after the Law "On Private Property" came into force. Further growth drivers were, again, the development of lending programs that were already adapted to the commercial sector, as well as the intensive development of the Russian economy, especially in the early 2000s.
The economic factor is universal for all segments
As in the case of the residential segment, the commercial real estate market was sensitive to the crisis of 2008-2009. It was also negatively affected by the recession of 2014 and 2015. Therefore, the prospects for the further development of this sphere of the national economy also depend on macroeconomic trends.
However, unlike citizens, who are the main sellers and buyers in the residential real estate market, the relevant entities in the commercial segment - enterprises, can have a more significant impact on economic processes in the country. So, the implementation of state programs aimed at modernization in the economy, largely depends on the intensity of commercial activity of private enterprises.
Therefore, the business has the power to do a lot so that the situation in the national economy of the Russian Federation acquires more positive dynamics. As a result, stimulate the further development of the commercial real estate market.
Summary
So, we determined the year in which the Russian real estate market was formed in the residential and commercial segments, and identified the main stages of its development. The main factors affecting the state of affairs in the corresponding sphere of the national economy are mainly macroeconomic in nature. If the situation in the country's economy is characterized by a predominance of positive trends, the real estate market in both segments is actively developing.
As for the peculiarities of its development in the residential and commercial sphere, we can first of all note the fact that the Russian real estate market was formed in the special conditions of the transition from a socialist model of the economy to a capitalist one. Legal and financial institutions necessary for its full functioning did not appear immediately.
However, in its present form, the Russian real estate market is developing according to the same principles that are characteristic of most capitalist states. The formation of prices on it occurs due to the objective correlation of supply and demand. This explains the dependence of its development on the situation of the economy as a whole. If there is solvent demand, then the dynamics of the market will be positive.