The primary housing market is those premises that for the first time act as goods. In other words, these are private houses and apartments for which property rights have never been established. Sellers in the primary housing market are the state and various construction companies.
Basic concepts
Primary housing refers to a dwelling, which is exhibited for the first time as a commodity. Primary housing is acquired either through participation in the construction during the construction of the house, or in finished new buildings with the presence of apartments that were not registered in the state register of property.
As for the prices per square meter of such housing, at the first stages of construction the cost is minimal and increases in proportion to the progress of the construction of a particular house. The appropriateness of acquiring real estate in the primary market depends directly on the construction time, subsequent cash investments in the improvement of this housing and the degree of risk involved in shared construction. Let's analyze the primary housing market.
Does it make sense to purchase such housing?
In the purchase of housing of the primary type, it makes sense only if obtaining a residence permit and place of residence are not paramount problems and can be delayed for a certain period of time until the construction of the house is completed. Otherwise, this option can be safely discarded. It should be borne in mind that having received such housing, you will not be able to immediately enter it. The apartment will need to be renovated, and to do this, as they say, “from scratch”.
Nevertheless, the purchase of housing in the primary market has some advantages: from the previous owners, you will not need to redo anything, due to the absence of repair problems. However, it is unlikely that it can block the minus in the form of significant additional costs of time and money.
The risks
In general, equity in construction is a process that, despite all the attractive aspects and legal “cleanliness”, carries a number of risks. The main ones are the high complexity of predicting the completion date of a house, the possibility of bankruptcy of the developer, the occurrence of social and economic changes within the state.
At the same time, only one point attracts: if the construction goes smoothly, you can get an expensive and legally “clean” property.
Pros and cons
The issue of primary housing has some aspects:
- Monetary aspect. There is a pattern confirmed by time and practice: the earlier you sign an agreement on consent to shared construction, the lower the cost of 1 sq. M. primary housing.
- Dates. If the contract was signed at a time when the house is still at the stage of excavation, the terms of commissioning and obtaining ownership can be delayed for a rather long period (sometimes up to 2 years). In this situation, housing in the secondary market looks more attractive, since you can enter it almost immediately after the conclusion of the transaction.
- Additional expenses.
- An apartment in the primary housing market is transferred to the owner not only in the legal sense of “clean”, but also literally. That is, the finish there will be draft, which implies significant repair costs. In the case of secondary housing, the situation is much simpler. But the plus of primary housing in this sense is the ability to make repairs the way the owner wants it. That is, to equip the apartment in accordance with personal preferences in terms of style, color scheme, the cost of building materials and their quality characteristics. What is more important - saving on repairs or primary housing, of course, is up to each specific buyer to decide on their own.
- Mortgages in the primary housing market. With this in practice, significant difficulties often arise. Not every financial institution will start lending to shared construction. Even if any bank agrees to this, then interest rates will be quite high. This is due to the fact that banks are not willing to take the risk, because in case of bankruptcy of the developer, they turn into owners of illiquid objects.
- The risk of being deceived by developers is high only if a person has entrusted their funds to a construction company that has low credibility and a bad reputation. A developer with a solid image will never take that risk. Therefore, transactions with such companies are a very profitable procedure with a low probability of disputes.
So, the main advantages of the primary housing market are:
- psychological comfort of the owner, due to the "effect of the first owner";
- legal "cleanliness";
- the possibility of obtaining supermarket profits of up to 30%, if invested in the early stages of construction.
Secondary market
Not everyone knows what the primary and secondary housing market is. Let's figure it out. The secondary housing market refers to residential real estate that is registered as property of the municipality or private individuals. The sale of such objects takes place from the owner, ownership in the course of the transaction passes to the buyer from the seller. The concept itself indicates that secondary housing is owned property.
Positive and negative sides
The advantages of the secondary market are:
- affordable price;
- quick processing of the transaction;
- developed infrastructure;
- additional discounts.
Cons, as a rule, are:
- object wear;
- low quality;
- repair and maintenance costs;
- possible legal issues.
The cost of secondary facilities depends on:
- year of construction;
- area and layout features;
- quality finishes and communications.
If the demand for secondary housing falls, the market reacts quite flexibly to changes and the average price of objects falls. The sale price will depend on how urgently the owner wants to sell the housing and how he plans to spend the funds received.
For example, if an owner sells an apartment to improve his living conditions, he will keep the price in the hope of receiving a better offer. If the sale is related to relocation, the owner is interested in selling the property in a short time, and may give a discount. The range of price or offer reductions can be quite wide.
Primary housing market in Moscow
Today in the primary real estate market of Moscow you can notice an unprecedentedly high volume of offers. This is approximately 2.2 million m 2 , and compared with March last year, this figure increased by as much as 69.2%.
Now on the primary market of Moscow there are approximately 35,000 apartments and apartments. There are 28 683 apartments under implementation, of which 53% relates to the mass segment, 42% - to the business class, and about 5% of apartments in new buildings to the category of luxury housing. We considered that this is the primary housing market.