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13 April 2021, 14:00

Growth Trend. Why prices for new homes continue growing in Minsk

Spring is a time of renewal. Not only air temperature and grass on the lawn are growing. So are prices for new homes in Minsk. What are the reasons and why so sudden? These two questions haunt both experienced analysts and ordinary buyers.

It is easier with analysts. They predicted the real estate market to collapse last autumn and prices to plummet to historic lows. It is not worth remembering the arguments they cited. They did not work all the same.

It is more difficult with buyers. Many acted on the forecasts and postponed buying an apartment waiting for prices to hit the bottom. However, in the end they faced an unexpected increase in prices!

Let's compare.

Thanks to realt.by, which regularly monitors prices and trends in the real estate market, we can draw quite objective parallels. Let's take two dates for the reference: 22 February and 5 April of this year. There is just a month between them, but the difference in prices is huge! This cannot be explained by fluctuations in the exchange rate.

During this period an increase in prices in the Olympic Park residential complex (Tapas developer) hovered from Br50 to Br100, depending on the size of a house.

The price per one square meter in the Levada residential complex (Iron developer) rose by about Br70.

An increase in prices per one square meter in the Promenad residential complex (Beijing-Minsk Real Estate Development Company BUCC) was from Br30 to Br500.

The Inforealt developer raised prices by Br200-360 in the Farforovy residential complex.

Prices in the DEPO quarter (A-100 Development) grew by about Br160 and reached Br9,236 per square meter. At the current exchange rate it is equal to about €2,940. And this, in the complex that no one has seen yet: it is slated for commissioning at the end of next year.

It is impossible to name all developers in one article, therefore at the end we will name the residential complex that triggered these heated discussions. This is the Park Chelyuskintsev complex which construction is to be completed by Dana Holdings this year. The prices in this complex have risen from about €1,300 to €2,500 per square meter in equivalent.

Park Chelyuskintsev complex

What could possibly be the reasons for it?

In the above-mentioned period from 22 February to 5 April, prices for square meter in the secondary market fell from $1,291 to $1,235. This is almost $60 per m2. It is noteworthy that prices for new homes rose by about the same amount on average over this time. However, the most important thing is the number of deals! Here the trends are clear: those who dream of their own home are considering new complexes, rather than second-hand property.

Analysts keep saying that the real estate market is perhaps the most accurate indicator of the supply/demand ratio. For the majority of buyers, the purchase of an apartment is not just another stage in life, but an important milestone. Such an event should be approached with the utmost responsibility, unless your income allows you to change apartments like a glove.

The trend is obvious in this context - buyers prefer new buildings to old housing!

Of course, this statement leaves out the apartments in the Stalin style houses in the city center. Actually, it is as immutable as no one can compare the price of a square meter in the 5th arrondissement with the 19th in Paris. Therefore, one should not contrast, for example, Karl Marx street with Myastrovskaya street in Minsk.

Minsk residents have “tasted” the new buildings of the Belarusian capital and vote for the new housing against the “secondary” one.

Some analysts see global reasons in the rise in prices for new buildings. Quite successful rates of vaccination against coronavirus in the European Union and Russia give us hope for the reopening of borders and the resumption of business activity on the continent in the middle of summer.

After several years of decline due to the COVID-19 the economic “rebound” will be especially active - the pace of development in the region is predicted to be quite high. The effect of “pent-up demand” will be felt, and money, which was kept until better times, will be poured into the economy.

This, in turn, promises to contribute to some growth in all countries economically linked to the region. Growth of the economy and growth of incomes mean an automatic increase in the cost of the goods in demand. In particular, residential and commercial real estate, of which there is no surfeit in Minsk.

Analysts do not call the current epoch ‘the era of investments' for nothing. Real estate has always been the most reliable investment, now – more than ever. This benefits real estate developers and manufacturers of construction materials and equipment. This situation also applies to Belarus, which means that it can be used to everyone's advantage and facilitate the growth in the state budget.

There is one more thing. For example, in Croatia, the value added tax on real estate equals 25%, in other European countries it ranges from 10% to 18%, while in Belarus, buyers of new real estate are not required to pay this tax. This is an attractive term for foreign investors, which is why prices for new real estate in Belarus will be growing instead of falling after the pandemic.

Thus, in the near future, the countries that have been able to make the most of the advantages stemming from the pandemic, lockouts and lockdowns will fare better.

We could finish at that, but we have not yet answered the question: why have prices for real estate in Park Chelyuskintsev gone up so much?

The answer is rather simple: look at prices for a square meter in the DEPO complex. Bear in mind that its construction has just begun, while the complex by the largest park of the capital is almost finished.

The developer offers apartments in finished houses that have been built using the developer's investments. The buyer comes, takes a look at the finished apartment and buys a home he or she is ready to move into instead of an apartment design, a promise, or a foundation pit. A highly comfortable home in the center of the city, in the most ecologically pristine district with a well-developed infrastructure. Does the developer have the right to ask the price it deems adequate for this kind of real estate? Sure it does!

The developer offers apartments in finished houses in the most ecologically pristine district with a well-developed infrastructure

If sales flop, the market will fix everything.

What is the buyer to do?

It is the most complicated question. It is difficult to predict how prices will change today. This is why you should take advice of analysts – they know how to recognize trends that can produce the desired results.

But it is a piece of advice for those who buy real estate as an investment. But for those who need a home to live in, a home to move into out of a rented apartment, a home where one can feel confident about tomorrow the recommendations are unambiguous: solve your problems here and now.

Because it may be too late otherwise.

The demand for residential housing and commercial real estate is still unsatisfied in Minsk. Close attention is paid to new construction, which supply is at its peak on the one hand but on the other hand the vacant space fit for housing construction in the city is not unlimited. Unless old houses are demolished on a massive scale, new houses will have to be built outside the Minsk ring road.

And yes, prices over there will be lower.

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