The Analytical Center has published a new bulletin about the current trends in the Russian economy. This time the study is devoted to private residential housing construction, which makes up about 40% of the total new residential housing being built in Russia. The authors note that it generates demand for construction materials, labor and durable goods and is also an indicator of how well the more affluent groups of the population are doing.
"The average availability of residential housing in the country increased from 21.4 sq. m. per person in 2008 to 24.9 sq. m. in 2016 per person, but the 2015-2016 recession slowed this sector down. Residential housing construction went into a prolonged crisis starting in mid-2015 and the first decline in the amount of new residential housing being commissioned took place almost exclusively in private housing construction," the experts write.
Nevertheless, they note that apartment block construction proved relatively resilient to the 2015-2016 economic crisis in Russia, even though this was to a large extent a result of the completion of buildings whose construction had started earlier. The experts estimate that despite the prolonged crisis the second half of 2017 saw some increase in the amount of residential housing being commissioned in some months despite the continued decline in total construction, which resulted an in overall increase in total new residential housing completed in Q3 2017.
In January and February of 2017 860,100 new apartments were commissioned with a total floor area of 60.4 million sq. m., which is 4% less than in the same period of 2016. The Ministry for Construction of Russia predicts that 2017 will see 76-78 million sq. m. of new residential housing being completed, which is 3-5% less than in 2016.
The decline in residential housing construction has resulted from falling effective demand, the experts conclude, seeing how disposable household income fell by 1.4% during the first 11 months of 2017. While this was happening the number of new mortgages increased: According to the Bank of Russia, the first 10 months of 2017 saw a total of RUB 1.5 trillion being issued to households (a 30,1% increase year on year). In October the weighted average interest rate on mortgages in rubles fell to 9.95% which further spurred demand.
For more see the bulletin Trends in Private Housing Construction.
For the other bulletins on the current trends in the Russian economy, please see Publications.