Published on 04 May 2006 at 01:48 pm
Filed in Property News for Russia » Property in St. Petersburg Russia
So far 2006 has been a good year for the estate agents and main constructors in Russia’s St. Petersburg property market. The five main construction companies LenspetsSMU, LEK, IVI-93, Lenpromstroy and D S K Blok have recorded between 3.5% and 15% increases in the prices they are receiving for property projects and predict that the demand for real estate from investors and private purchasers in St. Petersburg is about to outstrip the supply.
Average property prices in St. Petersburg had already reached their predicted highs for the whole of 2006 by April – naturally this bodes well for the rest of the year. The increase in demand for real estate has been fuelled in part by the increased availability of mortgage finance in Russia, but those considering buying a property in St. Petersburg are being advised to move quickly as demand will overtake supply and it will become a seller’s market.
According to property industry experts in Russia the St. Petersburg property market suffered a significant slow down both in demand and supply throughout 2004 and 2005 as new legislation regulating the real estate industry was analysed and passed through government. A significant number of constructors stopped building altogether while they waited to see what the outcome of these legislative developments would be and as a result these players have subsequently been pushed out of the market.
The demand for property for sale in St. Petersburg was incredibly low throughout 2004 and 2005 and only the largest most liquid property construction companies were able to keep building. These are the companies who have now embedded themselves into the St. Petersburg property market and who will profit now that the market seems to have turned.
There was a massive drop off in planning applications during 2004 and 2005 which means that the amount of new projects currently under construction and development is not sufficient to meet the renewed demand for real estate. Demand dropped off as the general public also waited to see what the new property related legislation would mean, but now that it has been passed and does not impact private ownership of property in Russia buyers are keen to start purchasing again.
It is estimated that about 50% of investors and buyers buying a property in St. Petersburg are applying for local mortgages. While the mortgage application process in Russia is tough, tricky and desperately needs simplifying, the number of institutions able to lend money has increased. This increase in the availability of mortgages has come at a time when more Russians are learning to accept the concept of living life on finance and it means that more buyers than ever are entering the property market particularly in the ancient, beautiful and historic city of St. Petersburg.
This increase in affordability has pushed up the number of buyers seeking property for sale in St. Petersburg and the reduction in the number of constructors and approved planning applications in St. Petersburg is already restricting the medium term supply of new housing stock. It’s these factors that have already pushed prices up by 15% in 2006 and which industry experts believe will continue to drive up the cost of buying a property in St. Petersburg for the medium term, this means that property investors looking for a market with room for property price expansion might like to closely examine this particular Russian property economy.
