Falling real estate prices: myth or reality?

Falling real estate prices: myth or reality?

Against the background of economic uncertainty and rising inflation, the question remains relevant: should we wait for a decrease in real estate prices? In the article, we will consider the main factors affecting the market and the prospects for the coming years.

Now the Russian real estate market is demonstrating resistance to significant price fluctuations. Despite expectations of a decrease in the cost of housing, which arose against the background of rising mortgage interest rates, current trends indicate the opposite. Over the past year, the value of real estate has increased by an average of 10%, which contradicts forecasts of falling prices.

Nevsky Prostor experts explain this increase by the influence of several factors at once, among which the key ones are general inflation and rising prices for building materials. The rise in price of almost all aspects of life — from food to construction resources — naturally affects the value of real estate. "When goods and materials become more expensive, it is logical to expect that the cost of housing will not decrease," experts say.

Today, talk of a possible drop in prices is likely to come down to their stagnation, not a decrease. The market may stabilize in the next few months, but it is not necessary to talk about a complete reduction in value in the context of current economic trends. Although a small price increase, as was observed in August — September, is possible, it is unlikely to exceed a few percent.

The impact of mortgage rates on the real estate market

One of the key factors that may further affect the dynamics of real estate prices is the change in mortgage rates. At the moment, high mortgage rates significantly limit the demand for housing, which, in turn, constrains more active price growth. However, in the event of a decrease in mortgage rates, which may occur in two years, the market may again face an increase in the value of real estate.

For buyers, this means that there is an opportunity for bargaining in the market today. High mortgage rates make demand less active, which allows buyers to make arguments in favor of reducing the cost and purchasing properties on more favorable terms. However, this advantage is temporary. As mortgage rates begin to decline, demand for real estate will increase, which is likely to lead to higher prices.

Price dynamics on the example of sales

Over the past three years, the following situation has been observed: apartments of a similar size and in the same building were sold at the same price, but the condition of the objects differed significantly. Three years ago, the renovated apartment was sold at the same price at which today you can buy a house in poor condition. This shows that inflation and rising prices for building materials during this period have almost offset the difference in quality.

Such dynamics serve as a clear indicator that the growth in the value of real estate continues, even if it is not obvious at first glance. Inflation, rising prices for building materials and other resources are gradually "eating up" the possible benefits obtained from keeping prices at the same level.

Recommendations for buyers

What should buyers do in such a situation? The answer depends on the purpose of the purchase of real estate. If you are buying a house for life, you should not expect a mythical decline in prices or a drop in mortgage rates. It is profitable to live now, and the possibility of refinancing a mortgage on terms that are more favorable is likely to appear in the future, when rates will decrease.

"If the purchase is carried out as an investment, it is worth paying attention to objects with growth potential — for example, a purchase without repair or at auction," recommends Alla Shinkevich, General Director of the Nevsky Prostor real estate agency. "Such facilities can be purchased at a lower price, repaired and then profitably leased or sold in a few years. In the long term, the value of real estate will grow, and rental rates are already making such investments attractive."

Source: www.bsn.ru