July home sales for property owners experienced a significant decline, decreasing by approximately a third compared to the same period the previous year. On a monthly basis, this decrease was even more prominent, amounting to around half.
In July 2024, sales of apartments under the DDU (shared-equity or pre-sale housing contracts) in Russia plummeted by 31% compared to July 2023 and 52% compared to June 2024, according to a development institute. The total area sold declined to 1.8 million square meters, while builders' revenue dipped by 10% year-on-year to 357 billion rubles.
However, the first seven months of 2024 revealed a different picture, with sales up by 11% compared to the same period in 2023, amounting to 16.6 million square meters. Builders' revenue increased by 33% to 2.9 trillion rubles during this span. The encouraging growth during January-July was attributed to high demand in the first half of the year, which offset the July decline, as reported by DOM.RF.
The organization pinpointed the decrease in apartment sales to the completion of preferential mortgage programs with state support and "prohibitive rates" on market mortgages. The sales slowed down in nine out of ten major regions, while the decline in Moscow and St. Petersburg was less pronounced.
Additionally, the economy showed signs of contraction, partly due to declining manufacturing output, subdued demand in services, and cautious business conditions that curbed consumer purchasing power and real estate investments. Rising construction costs and tariffs may have also hindered supply-side activity and impacted market dynamics. Moreover, Russia experienced significant inflationary pressures, straining household budgets and reducing affordability for mortgage payments.
The "Luxury Mortgage" program ended on July 1, 2024, and payments under the "Family Mortgage" program were suspended and its conditions were altered from July 10. Furthermore, the Bank of Russia increased the key rate to 18% on July 26. July 2023 saw a surge in mortgage demand.
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In light of the economic contraction and increasing mortgage rates, investors might reconsider their strategies in the real-estate market, potentially impacting new building construction. Despite a short-term decline in apartment sales in July 2024, the first seven months of the year demonstrated an 11% increase compared to the same period in 2023, indicating possible continuity in business conditions for builders.
