Residents of St. Petersburg massively sell investment apartments

In St. Petersburg, the supply of apartments in new buildings on assignment has increased. As RBC Petersburg experts explain, people who bought housing for investment purposes are massively trying to sell it - in order to fix profits, since they do not count on a significant increase in the price per square meter this year. According to experts, there is almost no demand for such apartments, since buyers are mainly interested in housing ready for occupancy. Sellers in these conditions are forced to reduce prices - often such housing is sold 15-20% cheaper than apartments in the same residential complexes from the developer.

The offer is growing

According to the center of new buildings of the federal company "Etazhi", since the beginning of 2022, the volume of offers for assignments has increased by an average of 5-10%. Now there are 4.5 thousand announcements on assignments in new buildings in St. Petersburg and 1.5 thousand in the Leningrad region on the CIAN website. "Avito.Nedvizhimost" at the request of "assignment" issues 3.5 thousand ads in St. Petersburg and about 1 thousand in the Leningrad region.

“There are several reasons for this. Firstly, this is the commissioning of those houses in which apartments were bought at the start of preferential mortgages, when many began to actively invest in real estate against the backdrop of low interest rates on loans. Secondly, many of those who have purchased real estate for investment understand that under the current conditions, price adjustments due to an imbalance in supply and demand cannot be ruled out. Thirdly, some investors actually sell apartments in order to reduce their debt burden due to the changed financial situation, while others plan to purchase secondary housing at a profitable discount, ”Sergey Zaitsev, HEAD of the center for new buildings of the federal company Etazhi, explained to RBC Petersburg.

The highest concentration of housing sold by assignment is observed in the comfort and economy class in large standard mass construction projects. There are much fewer assignments in business-class properties, says Maxim Yeltsov, general DIRECTOR of PIA Real Estate (formerly the First Mortgage Agency).

The highest concentration of housing sold by assignment is observed in the comfort and economy class in large standard mass construction projects.

“In large projects with affordable mortgages over the past two years, there have been a lot of purchases for investment purposes, now, these people, seeing the situation in the economy, understand that prices are unlikely to continue to grow strongly, so they decide to sell. The number of such proposals has already increased. As long as the ruble exchange rate is good, many seek to sell their property in order to buy foreign currency. The recent increase by the Central Bank of the limit on transfers abroad for individuals to $50,000 per month will contribute to this process,” Yeltsov believes.

Demand has shrunk

However, according to experts, in recent years the demand for housing sold by assignment has changed dramatically. “He has shifted towards properties that are completely ready for living, without excess space with an adequate price. Most of the assignments do not meet these requirements of buyers. They have caught up in attractiveness with objects on the secondary market (the so-called "grandmother's apartments"), while they have risks with the completion of construction on time. Assignment objects have become one of the main outsiders in the market. They are almost impossible to sell, while the supply of such apartments is growing rapidly. Extremely weak demand leads to the fact that the difference in price with the offer from the developer in the same residential complex reaches 15-20%,” Maxim Yeltsov calculated.

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Main competitor

The sharp increase in supply in the assignment segment puts developers in a difficult situation, since such housing is a serious competitor to apartments from developers. “For our company now, the main competitor is our “secondary”. Buyers put up apartments on the secondary market in our own residential complexes for sale cheaper than our “primary” property from the developer,” said Denis Zasedatelev, CEO of Lenstroytrest’s operating business, earlier.

The sharp increase in supply in the assignment segment puts developers in a difficult situation, since such housing is a serious competitor to apartments from developers.

Against this background, the service of repurchasing apartments from their former equity holders (sale-pay-back) becomes relevant. St. Petersburg construction companies have already begun to provide it, but this practice has not yet become widespread. “We assist clients in carrying out assignment transactions. In some cases, we consider the possibility of terminating the contract and returning funds to the client. However, these are always individual conditions,” explained Egor Fedorov, Sales Director of Akvilon Group.

Will still be positive

The Etazhi company explains its willingness to bargain in case of assignments by the fact that, against the backdrop of an active increase in real estate prices over the past couple of years, investors have received good returns, for some objects it is measured by 30-40%. “So that investors, even with a discount of 15-20% to the price of the developer, will remain in the black. Even if you took out a mortgage. There, the return on invested capital (for example, a down payment of 20-30%) is excellent: they invested 20%, paid a mortgage of 7% for two years (expenses of 14%) - if the price increased by 40%, we take into account the commission for the sale and costs of 4 % and get 50% per annum on the invested capital, ”Maxim Yeltsov quotes the calculations.

Against the background of the active growth in real estate prices over the past couple of years, investors have received a good profitability, for some objects it is measured by 30-40%.

According to forecasts of real estate market experts, the volume of assignments offered this year will continue to grow against the backdrop of restrained buying activity. “It is not excluded the appearance of objects with urgent sale, where, due to the discount, the price of the object can be significantly lower than in the primary market,” sums up Sergey Zaitsev.