Strive for the best, but prepare for the worst – Council leader Oleg IRN.RU Repchenko

Three factors that are currently playing on the rise of the real estate market, could result in a short time against the upward trend. It can be concluded from the report of the head of the analytical center “Indicators of the real estate market,” Oleg Repchenko, speaking at a conference during the exhibition “Real Estate – 2011.”

The visual picture

The graph of the index value of housing in Moscow, “Indicators of the real estate market” is clearly visible two corridors of price fluctuations on the Moscow housing. It reflects the dynamics of the situation on the market since 1998, to show the first economic crisis and its impact on the current situation.

There are two price channel manager commented Oleg IRN.RU Repchenko. First – aggressive (which is present in the market from 2003 to 2008, the mounting angle of 25-30% annual growth), respectively, the market grew within this range until the unfortunate events in 2008

“Later there was a correction in prices, – he said. – Why do we think the dollar? To keep continuity: everything must be comparable. When a market is born, only dollars were the measure of value. Of course, when sold today apartments, the price is expressed in rubles. But when we begin to compare rates with macroeconomic indicators, such as the oil price, it is expressed in dollars per barrel. ”

In fact, the fall in prices “hits” on the upper edge of the second uplink (moderate). Mounting angle – 10-15% per annum (approximately at the level of inflation or slightly above). This price range was observed after Russia’s withdrawal from the previous crisis, in about 1999 – 2003’s.

Roughly parallel to the channel moderate prices began to climb now. Looking at this picture, we can assume that they will continue to climb at about the level of inflation and after a while return to pre-crisis level – an index IRN.RU, it’s about $ 6, 000 per meter.

As a result, the impression that there was a correction in prices, but in global terms, the market was rising (due to inflation, at least). Another conclusion which has developed in the market in 2011 – the crisis is behind us. But it is worth thinking over, and some other issues.

Factors “Real Estate – 2011″

Three main factors are generally positive for the real estate market.

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Approximation of the Duma elections and presidential elections for various reasons, leads to activation of the housing market and increase in prices.

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The idea of??”Big Moscow” has opened the real estate market of Moscow region “second wind”.

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Start a legitimate correction of the overheated stock market led finally to the inflow of funds into real estate, there is a population flight from money, there is fear of inflation, the weakening of the ruble and all other currencies.

At the last conference in March (see “The unusual dynamics of the housing market: the first time in 20 years”), head of the analytical center “Indicators of the real estate market,” Oleg Repchenko already examined in detail the behavior of prices in 2003 – 2004 and 2007 – 2008. You can fantasize about the principles of internal market mechanisms, but the results show that in these times of housing grew in value by 15-25%. Whether through injections and the development of pre-election budget, whether due to inherent fear of the Russian mentality change and trying to solve people’s housing problem, “until it became worse.”

The second factor appeared quite suddenly and recently. Until the emergence of the idea of??”Big Moscow” evolved stalemate: on the one hand, everyone wants to Moscow, on the other – Moscow is overloaded, there is nowhere to build and expensive, and further compaction inevitably leads to a decrease in quality of life. Accordingly, the supply gap keeps prices high, although the “fair price” is much lower than on the chart. Therefore, the idea of?? expanding the borders of Moscow is positive, the issue is ripe.

The regular correction in overheated stock market also forces people to take profits and leave. After the 2008 crisis, in early 2009, all governments – the U.S. and the EU, and Russia – began to pump up market liquidity, the following happened. As a rule, the state money allocated to banks, the banks of the instability were afraid to lend to the real sector, so they preferred to play with all the liquid assets: stocks, bonds, futures. Over the next two years or the market has grown by leaps and bounds: the RTS index – four times, returning almost to pre-crisis level, the same situation with Dow Jones and European indices. Oil rose to pre-crisis levels, gold, silver rose to 2 – 2.5 times. Then the money stopped printing, such as the crisis was overcome. In the U.S., the second program of quantitative easing ended in June (the third has not yet announced), the European Union went through the infusion of money lending bankrotyaschihsya countries – Greece, Portugal, Spain and Italy. Now the situation has come to ensure that the donor countries of Europe have to stop financial support. In Russia, the money flowed through increasing the liquidity of state banks. Like a bubble inflated longer recharge it is not required.

But the stock market lives by the law: if something is growing long in the price, sooner or later it starts to fall in price. Analytical center “Indicators of housing market” began to talk of an impending “collapse” in March-April (see “Overview of the real estate market on the basis of April 2011″). “We saw the first correction in the stock market in May. A more serious correction took place in August, when for the first time has been reduced credit rating of the United States. Then, investors fled from risky assets. But where? There, the term “asset protection”. Really added to the price and gold, respectively, the real estate “, – said Oleg Repchenko.

Added problems and a significant weakening of the ruble. As a result, operators of the stock market in recent years earned more than one million dollars, or were able to significantly improve their living conditions (already good), or simply invest the money in order to diversify and preserve capital. As for the people, not speculation, which just saw a weakening of the ruble, the traditional approach of average Russian – flee into dollars. But now the dollar is also in trouble. In the euro? All second year of scare that now splits the eurozone and the euro also canceled. Remains the property.

Reasons for positive

These factors led to the apparent activation of the real estate market in the late summer and allowed to completely forget crisis. Of course, nobody could have foreseen the idea of?? new areas of Moscow, which arose out of the blue, but the upcoming correction in the stock market and the presence of electoral factors were evident in the spring.

On this basis, the analytical center IRN.RU in the middle of spring 2011 has forecast growth of prices (see “Overview of the real estate market on the basis of April 2011″) until the spring of 2012 at 15-20-25%. So it also happens to be a joke: “I decided to live forever as long as everything goes according to plan” – said Repchenko.

To date, growth has averaged about 10% and, apparently, so pace is all the chances to collect next spring predicted value. However, it is somewhat naive notion. But the flip side there are always shows Repchenko.

Black clouds on the horizon world

“Tough correction in the stock market may not be corrected simply and completely full second wave of the global economic crisis”, – said Repchenko. Now we were on her doorstep. The August rigid correction of the financial markets is favorable for real estate, ready at any moment turn into a complete collapse, comparable to the fall of 2008. At the moment: the fall of the RTS – almost 40% gold – 20%, oil – 15% from the highs of the year.

Why is this happening? Events in 2008 did not arise by themselves. The economy has accumulated major problems. About them not once mentioned, but that they have not disappeared. If you just simplify, the Western world used to live at the expense of everyone else. This world view was formed after World War II. America in 1971, abandoned the gold standard and began printing unsecured dollars (by the way, as soon as the Soviet Union concluded the payment was in gold military loans under the Lend-Lease. It is the constant pumping of the Soviet gold in Fort Knox allowed the U.S. to retain the gold standard for so long.) And those unsecured dollars has continued to buy up everything in the form of reserves.

“By the rules of the game in all countries – from the developed to the end of the Papuans – a zagashnike should have been a number of dollars that these countries could be dealt with, – says Repchenko. – And the more you bought the dollar, the more you love the U.S. and its supporters. ”

In the European Union the situation is similar. On the one hand, the integration of Europe – it’s noble and lofty goal, on the other hand, it led to the fact that the entire Southern Europe hooked on the needle the same credit as America. “All of Europe hung on the neck of Germany and France. Integration of the two countries needed to market their products in the medium term, they have won, but in the long term, we see that the system begins to crumble, “says Repchenko. Having access to a credit, the whole of South Europe is more relaxed and is in default, as in Russia, 1998 “It’s a barrel of gunpowder that could explode at any moment,” – said the expert.

In the U.S., the volume is constantly increasing debt, he rested in another bar already, which is an annual GDP of the country. Like any man, no bank will not give credit to more than he earns in a term loan, and the country can not borrow more than the annual GDP. Once again, the U.S. national debt has increased, but this is just moving aside the problem for some time.

What does this have to Russia? The most direct. It’s no secret that Russia has a budget surplus and a good feeling thanks to the export of energy resources. If the major energy consumers – the U.S., Europe and China – will reduce the purchase, the position of the Russian economy would be extremely difficult. And due to what is living China? Due to the fact that America and Europe to buy its consumer goods. If America and Europe will reduce consumption, then Russia will encounter difficulties with the export of energy resources, China – consumer goods. Accordingly, the fall in oil prices.

Direct link between oil prices and real estate there, you can not build a direct proportion. But everybody understands: they will fall to $ 40-50, as has happened in history – and for Russian real estate and the economy fell on hard times.

Conclusion: If the current correction is a very tough macroeconomic performance continues, it can carry off for themselves and the real estate market.

There is one subtle point: oil and gold rose to a point near the two is defensive asset. And in August, when the stock market began a correction, gold rose from $ 1, 500 to $ 1, 900 per ounce. Now practically rolled back – up to $ 1,600. The question arises – and the difference between real estate? How to grow and can revert back.

Something else to think about…

If the global economy continues to stagnate, it will intensify the correction in oil prices and there will be a budget deficit. So, the ambitious plans for the ‘New Moscow “may move over an indefinite period, and they caused a stir may quickly fade.

Authorities will actively promote the idea of??a “New Moscow” and invest it means only when the budget surplus. And this can only be subject to high oil prices. Moreover, counterbalance the “New Moscow” is the Olympic construction in Sochi. And if the idea of??”great Moscow” there is not nothing specific, just slogans, the Sochi project has a clear date: 2014. Moreover, Russia is bound by international obligations and the risk of image in the world.

So that the projects’ New Moscow “mega-projects could result in new suburban towns before 2008: drawing pretty pictures, building layouts, drove them to the MIPIM, received various awards, and as a result of digging anywhere and have not started. As a result of deterioration of the overall macroeconomic situation may postpone the implementation of the “Big Moscow” at least after 2014, because it is necessary to save the Olympics.

The election intrigue as resolved at this time, too fast, which can reduce the factor of “presidential rally” for the real estate market. It is important to consider the behavior of the masses. Babbitt always afraid of something new, and here the society announced that a change in leadership will not actually. Changes do not be afraid.

Reflect on the results of September…

In anticipation of the roundtable website is summed up in September (see “Overview of the real estate market on the basis of September 2011″). Weekly dollar index has gone down quite dramatically and. As the pace of price growth in September with a large gap in the lead segments “expensive housing.” If we talk about the types – the fastest rise in price modern monolith-brick houses, and if the geography – West and Southwest District, and if on the area – two bedroom apartment.

If you keep these figures together, then who buys a “three-ruble note” in the SWAD in the modern monolith? At least people with incomes above the middle class. Top managers, stock brokers who have earned quite a lot over the last couple of years. Clearly, for investment purposes, they will not buy an apartment in the four-floor buildings. They will buy something like gold, which will save cost in the foreseeable future, is not morally obsolete in 5-10 years will enjoy steady demand for them to clear the target audience or customers, or tenants.

Despite the general recovery, raises prices in the main flow of funds from financial markets and investment demand is directed to a good home.

Another interesting point. The behavior of the market in terms of acceleration and deceleration. When an acceleration of the market, conditionally low-income housing (the proportion of the most affordable apartments) in terms of growth ahead expensive. The main demand is drawn to ekonomsegmentu. Then he pulled him over inert expensive housing. But braking is reversed. Cheap accommodation stops growing because the market has overtaken the average and expensive inertial continues to go up.

That is what is observed in September. If you do not take into account new construction single piece, the secondary market, the most massive, shows the general direction of development of the situation. Higher growth dorozhaniya “expensive” housing above the “affordable” – a sure sign of not overclocking market, and the transition to stabilization, stagnation.

We can assume that the theme of elections and the “New Moscow” are not fundamental, and emotional, even irrational. Maybe in 30 years there will be a garden city, but in the next few years at best, there will only lay some foundations. And in the next 10-20 years there will only be a big building with no roads, no infrastructure. Run away now something to put into it – at least unwise.

Similarly irrational to invest money in the past anyhow any property, fearing an impairment of Finance. “I am very confused by the macroeconomic situation, it is a big powder keg that could explode at any moment, and it is not clear on what”, – said Repchenko.

That led to previous crises? In 2008, it was just a failure of one bank Lehman Brothers. This was followed by a collapse in stock markets, but this is not the cause, but only a pretext. How to shot an unknown Gavrilo Princip led to World War I, although the figure of the Archduke Ferdinand was not significant. So it is now: just in August, one rating agency lowered by one notch credit rating of the United States. “That is, some analysts have decided that now is not the U.S. economy is estimated at 5 +, and just 5″, – says Repchenko. And here’s the result.

Draw conclusions…

“I do not want to then say that the court Repchenko new crisis, I just call to follow closely what is happening” – said the expert. In his view, the current intensification of the property market is likely to prove brief. For macroeconomic reasons, it may come to nothing and be replaced by stagnation at any time – just a month or two, as it was in 2008. Even if this happens, logical recession hype, the end of rising prices and stagnant start to expect after the presidential election, that is, essentially to the following May holidays.

“I’m not talking about any impending collapse in prices is likely to be a period of stagnation, perhaps a small correction in prices for the same 05/10/15% – predicts the head of the site. – If anything catastrophic happens in the economy, our forecast remains the same: a revival until the following spring. By following the May holidays we will see the beginning of stagnation of the market: not so much a decline in prices, but reduced activity. ”

“Hoping for the best and do everything for it, but be prepared for the worst – that’s our advice,” – said the head of the analytical center “Indicators of the real estate market,” Oleg Repchenko.