Housing prices will increase: what happens to the primary market in war-an assessment from "Intergal-Bud"
We talked about the main trends in the residential real estate market, prices and consumer choice with Anisimova, the head of the Investment and Analytics of Intergal-Bud. Anna, as the company "Intergal-Bud" survived the first year and a half of the war, which was built during this time and how was construction on the company's objects? We resumed construction in May 2022. The work began with the fact that we conducted an audit of all our objects.
It was necessary to understand at what construction stage our objects and how long and money needed to finish them. After the audit, which lasted two months, in July we started active construction work, we resumed activity on our sites. At that time, we resumed the construction of 13 houses. That is, last September, the company resumed construction of 13, of which 7 houses were put into operation, and now the company is actively building 18 homes.
The next stage of work recovery came in the spring of this year. The company resumed the construction of seven more homes. Currently, we have 24 houses that are being built, but we plan to restore work on these facilities this fall. It is not only about homes at a stage of readiness of 20-25%, but also about objects from the pit. Among the main achievements for these one and a half years - the company managed to reach pre -war volumes of construction and restore the staff.
What complexes were commissioned last year and what this year? In 2022, we received a certificate and put into operation the section and queues of such complexes as "Nivki-Park", "Lake Grove", "Syretsky Gardens", "Academic Quarter", "Semitsvit Kiev", as well as Grand Boulevard Concept Hotel. Already this year, "Intergal-Bud" commissioned the fourth turn of the LCD "Teremki" and the first house of the Sky Avenue complex.
For the next 6-12 months, what are the plans in the company? We have fairly large -scale plans and intention to adhere to current construction plans. Among them this year: commissioning of the house "Nivka-Park", the house "Syretsky gardens", two sections of the LCD "Prix 8", LC "City Hub" building. 1, LC "Holosiivsky" building. 1, LCD "Park Lakes" 1 and 2 sections.
And next year, in the first or second quarter, we hand over two houses of the LCD "Nivka-Park" and the Holosiivskyi residential complex. We hope that all plans will be implemented in time. I do not see obstacles for this. In the next 6-12 months, we will put into operation six more homes with a total area of about 200 thousand square meters and restore construction on objects of about 218 thousand square meters.
We will also start new construction, it is about two new projects in Lviv and several more in the capital region. In your opinion, the area of housing is felt as of the beginning of the fall of 2023? I was recently at a meeting of the Confederation of Builders of Ukraine, where representatives of construction companies from all over Ukraine were present.
There was an opportunity to communicate with colleagues and hear from them confident statements about the continuation of the projects, about plans for new construction. That is, from any representative of the company did not hear that there was no money or any depressive sentiment. All are positive and have optimistic moods. We see that the sphere is restored and feels normal, there is confidence in tomorrow.
Some developers are introducing completely new construction, new sites, and this is a good signal. Please tell me if the company felt difficulty due to the reduction of the volume of transactions in the primary market, which was recorded, for example, last year? Sales are, of course, very important. But Intergal-Bud company always finances the schedule of construction work, despite the course of sales. That is, we finance construction work from our own reserves.
And even if sales do not meet our expectations, it does not affect the course of construction. We are also not tied to any bank credit or mortgage programs. We have a schedule of work, and at the beginning of construction it and the financing schedule are approved. Accordingly, if there are no sales revenues, we still have the money to finance work on the object on our own. We do not go to the project unless there is confidence that we can build it 100% at our own expense.
And even with regard to objects, such as Intergal City and Lukyanovsky Cascade, we will finish them for our own financial resources without relying on sale. And even more so we will not count on preferential programs from "Ukrfinzhitla". If we have started construction, then we will finish it anyway. Do you cooperate with banks in terms of lending to the company? Banks credit mortgage agreements for the end consumer. In the sales structure, the share of mortgage agreements is only 10-12%.
But we understand the importance of mortgage lending to support the industry and the formation of solvent demand. So, together with partner banks, we have developed mortgage programs to support buyers. For example, we have a Globe Bank program. The plans also have other collaborations. However, we are not ready to announce them yet.
We continue to work in this direction, knowing that large migration in the country, often do not have 100% of the money to buy an apartment, and therefore it is important to support the consumer precisely because of a more accessible mortgage. As for the lending of the company itself, we do not take loans for replenishment of working capital.
Could the financial institutions loans help the developers who lack funding? Rather, the question to the National Bank and its policies, because, in order to finance housing construction or project funding, banks should form double reserves. And so financial institutions are not particularly active in lending to the construction of real estate, because it means for them the formation of additional reserves. This is a problem that you need to solve.
After all, it is necessary to build, and to build not only in Kiev or Lviv, but also in other regions, in Poltava, Sumy, in Cherkasy region. And there are developers, various regional companies that are really important for lending to replenish working capital. I think that for the restoration of destroyed objects-business centers, shopping centers-lending is essential. Project funding is a good solution for restoring infrastructure.
Many companies are now finding funds to restore destroyed objects, so lending is very important to develop. What is happening now with the prices for residential real estate in the capital? We see prices rise in both the primary and secondary market. What is the situation in the primary market. The constructed objects are almost over. Accordingly, the price that developers could keep at the pre -war level is no longer relevant because we already have a different cost of construction.
And it has increased by 40%over the last one and a half years. Accordingly, prices will increase, because the developer should cover the cost. But developers do not raise prices by 40%, because they understand the level of purchasing power, but start raising by 5%or 10%. However, this is inevitable, for two years prices in UAH per square meter of a new apartment will increase by 40%. The cost of building materials and wages are affected by the cost.
Salaries have increased significantly over the last year. This is natural, there is a shortage of personnel on the market. This is partly related to mobilization processes - men protect our country. That is, people are literally missing. And the general contractors compete for the workers with the level of payment. As for the price of building materials, it also increased significantly. Concrete, gas block, ceramic block - all this cost.
In particular, several industries in the country were stopped through hostilities or hit, which created some difficulties and also affected prices. Therefore, for two years the cost of a square meter will accurately increase by 40% in national currency. Currently, how do you estimate the demand in the real estate market and are there in the market speculative demand? We have noticed the restoration of speculative demand since late May.
Sales departments were investors who buy real estate for further rent or resale. Now they choose objects from developers with reputation. This is good for the market, because it shows that investment demand is returning. And this stimulates the demand in the housing market, including those investors who have previously reoriented to Poland and other countries. And now they have returned to Ukraine.
We also see the restoration of demand for apartments at different stages of construction, but of course, the stage of the pit is not, rather, the level of readiness of the object from 30% or more. What are your current forecasts for further market work, price dynamics, demand trends, possible challenges for the industry? Prices will rise, by the end of the year by 10-15%-it is about the hryvnia value. As for the trends, they are like that. Buyers are interested in repair from the developer.
Prior to the war, people ordered design prosets, plan exclusive repairs, now priority repairs from the developer and as soon as possible settlement in a new apartment. This is due to the internal movement of the population. We, for our part, offer such solutions. There are three types of repairs to choose from buyers - minimalism, classics and Scandinavian style.
The second trend: smartcludes have previously been considered under investment, and now- two- and three-room accommodations, because they plan to rent them to families. These are apartments with an area of 60-90 meters. The demand for such objects has grown greatly, including because people buy for themselves. For many, buying an apartment is a purchase of life. Therefore, for the most part of the space, where you can comfortably live with children.
Another trend is the presence of high -quality shelter, which is considered underground parking. Buyers ask about it constantly whether there is parking, which can be used for shelter. To do this, it must be equipped with ventilation and bathrooms. Also among the trends are the security of the complex, its protection, video surveillance. Of course, autonomous heating, electricity supply is also in the focus of attention of buyers of new housing.
With regard to challenges to the industry, some developers may have difficulty financing construction. There is also a risk of blackberries this fall and winter, as it was last season. And for developers, this can also be a challenge, because electricity breaks affect the course of construction. Changes in the work of institutions that issue permits for commissioning can also be a significant call. The bureaucratic factor affects the speed of delivery of objects.