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Актуальные проблемы авиации и космонавтики - 2022. Том 3
УДК 332.72
SITUATION ON THE REALE STATE MARKET: RUSSIA AND CHINA
S.S. Belehov
Scientific supervisor - E.A. Kraus, E.M. Dorogaykina
Reshetnev Siberian State University of Science and Technology 31, Krasnoyarskii rabochii prospekt, Krasnoyarsk, 660037, Russian Federation
E-mail: sbelehov@mail.ru
In this article, using the example of two countries, Russia and China, we examined the state of the real estate sector: its problems, external and internal factors affecting housing pricing in the primary and secondary markets, as well as development prospects in the context of the consequences of the pandemic. As an example of the influence of a business company on the entire industry we consider the case of Evergrande, one of the largest Chinese developers
Key words: real estate, economics, mortgage, investing
СИТУАЦИЯ НА РЫНКЕ НЕДВИЖИМОСТИ: РОССИЯ И КИТАЙ
С. С. Белехов
Научный руководитель - Е. А. Краус, Е.М. Дорогайкина
Сибирский государственный университет науки и технологий имени академика М. Ф. Решетнева Российская Федерация, 660037, г. Красноярск, просп. им. газ. «Красноярский рабочий», 31
E-mail: belehov@mail.ru
В данной работе на примере двух стран, России и Китая, изучено состояние сектора недвижимости: его проблемы, внешние и внутренние факторы, влияющие на ценообразование жилья на первичном и вторичном рынках, а также перспективы развития в контексте последствий пандемии. Изучено влияние бизнес-компании Evergrande на целую отрасль, как одного из крупнейших китайских застройщиков
Ключевые слова: недвижимость, экономика, ипотека, инвестирование
Without a doubt, one of the most important spheres of business which constantly draws our attention is the real estate. Nowadays, all of us from low-paid plant workers to an executive manager of an international company are highly interested in the changes in it, which, frankly, turned out to be alarming. The reason behind it is the increase in price of the real estate. Thus, the importance of that topic is based on both the importance of the real estate to our society and some of the changes which have a tendency to its price increasing. On the example of two different countries as Russia and China we have collected valuable statistics and data on which we have based our analysis on the current status of the real estate and made some assumptions on how the situation will evolve later on. To start with, we have dwelled on the case of our country: average price for housing on the secondary market in 16 large cities went up by 2,2% per square metre (as for 2021 year, general price increase went up to approximately 25%); on December 2021 the Bank of Russia raised the key rate up to 8,5%, and the number of people with the bank debts has also increased to 43 million (from the beginning of the COVID-19 pandemic, this number went up to 2,4%)[1 - 4]. It is easy to see, that the most important issue today is the price increase of the real estate. Speaking of the reasons of that, there is an enormous number of different ones, however, we
Секция «Проблемы и перспективы развития государственного управления и международного бизнеса ...»
have found the most important, which are: the preferential mortgage; the pandemic's impact; low key rate; the increase in cost price of the real estate.From our point of view, the first three reasons have the most impact nowadays. Even at the beginning of the pandemic we've all faced the uncertainty: business closed, staff went to the distance work or simply was laid off due to the unprecedented decrease in the economic activity throughout not only our country, but also the entire world. Every single day we were waiting for the news about new restrictions and constant increase of numbers of infected people. Thus, the only way to "secure" our vague future perspectives is purchasing a real estate - solid passive, which will be in demand whatever the circumstances provided. The second reason for the increase in demand for the real estate is legislative authorization of the preferential mortgage program with the staggeringly low rate at 6,5% [5]. Now we can tell that there is quite scope of factors that stimulate people to purchase a real estate. However, that is not all: in April 2021 key rate was at 5,5 - 6%, and from August to the middle of May it was at 4,25% [6], which is another significant incentive to get a mortgage. Thus, we can clearly see that stimulated demand was backed up by more than enough ways of its realisation. In response to the increase of demand, property developers on the primary market and another holders of the real estate on the secondary market increased the prices of the real estate due to several reasons. One of them is that it is physically impossible to fulfil the demand: we simply cannot construct another 15-floor-building in a month. Also, expanding the numbers of people, machines and equipment considersunnecessary because of the temporality of the demand's increase.
By far, the Ministry of Construction, highly likely, with the purpose of the complete market stabilization, developed the direction which establishes the price of one square meter for the Russian real estate for the first half of 2022 (70,599 K RUB, which is 27% higher than it was in the second half of 2021). Also, with the increase of key rate to 8,5% on 5th of January 2022 The Bank of Russia has been handling the current situation quite well: credits have become less attractive, as a result, the demand to a real estate went down. In a nutshell, nowadays situation with the real estate is way more solid and stable regarding the past two years. However, we are concerned about the consequences of the market's overheating: according to the classical economics theory, increase in the key rate and, as a result, credit rates at the stage so called "peak of economic growth" goes along with the increase in the people's incomes and the full employment. This is the moment of discrepancy between the theory and a real life situation as today increase in the key rate goes along with the decrease (or in other cases stagnation) of the people's incomes (for 2021 the decrease was at 3,5%; the number of people living under the poverty line has gone up for 400K people).Thus, the decrease in the people's real income alongside with the higher debt burden can potentially lead to the debt's delinquency which may have an impact to consumption of the particular households (families) and, subsequently, to the whole country's economy. Now let us review situation with the real estate in China. From the first glance, we can see the same increase of price which is, however, based on the different reasons. There are enormous numbers of them (as well as with Russian case) although the most impactful one, from our point of view, is lack of the other ways of investments. In other words, due to the strict politics towards stock markets and investitions in general people can rely on buying real estate as there is no other way of saving and multiplying their capital. With the conjunction of high population numbers, the demand on the real estate had been so high that the prices have skyrocketed up to 150% (from 2012).
Hong Cong now is the most expensive city to purchase the real estate; Chinese public debt is 325% of GDP at the end of September 2021 which is the consequence of the method of debt expansion and investments in unprofitable actives (such as general infrastructure and real estate sector). At the meantime, of the 325% debt, 224% or $32.3 trillion account for the debts of companies [7],where over $300 billion is the debt of Evergrande, which is the largest player in the Chinese real estate market. On December 31 2021 the company withdrew the payment of funds to the investors in its capital management products, and on January 3th 2022 the developer suspended trading on its stocks.Possible bankruptcy of Evergrande will not only left approximately 4 million
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people unemployed. The main issue there is the giant debt which should be paid one way or another. As we said above, one of the main factors forming such an enormous debt are investitions in unprofitable actives (building real estate in the distant inhabitable areas precisely). As a result, now we can see the phenomena of so called "ghost cities" [8], where people buy real estate in order to resell it later by higher price (given the stable growth in price of a real estate), rather than to live in it which is hardly possible. However, regarding severe Chinese debt problem we expect decrease in construction tempo of the new real estate. The most significant factors there are inflation, increase in cost of the construction works and materials [9] and slight decrease of demand to the real estate inside China which is based on exorbitantly high prices and the lack of supply due to Evergrande's debts.
Taking everything into account, we see the foreseeable future perspective in a positive way. Undoubtedly, in the worst possible case scenario increased theFed USA rate due to the current economic situation will have a severe impact on periphery countries. Thus, debts of our country's households as well as Evergrande's one will be in rather difficult position (considering that bankruptcy of the last one will cause some unpredictable consequences to the whole world). However, current situation with all its ups and downs is clear for the experts, analytics and so on. Highly likely, that the specialists are now working on new laws, discussing politics and strategy in order to overcome the forthcoming difficulties with not only the real estate market, but also with the whole world's market.
References
1. Analysts estimated the rise in the price of secondary housing in the largest cities of Russia [Electronic resource]. URL: https://www.vedomosti.ru/realty/news/2022/01/07/903864-podorozhanie-vtorichnogo-zhilya (accessed: 08.01.2022).
2. RIA Novosti's choice: ten main events of the real estate market in 2021 [Electronic resource]. URL: https://realty.ria.ru/20211214/nedvizhimost-1763506979.html (accessed: 20.12.2021).
3. What will happen to loans in 2022: the forecast on rates and changes in laws [Electronic resource]. URL: https://quote.rbc.ru/news/article/61cc13a59a7947e9caccfb6c (date of appeal: 08.01.2022).
4. The number of Russians with debts has grown to 43 million. [electronic resource]. URL: https://www.rbc.ru/finances/28/12/2021/61caf8c09a794797b2b76764 (date of application: 08.01.2021).
5. Mikhail Mishustin approved a preferential mortgage program at 6.5% [Electronic resource]. URL: http://government.ru/docs/39558 / (accessed: 12/22/2021).
6. Key rate of the Bank of Russia. [electronic resource]. URL: https://cbr.ru/hd_base/KeyRate / (accessed: 07.01.2022).
7. Features of the Chinese real estate market and its impact on the global market [Electronic resource]. URL: https://iticapital.ru/analytics/international-stock-markets/12650/ (accessed: 20.12.2021).
8. Dead cities of China. Why are ghost towns being built in China [Electronic resource]. URL: https://mychinaexpert.ru/goroda_prizraki-kitaya / (date of conversion: 12/22/2021).
9. Building materials interest: Why prices for building materials are growing so rapidly [Electronic resource]. URL: https://rg.ru/2021/05/27/pochemu-ceny-na-stroitelnye-materialy-rastut-tak-stremitelno.html (accessed: 08.01.2022).
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