Financial crisis can result in decreasing prices for unfinished apartments, but will affect negatively reliability of investments — experts
The global financial crisis that exerted its negative influence upon Russia as well, has revealed problems of Russian developers. Even major players turned to be among those suffered.
On September 19, Fitch ratings agency placed in doubt liquidity of the PIK group of companies: a forecast on its long-term credit rating is changed from “stable” to “negative”. GALS System and Mirax Group agencies were given the same prognosis as early as this spring, reminds Smart Money magazine.
The magazine draws attention to the fact that on September 17, Mirax Group declared that it froze all objects being developed with a total area of 10 millions sq. meters, and within a year it will take not a single credit and will purchase not a single land lot. There are two reasons: there is no money to build, and there is no demand on what is built. Mirax promises to complete the objects that are already developed, but it is only 2 millions sq. meters, the magazine notes.
The analysts of Fitch stressed that Russian developers have high volumes of floating debt. It is fantastically difficult to refund it in present terms. “In case banks halt crediting, the cost of commercial and residential real estate will pull down so far as cases of the forced sales increase,” describes the possible scenario Fitch. PIK hopes that money from the sales of housing will allow it to pay off short-term debts.
With mortgage crediting rising in price and absence of solvent demand on housing it does not look probable. PIK insists that it depends on mortgage only by 25%. However, according to analysts of Morgan Stanley, 85% of economy class housing buyers are in want of mortgage. And those 15%, who have money, will not be able to solve the problem of builders. The point is that in order to lead the construction out of the stage of foundation pit, it is necessary, as a rule, to sell at least 30% of apartments. There is only one way out for developers, writes the magazine, to start sale-off.
A reduction of housing prices can become reality, but, in this case, it will be accompanied with a new danger: reliability of such investments is under question, because there are not any guarantees that a house will be finished.
15:14 09/22/2008
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