Problems of development

This stuff continues the series of research results of the Russian rental market, conducted by the Foundation for Social Development and the independent think tank, "The first St. Petersburg Humanities and Technology Corporation" in 2010. The full title of the work - "Institute of rental housing in Russia: current status, trends and possible role in the implementation of public housing, personnel, and migration policy." In the study, were assessed rental market in the major cities of Russia, held round-table discussions, expert workshops and focus groups with tenants and landlords. Customer research by non-governmental organization Institute of Public Projects. Study participants identified the following risks of market rental housing in Russia: • Lack of investment attractiveness of the market rent. • Sverhkontsentratsiya economic activity in metropolitan areas • • Undeveloped Undeveloped market legislation specific risks include the case in many areas of potential negative regulatory intervention of the state. Interestingly, in the interviews as the risks of market respondents called such general psychological nature of "problem" as: • passive Russian mentality • uncertainty about the future • excessively long payback rental business problems • Lack of competitive investment attractiveness of the market participants have identified a number of seminars groups of factors hampering the development of the rental market. The most important of them is economic, associated with low solvency of the population, resulting in construction of commercial (office) property, which has strong purchasing power, at the moment is far more profitable. According to research global consulting agencies in real estate, the standard payback period apartment building in Europe is 15 years. Unfortunately, in Russia only metropolitan centers can provide the conditions of the lease. According to calculations carried out by experts, the payback period of projects tenements in Russian cities studied ranged from 10 to 49 years. Despite the opportunities, before the crisis, 2008-2009, Russian business has preferred to build a property to sell online. The profitability of such activity was much higher rental income and, moreover, did not require any special efforts on property management from the developer. In addition, the system of "short loan" does not stimulate the process of long-term investments in the construction and subsequent operation. It is noted that residential real estate, in contrast to the office, is unattractive for bank deposit, due to the additional burdens in the form of institution registration (registration). This leads to the fact that residential real estate involved in a weak financial returns and does not bring additional income to their owners. As long as rental housing and rental payments will not be providing specific securities (like mortgage), which in turn will not be allowed to invest pension funds and insurance companies expect the rapid growth of investment attractiveness of this sector is not necessary. However, for investors - individuals, certain categories of conservative investors, this type of investment will be more attractive. Sverhkontsentratsiya economic activity in metropolitan cities are currently supports the post-industrial economy, the density of connections, the quality of life and economic features which make it possible to transition to a new level of socio-economic relations. In this case, the development of post-industrial economy, with its higher claims to many areas of development, is faced in modern cities, even relatively advanced, with significant challenges. Among these challenges, the transport problem (conflict between the requirements of accepted standards of quality of life and objective characteristics of the existing urban area), an infrastructure problem (contradiction between the function of cities as carriers of the postindustrial economy and their ability to provide this economy), the problem of the urban environment. These problems can be formulated as a generalized "Big cities are less able to support the post-industrial economy, thus, they are the only areas where this economy is possible." These challenges are not peculiarly Russian, and a similar situation exists in many cities around the world. Direct manifestation of this problem in the Russian and world cities - this overcapitalization territory. Its content is that the value of land and property in the central, most active and attractive part of the city becomes too high. This makes it impossible for almost any activity, except the most highly capitalized (and by no means the most interesting - restaurants, beauty shops, representative offices ...). As a result, there is a collapse of the activity and its outflow from the central part of the city, it is desertification. The first time the problem was fixed in Brussels, and now it can be clearly seen in Moscow. While there is no reason to believe that this will happen in ten years at the center of St. Petersburg. The flip side of "bryusselizatsii" is "detroytizatsiya": the city as people leave and activity, but because of the collapse of the core business. While that history knows many examples of such a collapse of industrial cities (Detroit, etc.), but the unfolding global economic crisis is forcing us to raise the question about the hypothetical possibility of "detroytizatsii", for example, the world's banking centers. For the rental market, this problem can manifest itself in two ways: • possibility of a legal rental units exclusively in the cities and megacities • disadvantage the development of rental housing because of overcapitalization territory Underdeveloped Market The overwhelming number of experts now market rent while he was a "seller's market." Landlords themselves form the prices of their apartments, but it does not mean that the pricing is on the market laws. That is, prices or unreasonably overstated due to the owners of personal attachment to housing, or for some other subjective factors. For example, the cause of high prices of certain objects may be in the real economic profitability of the company: There are also situations where the owner is not interested in the rental market, and allows it to dictate prices to the intermediary. A similar situation occurs infrequently and theoretically should form a more objective picture of the price. But in reality, the pricing on the part of real estate agents, although it allows you to cut off unnecessarily inflated by the lessor price, however the general price level does not affect the proposal. The reason lies in the use of "comparative method of assessment." The agency has no other source of data about the level of rents for similar facilities, except for open databases and some internal corrections for possible discounts and auctions. However, the objects in the public databases are the same internally "arbitrary" price. As a result, the observed rental rates reflect the expectations of most agencies and landlords from the market, rather than the actual price situation. A similar pattern, however, takes place in home sales. Closeness and lack of access to information on the price of actual transactions do not permit assessment of the real index of rental rates and sales value of residential real estate. Agencies and developers, as well as their own customers, for its part, also do not want to fully disclosed, for fear of taxes. Participants at the workshops directly note that the development of rental housing hinders prevailing at present taxation system. The lack of information on transaction prices, in turn, does not allow, for example, to build the objective indices of the real estate market in Russia, like the American Schiller Index. The only way to find out the real cost of supply of housing and rental rates - a survey of landlords and sellers on how to «mysterious buyer», that is practiced and specialized marketing agencies. Currently, a number of develperov St. Petersburg today announced the publication of data on the transaction. This gives reason to believe that in 5-10 years the real estate market of Russia will become more transparent. According to experts, without a public listing of rental housing, which includes options such as an address, rating, quality, property owner, to achieve standardization of pricing by category of rental housing is not possible. Without legalization of rental housing, prices will always spoil "grandmother" who give their privatized homes at dumped prices in order to replenish pension. The study noted the potential interest of intermediaries in the rental market transparency and centralized system of valuation of the lease. The motivation of intermediaries - to avoid negative points. A considerable amount of privatized apartments "get free", has a significant pressure on the rental housing market. It forms the inadequate (not having an economic basis for) the price, on the one hand, and malopredskazuemyh landlords who do not have a culture of compliance of contractual relations - on the other. The current structure of small dispersed owners are not able to specifically develop a profitable market for housing, since it has no access to financial resources necessary, nor appropriate planning horizon. But even owners who have acquired the dwelling on a commercial basis, often do not bear any responsibility for it. Lack of development of legislation and public policy Among the features of modern legislation, limiting the development of public housing rental market, workshop participants noted the ongoing privatization of the free, which at some time in making the construction of apartment buildings and rental housing in general meaningless. There is a very low security as the owner, dealer rental housing and tenant (lessee), who do not have adequate controls and enforcement of contracts, even if it is agreed in writing. This provokes mutual suspicion and mistrust between tenants and landlords. In addition, the current auction system of land allocation for housing does not encourage the creation of tenement houses. Thus other mechanisms for the earmarking of land for construction of rental housing and realizing the interests of the municipality is not available. The seminar participants noted low efficiency of housing management, and the rental housing management companies to create additional risks. This issue is complex and is based both in the absence of management practices to commercial housing in Russia, and in the undeveloped legislative and legal basis, not to the end and shallow governing the relationship of the parties with respect to rental housing. As a consequence of the lack of a competent self-regulation of the market today in Russia, can point to the vulnerability of the market agents. And this applies as tenant, and agent-brokers. In the case of illiterate drafting contracts, nothing, except it does not constrain either the tenant or the landlord. However, international experience shows that, for example, in Finland, rental agents enter into a relationship of the Institute with the responsibility, but without a contract, which confirms the feasibility of playing by the rules, even on the basis of verbal agreements and self-regulating market. An additional problem common to all cities in Russia, is the issue of registration of the Institute. Despite all the positive aspects of the institution in terms of the functioning of the state machine, it causes significant damage to real estate development and dramatically reduces the mobility of the population. With regard to the lease, the problem manifests itself, for example, registration is required. The problem of registration of non-resident tenants can be resolved by contacting the police station, where necessary be called "temporary residence", but due to lack of relevant legislation is obtained again the tension between tenant and landlord. Psychological problems Separately, a group cultural and psychological factors are also limiting the development of the rental market: • passive Russian mentality • uncertainty about the future • excessively long payback rental business competition issues • Detailed consideration of these factors is beyond the scope of this work, but may represent an interesting material for specialized research. Many elements of the illogical and irrational behavior of players in the property market is due to psychological rather than economic factors. Significant psychological problem of rental market are high expectations of profitability. Developers, and with them, and tenants, bad habit for the last fifteen years to sverhrentabelnosti business, not in a position to take seriously the global average level of profitability of rent of 5%. In terms of Russian business, it is at least as interesting. And, coupled with relatively short credit and the inability to long-term planning, this factor is a serious brake on the development of all segments. In many ills interviewed market participants blamed the "Russian mentality." In particular, states that people see housing as an investment limit. Partly to blame for the boom in global real estate markets 1990-2000's, partly - a lack of subjective psychological problems of private housing in the Soviet period. Homeowners generally do not consider its use as a mobile capital, preferring to just "deaden" the money, without taking into account long-term investment attractiveness of objects. Often in the descriptions of the respondents mentioned problems of the market in general, lack of housing and low levels of competition. It is important to note that, as a means to address the stated increase in construction. The fact that growth in housing construction is weakly correlated with its availability, the respondents shall not be considered.