Housing market in Russia: Demand potential shaping future market dynamics

While in the EECFA Forecast Report Russia we estimate/forecast residential output, this article is looking at another angle of predicting housing market developments: demand potential in the Russian housing market (the number of households able to buy housing) as the main indicator of further market dynamics. Positive macroeconomic indicators in Russia currently are suggesting growth in real incomes and an increase in the population’s solvency, which in the near-term future is set to raise the number of households able to buy housing. This growth in demand potential will have a positive impact on residential output, yet, this is not something that will happen overnight: the Russian housing market is predicted to continue to slump for the time being. Nevertheless, the predicted growth in demand potential will play a major role in halting this drop, leading to an expansion in the housing market in 2019.

Written by Andrey Vakulenko – MACON Realty Group, EECFA Russia

‘North Valley’ Residential Complex in St. Petersburg – Source: http://www.severdol.ru

Having the largest share in total construction both in value and volume terms, the housing market is the engine of the whole Russian construction market. Any change – decline or growth – in the housing subsector may have a decisive effect on the Russian construction industry as a whole; as it was the case, in particular, during the crisis of the Russian economy in 2015-2016. In this period, the housing sector enjoyed an unprecedented level of state support (more details in the current/previous EECFA reports), which prevented the entire construction industry from collapsing.

The state of the housing market primarily depends on the ability of the population to purchase housing. Other market factors, such as the volume of supply in the market, the level of competition or the cost of housing are secondary. It is the ability of citizens to buy housing that ultimately determines the total volume of effective demand, which in turn regulates development activity and price trends in the local housing market. At the same time, the indicators of the population’s need for housing are also secondary in terms of the dynamics of the market situation; they are of an abstract nature and cannot be used to predict the situation in the market. The need for housing is a conditional market potential, which, without the ability to buy housing is never realized. The ability of the population to purchase housing is the real market potential, which – in most cases – is realized in transactions. The level of housing provision (need) affects only the nature of demand: investment purchase, purchase of a first home, improvement of housing conditions, among others. Continue reading Housing market in Russia: Demand potential shaping future market dynamics

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New manufacturing is coming: Europe or China will be the new China?

JAPAN-SCIENCE-TECHNOLOGY-ROBOT ELDERLY

Robear is helping to revolutionize the manufacturing industry: do robears prefer China or Europe? (source: HuffingtonPost)

Adidas has announced that it will open its first all-robot factory in Germany, and many will follow in rich countries. Foxconn, the manufacturer of Apple products fired 60,000 employees and employed robots instead of them. It seems this is the beginning of the end.

The way we manufacture products is about to change dramatically in the next decade. There are two intertwined trends that have already started to revolutionize the industry: the digitisation of industry (or the “takeover of robots”) and that global economic growth is less and less energy and machinery-intensive (more and more value added comes from services). None of these are new; however, both of these trends are in front of a new era of growth. Developments in big data and machine learning are increasing the capabilities of robots and global value chains are becoming seamless. Economic growth is coming increasingly from services, as opposed to manufacturing. Moreover, growing concerns about climate change and the ongoing shift away from heavy machinery in state-of-the-art manufacturing are leading to the growing use of lighter materials instead of metals. Continue reading New manufacturing is coming: Europe or China will be the new China?

The coming wave of energy efficiency investments

The most energy efficient animal and the wave. Source: FatCatArt

This week’s post is concerned with energy efficiency investments in housing. We wanted to point out the importance of three factors: stable economic growth, further decrease of costs in renewables, and sufficient amount of fundings from the EU. All three factors seem to be fulfilled for the next couple of years, and we think a new wave of energy efficiency investments is likely in the future. Continue reading The coming wave of energy efficiency investments

The housing market’s James Bond: increasing immigration

Our current post is the next in line dealing with migration that has an impact on construction. Such issues will be discussed at the 80th EUROCONSTRUCT Conference.

In our previous post we concluded that lower potential economic growth and an increasing immigration are likely in Europe in the long run. An overall lower economic growth puts pressure on the construction industry as well, however, increasing immigration provides new opportunities for growth. In this post we will first elaborate on possible short-term effects and then we will present our expectation for the long-term. Continue reading The housing market’s James Bond: increasing immigration

Europe at crossroads: Economic decline and the possibilities of increased immigration

There is a series of current issues having an impact on construction that will be discussed at the 80th EUROCONSTRUCT Conference and first, we would like to address a very current issue in Europe: migration. There are many aspects of this phenomenon and it would be hard to present them all. Instead, we will address only one: how immigration can help slowing the ageing of the European Union’s population and thus increase growth prospects. Continue reading Europe at crossroads: Economic decline and the possibilities of increased immigration