The primary housing market is Features, pros and cons

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Primary housing market - these are the premises that for the first time act as a commodity. In other words, these are private houses and apartments, for which the right of ownership has never been established. Sellers in the primary housing market are the state and various construction companies.

Basic concepts

Primary dwelling is a dwelling that is listed as a commodity for the first time. Primary housing is acquired either through participation in construction during the construction of the house, or in ready-made new buildings with apartments that were not registered in the state register of ownership.

As for the prices per square meters of such housing, at the first stages of construction, the cost is minimal and increases in proportion to the progress of the construction of a particular house. The expediency of acquiring real estate in the primary market depends directly on the timing of construction, subsequent cash investments in the improvement of this housing and the degreerisk when participating in shared construction. Let's analyze the primary housing market.

Does it make sense to buy such housing?

In the acquisition of housing of the primary type, it only makes sense if obtaining a residence permit and a place of residence are not primary problems and can be postponed for a certain period of time until the construction of the house is completed. Otherwise, such an option can be safely discarded. It should be borne in mind that having received such housing, you will not be able to immediately enter it. The apartment will need to be renovated, and to do it, as they say, "from scratch".

However, the purchase of housing in the primary market has some advantages: the previous owners will not need to redo anything, due to the absence of problems with repairs. However, it is unlikely that it can cover the minus in the form of significant additional costs of time and money.

Risks

In general, equity participation in construction is a process that, despite all the attractive aspects and legal "purity", is associated with a number of risks. The main ones are the high difficulty of predicting the date of completion of the construction of a house, the possibility of bankruptcy of the developer, the emergence of social and economic changes within the state.

At the same time, only one point attracts: if the construction goes without problems, you can get an expensive and legally "clean" property.

Pros and cons

The issue of primary housing has some aspects:

1. Money aspect. Here there is a regularity confirmed by time and practice: the earlier you sign an agreement on consent to shared construction, the lower the cost of 1 sq. m. primary housing.
2. Timing. If the contract was signed at the time when the house is still at the stage of excavation, the terms for commissioning and obtaining ownership can be delayed for a rather long period (sometimes up to 2 years). In this situation, housing on the secondary market looks more attractive, since you can move into it almost immediately after the conclusion of the transaction.
3. Additional cost.



4. An apartment on the primary housing market is transferred to the owner not only in the legal sense of "clean", but also literally. That is, the finish there will be rough, which implies significant expenses for repairs. In the case of secondary housing, the situation is much simpler. But the advantage of primary housing in this sense is the ability to make repairs the way the owner wants. That is, to equip an apartment in accordance with personal preferences in terms of style, colors, cost of building materials and their quality characteristics. What is more important - savings on repairs or primary housing, of course, is up to each individual buyer to decide on their own.
5. Mortgage in the primary housing market. This is often difficult in practice. Not every financial institution will lend to shared construction. Even if any bank agrees to this, theninterest rates will be quite high. This is due to the fact that banks do not want to take risks, because in the event of bankruptcy of the developer, they turn into owners of illiquid objects.
6. The risk of being deceived by developers is high only if a person has entrusted his funds to a construction company with low authority and a bad reputation. A builder with a solid image would never take that risk. Therefore, transactions with such companies are a very profitable procedure with a low probability of disputes.

So, the main advantages of the primary housing market are:

• psychological comfort of the owner, due to the "effect of the first owner";
• legal "purity";
• Possibility of up to 30% above market profit if invested in the early stages of construction.

Secondary market

Not everyone knows what the primary and secondary housing market is. Let's figure it out. The secondary housing market refers to residential real estate that is registered as the property of the municipality or private individuals. The sale of such objects passes from the owner, the ownership during the transaction passes to the buyer from the seller. The concept itself indicates that second homes are objects that are owned.

Good and bad sides

The advantages of the secondary market are:

• affordable price;
• quick clearancedeals;
• developed infrastructure;
• extra discounts.

Cons, as a rule, are:

• object wear;
• poor quality;
• repair and maintenance costs;
• possible legal issues.

The cost of secondary objects depends on:

• year built;
• space and layout features;
• quality finishes and communications.

If the demand for secondary housing falls, the market reacts quite flexibly to changes and the average price of objects falls. The cost of the sale will depend on how urgently the owner wants to sell housing and how he plans to spend the funds received.

For example, if the owner is selling an apartment to improve his living conditions, he will hold the price in the hope of getting a better offer. If the sale is related to the move, the owner is interested in selling the property in a short time, and may give a discount. The range of price cuts or offers can be quite wide.

Primary housing market in Moscow

Today, an unprecedented high volume of offers can be seen on the primary real estate market in Moscow. This is approximately 2.2 million m2, and compared to March last year, this figure increased by as much as 69.2%.

Currently, there are approximately 35,000 flats and suites on the primary market in Moscow. 28 683 are in implementationapartments, of which 53% belong to the mass segment, 42% - to the business class, and about 5% of apartments in new buildings belong to the category of elite housing. We considered that this is a primary housing market.