The increase in the number of households is due solely to the decrease in the number of members in a household.
This has changed the cardinal demand in the real estate market. If 15 years ago only 10% of the apartments sold were one and two rooms. Currently, they have reached 70%.
15 years ago an apartment built had an average of over 120 m2, and currently, it has reached below 70 m2. This fact has only one logical explanation: the unprecedented increase in the number of households consisting of 1 or 2 persons, who obviously prefer apartments with small spaces.
If we also consider the prices for apartments, then companies now have to sell three apartments to get the same amount of money from the sale of a single apartment 10-15 years ago.
Stabilization at the bottom level of prices
The real estate market in Moldova experienced a boom in prices until 2008, when they increased six times in just ten years, reaching a record level of 867 Dollar / m2 in 2008. Then, following the real estate crises, they collapsed. up to the level of 525 Dollar / m2 and already the second consecutive year have stabilized at this level.
In the medium term, prices will start to rise, but now the construction companies are facing huge liquidity needs. Many of them did not resist the crisis and went bankrupt, others had and continue to have problems with the return of loans to the bank.
Banks avoid lending to construction companies, as a consequence, the increased demand for apartments has not led to higher prices, because companies prefer to get liquidity as quickly as possible. In our opinion 2017-2019 are the years with the lowest prices for apartments, most likely after 2020 the prices will start to increase.
Increasing population incomes
Let us not forget that the apartments are traded in Dollar, for this reason the population incomes have to be recalculated in Dollar. As we have anticipated since spring, due to the increase in wages in USD and appreciation of the Moldovan USD against the Dollar, the average salary recalculated in Dollar, this year will amount to around 320 Dollar / Month.
Only the appreciation of the national currency for the last two years has made the apartments cheaper by over 10%. As a consequence the financial effort made by a family to buy an apartment is much smaller than 10 years ago.
Thus, for the purchase of an apartment of 70 m2 12 years ago, 36 annual average wages were needed, and this year the indicator was reduced 3.8 times to 9.5 annual average wages. In other words, the financial effort made by a family is almost four times smaller now than it was 10-15 years ago.
Accessing mortgage loans
The increase in the recalculated income in Dollar does not solve the problem of buying real estate, because the savings are too small to solve the problem.
A solution has become mortgage loans, and the situation is extremely favorable: 1) banks face an unprecedented surplus of liquidity, 2) very weak banks credit companies both for lack of projects and the high share of non-performing loans registered with agencies economic 3) the natural persons are the best payers, the bad loans to them are 5-6 times lower than to the legal persons.
Under these conditions, banks have accelerated the process of providing loans to individuals for the purchase of the real estate. In a single year, loans increased by over 1 billion USD.
In October alone, the volume of mortgages increased by 180 million USD, compared to the first nine months of 2017.
If we also consider the non-banking sector, then we see that the construction industry received a financial injection this year from banks, larger than ever.
Namely, these five factors are fundamental in understanding what is happening in the construction sector and what are the trends for the coming years.