Why real estate will rise in price from July 1 and is it urgent to buy an apartment

What will happen on July 1st?

On July 1, 2019, amendments to the law come into force, which change the rules of the relationship between the company and the client in the shared construction market.

Developers will no longer be able to directly use the money of people who purchase apartments at the stage of building a house. These funds will be held in escrow accounts. The company will be able to remove them only after the object is put into operation.

Developers will have to take bank loans - of course, at interest. Sberbank, for example, promises to lend them at 7-8%, which is a lot.

And why is this law needed?

This is the next stage in the improvement of legislation in an attempt to protect the money of equity holders.

Until 2004, there was no single regulatory framework for shared construction, so various fraudulent schemes flourished in the form of multiple sales of the same apartment to several clients, the disappearance of the developer with all the money, and so on.

Law 214-FZ significantly improved the situation in the shared construction market. It protects the buyer from a double sale of objects, regulates the relationship between the client and the developer. But the regulation does not insure against bankruptcy of the company, which happens not so rarely. Now there are 887 problem buildings in the register of the Ministry of Construction.

The new law is designed to protect equity holders from just such cases. If the company does not fulfill its obligations - does not complete the construction, misses the deadline - then the money from the escrow account will be returned to the client.

Seems like a good law. Or is there a catch?

There are some nuances here. The new mechanism for protecting equity holders is a good improvement. It excludes situations when people are left without money, without an apartment, but with a long-term mortgage for non-existent housing.

However, at the same time, the construction of the building will cost more for the developer, which will certainly affect the cost of apartments. And we are talking about the price of unfinished housing.

Here's how it worked before: the developer took money from the shareholder and gave him a discount for using these funds. Buying an apartment in this case was a kind of high-risk investment. You could, for example, buy a house at the excavation stage for 1.5 million rubles and get it ready with a market value of 2 million. Now the developer has much less reason for such generosity: he still has to pay interest to the bank.

So apartments in new buildings are likely to rise in price: companies will not operate at a loss. But there is also a powerful deterrent - the purchasing power of Russians. For goods that are too expensive, there may simply not be merchants. According to surveys, now buyers are ready to pay 5% of the apartment price for safer transactions with escrow accounts.

The rise in price of shared construction objects may tighten the cost of other apartments. But the rate of growth depends on the market. In 2018, housing prices in the primary market and without laws on escrow accounts increased by 4.35%, in the secondary market - by 1.58%.

So will the apartments rise in price or not?

Nobody can say with certainty about this. The prerequisites indicate that apartments will rise in price. But the developers themselves are talking about this most of all. It is possible that in this way they are simply pushing people to buy apartments before the entry into force of the law on escrow accounts. Moreover, there is a risk that prices for such rushing clients will already be increased.

What is definitely not worth doing in this case is to rush. You risk in a hurry to give money to an unscrupulous developer and become one of the last defrauded real estate investors. Check the company carefully - Lifehacker wrote how to do it.

If you don't have time, don't worry. Even if prices start to rise, it is better to overpay a little than to be left without an apartment and without money.

Wait, what will happen to the money if the bank's license is revoked?

Such a risk is also provided for in the laws. If the bank loses its license, the Deposit Insurance Agency will return the money - however, no more than 10 million. The insurance is valid until the apartment is rented out or until you terminate the contract with the developer.

So an escrow account looks like a deposit?

Only partly, and the banks are doing very well in this respect. Thanks to the new law, they will lend to developers and receive interest from them. While they are building the house, the bank will be able to "twist" money from escrow accounts and have income from them. After the apartments are commissioned to the developer, he will transfer exactly the amount that you put in, without interest. In case of bankruptcy of the developer, you will also be given money without interest. It is obvious who will win in the end here.

So, what is the result?

The bottom line is simple:

From July 1, 2019, it will be safer to buy property under construction, but possibly more expensive.
The money that you pay for the apartment will remain in the bank until the house is commissioned. If the developer violates the obligations, they will be returned to you.
In case of problems with the bank, the money will also be returned to you, but not more than 10 million rubles.
There is no need to rush into buying an apartment in any case - take into account all the nuances. But if you have chosen a developer and have already planned a deal, you may be able to save some money.