Russian tycoons earn billions in the midst of property market blast

Russia’s property investors are stamping immense fortunes after a government move to support the market during the pandemic aided spike a housing blast.

Sergei Gordeev, the controlling shareholder, chairman and chief executive of PIK Group, has seen his net worth over two double this year to $8.9 billion, as indicated by the Bloomberg Billionaires Index, as shares in Russia’s greatest developer surged. Pavel Golubkov and Mikhail Kenin’s stakes in their property firm Samolet Group are every worth more than $1bn after its stock has taken off more than fivefold in 2021.

Real estate markets across the world have been red-hot during the Covid outbreak, supported by low interest rates, decreased supply and demand from individuals who are stuck at home and purchasing bigger homes or making new investments.

Those factors are additionally affecting everything in Russia, yet there is another significant reason: President Vladimir Putin’s government presented a mortgage-subsidy programme in April 2020 to stimulate demand in the midst of the pandemic and a slump in the country’s key export, oil.

Property costs have since taken off, and Samolet says the good times have space to run.

There is “huge” demand for housing, CEO Anton Elistratov said, highlighting huge progressions of individuals into Moscow and St Petersburg, the country’s two greatest cities. “But the supply is very limited.”

Russia’s housing costs hopped 14.4 percent in a year through June contrasted and a year sooner, as per Knight Frank’s Global House Price Index report. This put the country in the best 10 internationally for price growth. Mortgage originations rose to 545bn roubles ($7.5bn) in June, up 150% from that same month in 2019, as per Russian real estate research firm Cian.

“The pandemic made people stay at home,” said Yury Ilin, PIK’s vice president for capital markets and corporate finance. “They realised they want bigger places to live and had enough time to find them. Plus, they didn’t travel much and spent more domestically.”

However, as ahead of schedule as last July, authorities were warning about the sustainability of the blast.

Covid subsidies hazard swelling a housing bubble in the country among individuals who are not dissolvable enough to take out mortgages, Deputy Finance Minister Alexey Moiseev said that month.

“A mortgage is a loan for many years and it must be paid,” Bank of Russia governor Elvira Nabiullina said last week in an interview with local media RBC Daily. “There should be an appropriate level of family income for it.”

Adapted to expansion, Russian salaries have been sliding for a lot of Mr Putin’s two latest presidential terms, hurt by feeble economic performance and speeding up inflation.

In June, Mr Putin ordered that the mortgage-subsidy programme be stretched out by one year to July 2022, yet with tightened conditions. The government expanded the subsidised rate for purchasing new apartments to 7 percent from 6.5 percent and cut the mortgage limit countrywide to 3 million roubles from 12m roubles in Moscow and St Petersburg and 6m roubles in different regions.

In a report in August, the central bank said the danger of the mortgage market overheating had diminished because of factors including the progressions to the program.

Mr Gordeev claims 59% of PIK, which centers around building housing, essentially in Moscow. The organization announced income of $5.3bn last year. Its stock is up 148% in 2021.

Mr Golubkov and Mr Kenin established Samolet in 2012 as an engineer zeroed in on mass market skyscraper condo blocks on the edges of Moscow. They and their accomplices sold just about 10% of the organization this month to the extremely rich person God Nisanov. Samolet’s offers have risen 483% in 2021.

“At the moment Samolet stock looks heavily overbought and we expect a correction,” said Finam analyst Natalia Pyreva. “The change in terms of the mortgage-subsidy programme will lead to a slowdown in demand in the second half of this year, while supply in the market is growing. It should stabilise housing prices.”

Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Planet Economic journalist was involved in the writing and production of this article.