The year 2023 will be a turning point for the real estate market in Chisinau. The economic and social effects of the last period have left a heavy mark on the direction and development of the real estate market, but also on real estate prices.
Although it is very difficult to make certain predictions, because we do not know what unknown factors will appear in the near future, in this article I will try to explain what could happen in certain market segments and how the real estate market will evolve in 2023.
How the real estate market evolved from 2018-2022
The real estate market started to "heat up" with the launch of the "Prima Casa" state program in 2018, so that later the banks would offer cheaper loans and the taste of Moldovans to purchase a home would increase. At that time, the average price of a square meter was 630-650 euros. See the Evolution of apartment prices in Chisinau.
Then came the effects of the Covid pandemic, which diverted all people's expectations on real estate prices. At the beginning, everyone expected apartment prices to get cheaper, but they unexpectedly exploded, increasing by 30-50 euros per m2 every quarter, during the years 2020-2021.
Thus, at the beginning of 2022 we woke up with new historical highs in the prices of apartments (the average price for one square meter reached 900-1000 euros), houses, land, etc. And it is not known how the market would evolve, if that "Black Swan" did not appear, namely the beginning of Russia's war on Ukraine.
In parallel, the year 2022 was marked by an unprecedented inflation for the Republic of Moldova of over 30%. At the same time, mortgage loans became more expensive, and the number of transactions in this segment decreased considerably.
The decrease in purchasing power as well as the energy crisis in the second half of the year also left its mark on the real estate market and long-term investments.
How the war and rising mortgage prices affected the number of transactions
Due to the war in the neighboring country, many Moldovans have simply postponed the decision to buy a home until there is economic and social stability in the region.
On the other hand, we have a sharp decline in purchasing power among the population due to record inflation. People simply or focused on current expenses rather than major long-term investments, such as purchasing a home.
Record inflation has made mortgages more expensive, by about 50%. This fact discouraged the population from accessing a mortgage to purchase an apartment or house. And we know that in the years 2020-2021, approximately 30-40% of all transactions for the sale and purchase of an apartment were carried out with the help of this financial instrument.
Although there is no real statistic of the total number of transactions for the sale and purchase of apartments for the year 2022, from the internal statistics we can see a decrease in demand by about 30%.
Scenarios and possible new "Black Swans" for the real estate market in 2023
The beginning of 2023 started on the right foot, the buyers who kept putting off the purchase request in 2022 started knocking on the owners' doors.
There is a slight revival in the real estate market. Buyers make offers, some perhaps excessively low compared to the promotion prices. At the same time, property owners, who are motivated or constrained by certain situations, are put in a position to compromise on price if they really want to sell.
However, some are on the wait and wonder if prices will drop in the coming period.
Why might apartment prices fall?
It is not yet clear how the war in the region will develop. It is also unclear how long this recession will last and what its long-term effects will be.
The level of indebtedness of Moldovans in the last 4 years has increased a lot. many have accessed a mortgage loan. And now, due to the high cost of credit and the fact that many companies may be downsizing or going bankrupt, more offers may appear on the market at prices lower than the market. Those who will no longer be able to honor their bonds with the bank, and will have to sell in order to recover their invested money.
Why might apartment prices rise?
If the war in Ukraine ends with its victory, apartment prices will rise in the coming period. Peace will bring much greater clarity and people will no longer have that fear of investing in the Republic of Moldova.
Along with this, many foreign investments will come for the development of the socio-economic infrastructure, jobs will be created, and the Republic of Moldova will become interesting not only for our citizens but also for foreign investors.
What will buyers look for in 2023?
Buyers will become more calculating. They will focus on quality. They will no longer buy everything like before. They will be much more attentive to the quality of the construction works and the finishes used by the builders, on surfaces that are not very large, but with very well thought out floor plans.
Buyers will focus on areas with well-developed infrastructure, with access to pedestrian areas and recreational areas.
Last but not least, they will opt for energy-efficient homes, homes with thermally insulated facades, with quality double-glazed windows, with autonomous heating as well as the availability of other alternative heating sources if we are talking about houses on the ground.
The builders who suffered the most in 2022 due to the crisis and the war in Ukraine, should think much more about people's comfort, build not only square meters but also a quality way of life for the new owners. Only in this way, they will be able to attract the final buyer, when the return between price and quality of the new apartments will be fair and balanced.
What do you think, will apartment prices increase or decrease in 2023?
