Pricing and price-determining factors in property market

In the real estate market there are many different factors that have a significant impact on theprice of the property. The real estate market in Russia in relation to the developed market economies is young, and its formation as anew sector of Russian economy is connected with 1990. Gradually the real estate market increased its activity due to the formation ofprimary and secondary real estate market, new players and development of construction technologies. The main problem of Russian realestate market currently is growing prices, which is connected with many problems: an increase in the period of the investment phase ofconstruction, development of small size housing, inefficiency of technology development, corruption, concentration of money and jobsin Moscow and Moscow region, lack of desire and possibility of the state and municipalities to improve the mechanism of regulation ofthe real estate market. Overall pricing in the property market is directly related to the pricing in construction, that is, the profits andexpenditures planned for a particular property. Due to the nature of urban construction law construction in Russia is not optimized and isconsistent. It is impossible to start construction in Russia without obtaining all the permissions, which total to 50, and approving of theconstruction plan, which drastically increases the investment phase and subsequently leads to higher prices. Accordingly, during theinvestment phase it is necessary to solve many problems, some of them are of corruption nature. Development of mainly small sizehousing is due to the fact that property of small area are of greater demand in relation to large areas, respectively, the cost of 1 sq.m. ofsmall size housing is a lot more than the cost of 1 sq.m. of big size housing. The rapid development of the construction of prefabricatedand monolithic building is relatively recent. In Russia, historically, most of the property is built of brick, so the cost of the secondaryreal estate market is high. Solid-cast construction is a relatively new way of building houses and public buildings. It has a lower cost ofconstruction, non-standard layout and lack of erection joints. The real estate market of Tomsk has the following price increase forsecondary housing in relation to the primary per 1 sq.m.: brick houses - 26 %, prefab houses - 4 %, solid houses - 45 %(http://statistic.tomsk.ru/). The increase in real estate prices in Moscow and Moscow region affects a large concentration of money andjobs that will attract a large flow of people from different regions and thereby cause an excessive demand for real estate. The same trendis observed in Tomsk and Novosibirsk regions. All of the above problems influence the variety of factors that ultimately determine theprice of the property. The solution of these problems is the task for the state and municipalities, but, unfortunately, the state andmunicipalities are not willing and able to improve the mechanism for regulating the real estate market. Factors affecting the price of realestate can be classified into groups: macroeconomic factors, microeconomic factors, social factors, physical factors and naturalfactors. All of the above problems can be attributed to the macroeconomic and microeconomic factors groups. Given the fact that theoverall economic and political situation in Russia is stable, the major impact on the real estate market prices is microeconomics, socialand physical factors. There are also natural factors related to the seismological situation that are not quite appropriate for the Russianreal estate market. A striking example of the influence of environmental factors on the price of real estate market is a tragedy in Japan(Fukushima-1 Fukushima-2), which led to an increase in property prices in less seismic areas.

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