Why Belarusians Cannot Afford Housing in Belarus
In 2015, prices for Belarusian apartments fell by about a quarter. Yet few Belarusians can afford to purchase an apartment even at this cheaper price. Interest rates are incredibly high, reaching 30-35% per annum. Banks also impose loan requirements that are hard to satisfy for an an average citizen.
An average flat is just 26 m2 of space, according to the National Statistical Committee of Belarus. The square footage area is lees than other countries in Northern Europe. According to the Eurostat, on average a German has 43 m2 and a Swede has 44 m2 for their living space. Not surprisingly, many in Belarus dream of owning a separate flat.
Why the Housing Issue Remains so Important
Buying an apartment remains out of reach for ordinary Belarusians due to the combination of sky-high prices and high interest rates on apartment loans, which reach about 30-35% per year. In order to receive a loan for at least a part of an apartment, one needs to earn around $1000, or twice the average salary in Belarus.
Many young families have no choice but to live with their parents. Take the example of Maxim Komich, 25, who lives in Vaukavysk, a small town in the western part of the country. Komich told Belarus Digest that he, his wife, their child, his wife’s brother and her parents live together in a two-room apartment. Komichs company forced him to take an unpaid leave because of the lack of work. As a result, he can no longer afford renting a flat.
Many prosperous Belarusians invest in real estate because Belarus offers few other investment opportunities and because they distrust Belarusian banks. They want to buy something real, something they can touch, a place of their own.
For the authorities, attuned to the people's mood, real estate construction remains one of the chief priorities. In his program ahead of the 2010 presidential election Lukashenka promised to build 10 million square metres of flats annually between 2011 and 2015. On average, the authorities build about half of the required flats.
Lukashenka had also promised that an ordinary young family would be able to buy an apartment in the next five years since his 2010 campaign. This promise remains unfulfilled to this day. While an average flat in Minsk, with two rooms, costs around $70,000, the average monthly salary in Minsk is just $530 today.
The Crisis on the Housing Market
Belarusian statistics do not allow us to trace the fluctuation in the prices of real estate over time. Pavel Astapenia, the owner of “Expert” real estate agency in Minsk, told Belarus Digest that insiders estimate real estate prices to have fallen by a quarter. In Minsk, the drop in prices may have been slightly higher.
Accurate figures for the decrease remain unknown, as Belarusian flats have two prices: the offer price and the price of actual transaction. People usually sell apartments for less than they first wanted. The price settled upon in the end is not reflected in the statistics. According to Pavel Astapenia, today the difference between the two prices reaches up to 10%.
The fluctuation in real estate prices once more confirms the extent to which the economies of Belarus and Russia are connected. The changes in price in Moscow's real estate market reach the Minsk market 4-6 months later. These changes are then reflected in the real estate prices in the Belarusian province.
In spite of the fall in prices, the number of purchases remains stable this year compared to 2014. This may be the result of deferring demand. Many people have delayed buying an apartment for a long time, waiting for lower prices. But next year, as Pavel Astapenia told Belarus Digest, the demand for apartments may also drop.
For Belarusian real estate agents this crisis presents a far bigger problem than would be the case in other countries. The Belarusian government fixes the rates of payment for service, so agents in Belarus earn from 1 to 3% of the purchase price.
This remains a fairly low figure by European standards, and in Ukraine or Russia payment for real estate agents can even reach 10%. Many sellers became desperate because of the crisis. Because of that they are willing to pay huge sums to real estate agents who can find a client. Belarusian agents struggle with fronting these high costs, and some of them may be forced to leave the profession next year.
How State Policy Changes
The regulation of payments for real estate agents is just one example of how the Belarusian state dominates the housing market. Not only does the state regulate profits, but state enterprises also build 90% of Belarusian apartments. The state's dominance in construction may change if the economic crisis deepens, however.
The crisis has already changed state policy. In the past, the authorities would built housing to sell to people in need, such as large families, at lower prices. Now such state programmes have shrunk, and so did their share in the state budget. Instead, the authorities are increasingly building housing for rent, including to low-income families at lower prices.
The promise of affordable housing has been one of the key electoral slogans for the Belarusian president. Lukashenka's rhetoric is changing, however. Unlike his program from the Presidential elections in 2010, the president's 2015 manifesto lacks references to government housing programmes. With construction of flats slowing down and crisis deepening, fewer and fewer Belarusians will be able to afford their own flats.
Sanctions Suspended, Belarusian Airlines, Warsaw Conference – Ostrogorski Centre Digest
In the past month, Belarus's authorities have continued to benefit from balancing between east and west.
The EU suspended sanctions against Belarus in response to the nonviolent presidential election, and in the east Belarus continues to enjoy the benefits of Russia-Ukraine tensions.
Igar Gubarevich analyzes the steps the foreign ministry took to use the presidential elections as a tool to strengthen the positive relations trend between Belarus and the West. In another article he shows how Belarus's national air carrier, Belavia, tries to profit from the suspension of air traffic between Ukraine and Russia.
In his analysis of recent alcohol policies, Vadzim Smok shows that despite a huge problem with alcoholism in Belarus, the authorities seem unwilling to introduce consistent anti-alcohol measures. They effectively use it both as a tool to calm social discontent and a lucrative revenue source.
Comments for the Media
Ryhor Astapenia explains what the results of the Polish parliamentary elections mean to Belarus on TUT.by portal and Polish Radio. The new Polish government will focus on supporting the Polish minority in Belarus, but the financing for Belarusian civil society will remain at the same level.
French TV channel BFM Business highlights the article "Belarus and Russian Food Embargo: a Success Story" by Igar Gubarevich in its programme "La librairie de l'Eco". In the article Ihar Gubarevich explains that Belarus' success in becoming the primary beneficiary of the Russian food embargo has been a complex mixture of hard work, honest entrepreneurship and cunning scheming.
Ryhor Astapenia explains to Polish Radio divisions within the Belarusian nomenklatura. Although Soviet cadres loyal to Lukashenka will remain in the new government, he will need some reformists and well-educated people to balance the older generation.
Igar Gubarevich talks on Polish Radio about the foreign policy implications of the 2015 presidential elections in Belarus. The authorities offered to allow peaceful elections in exchange for some lifting of sanctions, and the west eventually accepted this compromise.
Igar Gubarevich published an article about the EU's decision to suspend sanctions against the Belarusian regime in Emerging Europe, a British online business portal. As the Belarusian government will seek the full withdrawal of sanctions, the European Union and the United States should use the current momentum to press the regime into implementing further measures of political and economic liberalisation, Igar suggests.
Ryhor Astapenia comments on the perspectives for economic reforms in Belarus for thinktanks.by web-site and Polish Radio. The authorities are unwilling to pursue reforms, yet if they wish to receive an IMF loan they will have to implement a number of them, the expert says.
The East Journal, an Italian publication focusing on Eastern Europe and Asia, quotes an article by Volha Charnysh. In the article Volha shows how authorities manipulate early voting to facilitate electoral fraud.
BelarusProfile.com database now includes the following personalities: Jury Šaŭcoŭ, Hleb Šymanovič, Aliaksej Lastoŭski, Arsień Sivicki, Aliaksandr Špakoŭski, Ivan Halavaty, Uladzimir Tracciakoŭ, Maksim Mirny, Anton Kušnir, Alhierd Bacharevič.
We have also updated the profiles of Sviatlana Alieksijevič, Aliaksandr Hura, Siarhiej Hajdukievič, Vadzim Hihin, Valiancin Holubieŭ, Siarhej Darafiejeŭ, Andrej Dzmitryjeŭ, Darja Domračava, Siarhej Dubkoŭ, Siarhej Dubaviec, Andrej Dyńko, Marat Žylinski, Uladzimir Zinoŭski, Valier Ivanoŭ, Andrej Kazakievič, Anatol Kalinin, Paviel Kalaur, Tacciana Karatkievič, Andrej Karol, Valier Karbalievič.
The Ostrogorski Centre continues to update the database of policy papers BelarusPolicy.com. The papers added this month include:
- Tacciana Vadalazhskaja, Andrei Yahorau. Agenda for Civil Society Forum (Policy paper). Centre for European Transformation, 2015.
- Jury Ravinski, Uladzimir Akulich, Uladzimir Valetka, Sierž Naŭrodski. Capital and labour market in Belarus: equal status for long run growth. CASE Belarus, 2015.
- Vialieta Jermakova. EU countries: Interest in the Eastern Partnership. Centre for European Transformation, 2015.
- Dzianis Melyantsou. Foreign Policy Accent. Supplement to BISS Belarus’ Foreign Policy Index №22. BISS. Belarusian Institute for Strategic Studies, 2014.
- Andrei Yeliseyeu, Aliaksandr Aleshka. Eurasian Review №1. BISS. Belarusian Institute for Strategic Studies, 2014.
Siarhei Bohdan, senior analyst at the Ostrogorski Centre, on 4 November 2015 spoke in Warsaw at the conference "25 Years of the Charter of Paris. How to Renew Commitment, Fulfil Expectations, and Revive the OSCE."
The high-level conference was organised by the Polish Institute of International Affairs (PISM) and the German Federal Academy for Security Policy (BAKS) with the support of the Polish Ministry of Foreign Affairs and the German Federal Foreign Office in Warsaw.
Other speakers included Grzegorz Schetyna, Štefan Füle, Michael Link, ambassadors and senior officials.
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