ANALYSIS OF THE MARKET STRUCTURE TYPE: THE CASE OF THE KRASNOYARSK PRIMARY REAL ESTATE MARKET

ANALYSIS OF THE MARKET STRUCTURE TYPE: THE CASE OF THE KRASNOYARSK PRIMARY REAL ESTATE MARKET

Dmitrii Vershinin

master’s student, Siberian Federal University,

Russia, Krasnoyarsk

ABSTRACT

The article discusses developer distribution on the primary real estate market in the city of Krasnoyarsk. The paper is aimed to estimate the market structure type and make a conclusion how strong is monopoly power among developer companies. This study is relevant today, since such studies have not been conducted for the city of Krasnoyarsk earlier. Moreover, this analysis helps to identify similarities in the construction of certain residential complexes.

Keywords: market structure, real estate market, primary sales, monopolistic competition, perfect competition.

1. Introduction

Krasnoyarsk is the capital of Krasnoyarsk Krai, a part of investment project “Yenisei Siberia”. Thus, this paper makes an important contribution to regional development including the understanding of city development strategy. This research paper is based on only primary sales of real estate because it shows the current situation. This paper is aimed at studying and describing developers in primary real estate market in Krasnoyarsk. Its structure is as follows. In the beginning, a description is given of raw data and material used to buildings. Then, a description of main results of the market structure analysis.

2. Data Description

Raw data base was formed with the help of price parsing and data crawling methods with Screaming Frog SEO Spider. This data base contains more than 9.3 thousand strings with primary sales available on January 2022. Different Russian real-estate agencies such as “Arevera” open base [1], “Etagi” database [2] and “Unified Database of Russian developers” [3] were used as data sources where you can download any important information. In particular, the last source helped to form groups of small firms under big developer corporations to show real developer distribution.

Thus, collected data contains information on more than 9.3 thousand housing supply built by 33 developer companies in Krasnoyarsk. Figure 1 contains bar chart developer distribution among city districts.

Figure 1. Developer distribution among city districts

According to figure 1, there is monopoly with Arban company in Central district and Krasstroy company in Leninsky district. It can be explained by the small district square.

The table 1 contains information about developer distribution according to material used for building constructions. It can help to understand the middle development quality.

Table 1.

Developer distribution

According to table 1, almost a half of apartment supply represents brick-built houses. Almost 25 per cent of developers or 8 companies construct the buildings with brick houses. Three of them represents the majority or more than four fifths. The second used material in apartment supply buildings is mixed one, brick and cast concrete. The majority of companies prefer to build houses with mixed material type and only one developer represents almost two fifths of that supply. Only 5 companies, including three quarters or 3 developers, supply the cheapest apartment material for consumers.

3. Market structure analysis

Let us now consider the structure and segmentation of the real estate market by developers in the city of Krasnoyarsk. The figure 2 illustrates the changing in the distribution of developers in 2019 and 2022. In 2019, there were 27 companies on the market, including 4 firms which represented more than half of the total supply of apartments. In 2022, the market was redistributed among developers, and the distribution changed towards market monopolization. Despite the growth in the number of market participants to 33 companies, today 4 companies own 60% of the total supply of apartments in the primary real estate.

Figure 2. Changing in market supply distribution among developers

There are indexes which are used for a more detailed analysis of the market type, such as Herfindahl-Hirschman Index (HHI). This index characterizes the market economy between all members. You can see the formula of HHI down below (1):

                                                                                                                          (1)

where S_i – share of each specific market participant in %, i = 1,...,n;

n – number of business entities operating in the market.

Another additional index, the Entropy coefficient (E), has been added for a more thorough and in-depth analysis of the type of real estate market among developers. This coefficient measures the disorder in the distribution of shares among market firms: the higher this indicator, the lower the ability of sellers to influence market prices. Moreover, this coefficient increases with an increase in the share of firms in the market (especially when firms merge). It is calculated by formula (2):

                                                                                                                      (2)

where S_i – share of each specific market participant in %, i = 1,...,n;

n – number of business entities operating in the market.

4. Results and conclusion

Table 2 represents the results calculated according to formula (1) and formula (2).

Table 2.

Market type results

Thus, according to table 2, we can conclude that the structure of the real estate market in the city of Krasnoyarsk has been changed towards perfect competition. Here we can see the quantity growth of the developer companies as well. However, in 2019 monopolistic competition indicates the presence of monopoly power: with a large difference in constant price, the buyer changes firms in order to purchase the product.

References:

1. Arevera. Real-estate agency : Database <arevera.ru>
2. Etagi. Real-estate agency : Database <kras.etagi.com>
3. Unified Database of Russian developers. The biggest database of primary real estate and Russian developers <erzrf.ru>