The market of the PVC - constructions, as well as any other market, develops in accordance with the general rules (introduction, growth, saturation, recession). Presently the PVC - constructions market can be characterized as growing. Recent years have shown high rates of the market developing by 27% annually. On the one hand the situation seems to be very promising, on the other the market participants can’t help thinking what’s going to happen in future.

The overdue PVC - constructions sales season in 2005 has caused fears among participants of the market. We still remember the experience of the European countries, Germany in particular, which developed under the similar script as Russia did. High demand for the PVC-construction caused by the energy crisis of 1970s lasted for 25 years. Many German enterprises went bankrupt. Nobody wants to go through this in Russia. It is necessary for participants of the market to understand how to develop the enterprises further - to go into new segments or to increase manufacturing in the existing business.  

The branch marketing center O.K.N.А. Marketing has been keeping track of all the changes on the Russian PVC - constructions market doing the market research. Specializing in studying the building industry segment - the market of glass (translucent, transparent) constructions – the marketing center does the assessment of the market estimating it in a long-term prospect.

It’s still too early to speak about saturation of the Russian PVC - constructions market. The sales season of 2006 has started earlier than usual and the growth rates have increased even more in comparison with the past year. The market growth has made about 30 %. O.K.N.А. Marketing has made the feasibility study PVC - constructions market taking into account high rates of the market development, the demand of the population for energy-efficient windows and other macro and micro factors.

According to O.K.N.A. Marketing forecasts by the year of 2010 the PVC-constructions market volume will increase almost by three times in comparison with 2006 and will make approximately 85 million square meters. The tripling of the market volumes will take place due to high growth rates and increase of the PVC-constructions consumption in the next five years. But even such an intensive development will not lead to the market saturation. Thus at the most pessimistic calculations by 2010 approximately 50 % of the real estate objects will be glassed by energy-efficient windows. It took about 25 years to saturate the German market and we assume the similar process in Russia will be longer. As the population of Russia is twice as much as of Germany and the climate conditions are more severe the window business owners have 25 years minimum to satisfy the demand. By 2025 they will have to have the windows of “the first wave” replaced as they are can be used in service about 40 years. If the Russian PVC-constructions market saturation will not take place soon there is a logical question regarding the prospects of the market growth.


Development of the Russian Economy

The macroeconomic situation influences the PVC-constructions market development. The consumer ability of the population depends on incomes growth and stable economy. Therefore it is important to understand the prospects of Russia’s development. Russia has significantly changed for the past 6 years, both externally and internally. From the country weakened by the default it has turned into a strong and acknowledged G8 member. Irregardless all criticism Russia is now considered to be a powerful state that directly influences the energetic safety of many European countries. 

The budget proficiency, prescheduled debts payment to the Parisian club and plans on convertibility of the Russian ruble on the background of a constant rise in oil prices allow Russia to apply for a new role on the foreign political arena.

Economic growth and stability are also confirmed by such world rating agencies as Fitch, Moody's S*P. So, on June, 19, 2006 Fitch again has raised Russian sovereign rating up to "ВВВ +" level and thus put it closely to category "А".

In 2005 the Foreign Investment Advisory Council (FIAC) has declared Russia one of the developing countries that attract investors alongside with China, India and Brazil. Only for the first quarter of 2006 the volume of foreign investments in such sectors of Russian economy as industry, trade and construction has increased for 46 % and has made about 8.8 billion dollars.

In August, 2006 Russia ranked the third country in the world in gold and currency reserves having conceded only to China and Japan. Now the volume of the Russian Central Bank reserves gains 265 billion dollars. Analysts predict that by the end of 2006 it will exceed 300 billion dollars.

The Russian windows market attracts investments as well. In 2005 - 2006 there opened factories manufacturing glass (Glaverbel, Pillkington) and the PVC-structures (Dimex, Deceuninck, Brusbox, ECP PLASTICS and others). In 2005 such companies as VEKA, Gealan and Montblanc opened their factories in Russia. Plus the market participants increase their manufacturing capacities 30 % - 70 % annually. Some transnational companies install their businesses in Russia as this country ranks the first in sales volumes among all the countries of their export. Now foreign manufactures establishing in Russia is taken for granted.


Incomes and Consumer ability Growth of the population

Economic development of Russia influenced incomes of the population. According to G. Gref in June, 2006 there was a record incomes growth of the Russian population for the past two years at 15% level. If to take 6 months calculation into account the income growth is 11 %. What is of interest is that the incomes growth is not accompanied by savings, so to say a postponed purchase. People are no longer afraid of spending their money and as a result the population’s consumer ability has increased. Rosstat states that in January - April, 2006 expenditures of the Russian population have exceeded incomes for 62,6 billion rubles, that is twice as much as the past years figures. V. Putin’s high trust rating (51% according to the Russian Center of Public Opinion Study interrogations) makes the population feel more optimistic about future and allows to spend not only their money but to receive credits as well.

During recent years banks have simplified the process of consumer (buyer’s) credits allotting. Buyers have an opportunity to purchase anything they need without waiting for next month salaries. The amount of consumer credits the Moscow University of Industry and Finance (MIFP) provided in 2005 was 1.33 trillion rubles, which makes about 15-20% of all purchases made by the population. And it is far from being a limit. The developed countries experience shows that this figure can reach 70-80 %.

On the PVC-constructions market the large companies have taken over the practice of crediting their clients and have been using it during several years. Since last year the window companies offer purchase of windows by installments without any interest. According to О.К.N.А. Marketing interrogations of the buyers in 2005 about 10% of them received credits to purchase plastic windows. That once again confirms increase of the PVC-constructions market growth rates.


Development of the Mortgage System

Real estate objects under construction are also very important for development of the PVC-constructions market. About 45% of purchased PVC-constructions are used in new objects. The federal authorities’ activity aimed to resolve lodging question has been emphasized by president V. Putin and has become a national project "Accessible Lodging". Within this project the government of the Russian Federation plans on increasing the construction volumes from 40 million sq. m up to 80 million sq. m by 2010. However they admit this process is very slow in spite of the first improvements.

 New players of the market such as Mortgage Lending Agency (MLA) have influenced the decrease of mortgage lending rates up to 10.5% in currency and up to 11% in rubles, and also the initial fees reduction up to 10-20% (there was 30% rate).

In 2005 the “Lodging code (the law regulating the tenants’ relationships) of the Russian Federation” and the law “About participation in share construction of apartment houses and other objects of the real estate” came into force and simplified the procedure of apartment pledge payment. The risks undertaken by banks were diminished. As a result, according to the Central Bank, in the first quarter of 2006 there was 25% increase of the mortgage lending market, from 52.8 billion rubles up to 70 billion rubles. As D. Medvedev said that this year the government is planning to increase mortgage lending up to 100 billion rubles and by 2010 up to 415 billion rubles.

Some amendments to the law “About participation in share construction of apartment houses and other objects of the real estate” will help to develop building sector of the Russian industry. At the moment the mortgage lending is developing only on the secondary market of the real estate. That fact proves increase of the PVC-construction market growth rates as when people move to a new apartment they start from repair works.


The Market Specifics

In some countries the government regulations influence the PVC-constructions market growth rates. For example in Switzerland new windows are put in real estate objects every 10 years. The state authorities calculated that energy-efficient windows should be replaced every 10 years. After this period of time it becomes useless to maintain windows since the expenditures for the heating of the real estate proved to be considerably higher. 

Russia has taken its own way. In Russia the reasons for the repeated windows replacement are different which are connected with the low quality produce. As O.K.N.A. Marketing interrogations of buyers show the population is ready to pay more but to buy good quality windows. So those companies that stake on quality become successful.


In Conclusion

There are always risks that can change a stable economic and political situation in the country. The CIS countries experience proves it. Many experts considered the presidential elections of 2008 to be a risky event for the national economy. A new epoch in the country life will begin – “the Epoch without Putin”. There are practically no doubts that Putin’s follower will be a good one. The president’s trust rating is very high and Putin’s opinion will surely be taken into account in Russia. Therefore risks of an economic decline and the growth rates decrease are very insignificant. There are all conditions in Russia for business development including in the glass construction market included.