Residential real estate market overview 2011

By the results of 2011, 62.3 mln. sq.m. of residential space were delivered inRussia, according to the Federal State Statistics Service data, which practically corresponded to the planned for delivery volumes and exceeded the indices of last year by 7%.

The leader by the residential space delivery volumes for 11 months of 2011 was still the Moscow Region, where 4.9 mln.sq.m. were delivered for the past period. TheRepublicofTatarstantook the second place, St.-Petersburg followed.

According to the results of January-November 2011, 1.2 mln.sq.m. of residential space were delivered inMoscow. By the results of 2011, according to the preliminary data of the Complex of architectural policy and construction ofMoscow, 2 mln.sq.m. were built in the capital, which constituted 80% of the planned indices.

During 2011, the primary market increased by new properties predominantly of economy and comfort classes. Business class new buildings entered the market in considerably smaller volumes during the year. As of the end of 2011, the supply volume in the primary market amounted to 218 properties and approximately 1 mln.sq.m. inclusive of apartments and elite new buildings. No drastic changes took place in the supply structure compared to the previous periods.

The demand in the residential real estate market ofMoscowin 2011 was at the high level, however no rush was observed in any segment: despite the decline of residential supply volume and the forecasts about the forthcoming deficit of supply, the buyers were rather calm. The main driver of demand in 2011 was the mortgage lending, which was easily explainable: the terms for the purchase of residential space with attraction of mortgage lending were rather advantageous: the rates decreased, the prices did not reach the pre-crisis ones. One of the remarkable trends of 2011 was investors’  heighten activity. Nevertheless, the investment demand in theMoscowmarket did not have strongly speculative character: it was rather difficult to make money of high growth of prices inMoscowin the past year. Rather, investors were geared to long-range investments, including for the purposes of maintaining assets, in particular, this trend was gaining force in the light of growing instability in the financial markets.

The average supply price in the primary market settled at the level of 182, 250 as of the end of 2011. The dollar equivalent amounted to $5, 730 per sq.m. The change of the average price for Q4 2011 turned out to be of no consequence and constituted +1.4% in dollars (i.e. approx 0.5% per month) and +2% in rubles. The growth of the average supply price in the primary market since the beginning of the year (versus December 2010) amounted to about 4% in dollars and 8% in rubles. Therefore, the growth of the average prices by the results of the year is at the inflation level. 

 The average level of prices in the secondary residential market reached 187, 620 rub. per sq.m. ($5 900 per sq.m.) as of the end of 2011. The increase of the average supply price for Q4 2011 amounted to +1.4% in rubles and +0.7% in dollars. The analogous indices versus December 2010 constituted +3% and -1% respectively.

By the end of 2011 the supply volume in the primary market of apartments amounted to approximately 111.5 thous.sq.m. in 16 complexes. The volume of presented for sale areas increased by 8.7% for the year. In 2011, the market increased by new supply in Loft Garden RC, Mercury City, Marshal MFC (building 7) and Clerkenwell House and 26 Tsvetnoy boulevard. The average dollar price in the primary market of apartments by the end of the year reached $9, 250 per sq.m. (292.3 thous. rub. per sq.m.). By the results of the year, the growth of the average price in the market of apartments amounted to about 30%. The main reason of such a rapid growth was a cardinal change of the supply structure: the growth of the share of elite apartments.

By the end of 2011, the supply volume in the elite primary market* ofMoscowconstituted approx 800 apartments in 33 complexes (about 115 thous.sq.m). In 2011, the market enlarged with new supply in Barkli Park RC, Barkli Virgin House, 19 Pechatnikov per., 3 Pechatnikov per., Smolensky de luxe RC,Knightsbridge PrivatePark, as well as Andreevsky RC (the last 5 apartments from the developer). Despite the delivery of new projects to the market, according to the results of the year, the supply volume in sq.m. decreased by 9.6% in the primary elite market. The activity of elite residential space buyers in 2011 stayed at the higher level than in the past year. The number of deals concluded by Blackwood Company in the elite residential segment increased by 38%.

The average dollar price in the primary elite residential market gained 6.1% for the year, and stayed practically at the same level in the secondary market. The current average prices are still lower than the pre-crisis level by 6.9% in the primary market and by 11.6% in the secondary market. The change of the supply structure (the withdrawal of cheap supply) and the ruble exchange rate fluctuation exerted considerable influence on the prices level. The direct raise of prices was noted only for some properties.    

The elite rental market recovered the former balance and returned to the position of a stably developed segment. During 2011 the elite rental market developed in compliance with traditional seasonal trends. The growth of the share of expatriates became an important trend—in 2011, this share reached the pre-crisis level of 70%. By the results of the year the market displayed moderate growth—at the level of 6.5%. By the end of 2011, the average level of rental rate reached the index of $8,400 per apartment per month.

A high level of demand against the background of a rather limited supply in the elite countryside rental market caused the growth of prices. By the results of 2011, the average level of rental rate amounted to $16, 100 per cottage per month. The growth since the beginning of the year reached 19%.

The supply in the primary market, the basis of which is formed by large residential projects, including the ones implemented in the format of low-rise and medium-rise construction, increased by 1.7 times as a result of high activity of the Moscow Region territories development. Currently, the supply volume consists of 923 new buildings, more than 500 new properties entered the market since the beginning of 2011. The majority of new supply is concentrated in the nearest Moscow Region, at the same time complex development projects on these territories are implemented with increasing frequency within the land plots located/adjacent to small settlements.

Buyers’ increased activity, annual indices of which exceeded the analogous indices of last years, came as the result of a number of factors. They mainly include the growing popularity of the Moscow Region residential space among buyers, includingMoscowresidents, in the condition of liberalization of the mortgage lending terms, the burst of buyers’ activity in the new buildings of New Moscow. Besides, private investors’ activization was observed against the ambiguity in the financial markets.

Despite considerable increase of offers, the price dynamics in the second half of the year was positive. The price level by the results of the year approached the pre-crisis indices as the buyers’ activity grew. As of December 2011 the average supply price equaled  66, 900 rub. per sq.m., the growth for the year amounted to 7%, at the same time the increase of prices was observed in all the segments of the market. In several most successful projects, as well as in the new buildings of New Moscow, the annual growth exceeded the average market index.

The main trends of the countryside residential market development in the Moscow Region, evolved after the crisis, were relevant during the whole 2011: the main sale items in the newly delivered settlements were land plots without compulsory building contracts (65% of all delivered settlements); the leader by the delivery of new supply to the market is the Novorizhskoe highway (40% of all new projects). All in all, about 50 new settlements entered the market in 2011 (by one third less than in the previous year).

There were no important changes in the price situation in the countryside residential real estate market in 2011. The aggregate increase of average prices by classes amounted to about 3%. The growth of prices in some projects took place first of all at due to the increase of the projects’ readiness stage as in the last year, however, no dynamics was observed in the market: the majority of new projects entered the market at prices much lower than the pre-crisis ones.

The traditional leaders of demand for countryside high-budget residential space were Novorizhskoe and Rublevo-Uspenskoe directions, 37% and 31% of all the requests were accounted for them by the results of 2011.

The households at the price of up to $1 mln. are in the highest demand by the purchase budget. At the same time it is necessary to note that the share of requests for more expensive properties is growing stably: the main trend in 2011 was a gradual leveling of the demand structure due to the growth of requests in higher budgets.

In the conditions of dominance of the land plots without building contracts in the new supply, the further decrease of the share of more high-quality elite and business class supply is inevitable. Taking into account the prerequisites towards the further recovery of demand, the development of serious deficit of high-quality ready supply may be forecasted.