Residential real estate market overview H1 2013

• According to Rosstat, 17.5 mln. sq.m of residential space were commissioned in Russia for the first five months of 2013. This index exceeded the previous year’s volumes by 11%.
• The leaders by the construction volumes, as before, were: the Moscow Region, the Krasnodar Kray and the Tatarstan Republic. Moscow turned out to be the fourth among the construction leaders. All in all, 1. 187 mln. sq.m were commissioned in Moscow in H1, 606.5 thous. sq.m of which were put into operation on the newly annexed territories of New Moscow.
• By the results of H1 2013 the supply volumes in the primary market of Moscow constituted 1.54 mln. sq.m (with account of apartments and elite new buildings*), 265 properties were presented in the supply. In comparison with Q1 2013 the growth amounted to 10%, and this index gained almost 20% since the beginning of the year.
• During H1 2013 the primary market was buoyant. The summary volume of new supply in the primary residential market was estimated at the level of 380 thous. sq.m in H1 2013, which was 5.5% lower than the index of H1 2012. The largest supply volume was commissioned in the business class segment (140 thous. sq.m).
• The purchasing power in the market remained rather high. And the main demand and sales volumes shifted to economy and comfort classes due to the active implementation of large scale properties of PIK company, the microdistrict Tsaritsino, the Zagorie and the Nekrasovka-Park.
• For H1 2013 according to Rosreestr Administration’s data, 14, 869 mortgage deals were concluded in Moscow, that was 5% higher than the analogous indices of the previous year. A number of transactions under equity participation agreements reached 9, 103 transactions—almost 5 times higher than the indices of the previous year (the period before the annexation of New Moscow territories, where the majority of transactions in the primary market were concluded under equity participation agreements).
• By the results of Q2 2013, the average-weighted supply price in the primary market  amounted to 189, 070 rub. per sq.m (exclusive of the elite segment, apartments and townhouses), the dollar equivalent—$5, 750 per sq.m. In comparison with the previous period the decline of this index at the level of 3.8% in the ruble equivalent and at the level of 9.7% in the dollar equivalent was observed. The average supply price in the secondary residential marker lost 4% versus Q1 2013 to the level of 198, 500 rub. per sq.m ($6, 030 per sq.m). The decline of the average price in the dollar equivalent constituted 10%.
• The supply volume more than doubled by the results of H1 2013 and amounted to 4, 400 apartments and 342 thous. sq.m. Apartments were offered in 45 complexes. In H1 2013 the primary market of apartments saw 12 new complexes. The share of apartments in the supply structure of the primary market of Moscow  (within the former borders) advanced and reached 22.5% by the results of the quarter. The average supply price in the primary market of apartments declined by 7.3% due to the change of the supply structure (entry of comfort class properties to the market). Without regard to the change of the supply structure, the average supply price did not undergo any substantial changes (+1%). The average price for business– and elite class apartments advanced by the results of half a year by 7.4 and 14.5% respectively, and it declined a little bit in the comfort class (-1%). At the end of June 2013 the average supply price in the primary market of apartments reached 288.1 thous. rub. per sq.m. This index settled at the level of 506.6 thous. rub. per sq.m in the segment of elite apartments, at the level of 180.9 thous. rub. per sq.m in the business class and 122.4 thous. rub. per sq.m in the comfort class. 
• At the end of H1 2013 the supply volume in the primary elite residential market* of Moscow consisted of 960 flats in 43 complexes (163.7 thous. sq.m). If in Q1 the growth of the supply volume was noted due to the entry of new projects, then by the results of Q2 the supply volume declined by 3.7%, first of all, due to the sale of some volume and, secondly, due to the withdrawal of some flats from the market in June 2013. Therefore, at the end of June 2013 the supply volume returned to the level of December 2012. The average price in the elite primary market equaled $19, 550 (645.2 thous. rub. per sq.m.) at the end of June 2013. The secondary market presented flats at the price of $23, 900 (788.7 thous. rub.) per sq.m. During H1 no tangible change of prices was noted. The change of the supply structure (in particular, the commissioning of a new residential complex at the initial stage of construction) had the main influence on the fluctuations of the average price index, the price increase (not more than 5%) in the price-lists was noted in some complexes at the active stage of construction. By the results of H1 2013 the average dollar price of the supply in the elite residential market declined a little bit by 1.5% in the primary market and by 1.9% in the secondary one. The average ruble price advanced both in the primary and in the secondary market by 6-6.5% due to the growth of the dollar rate.  
• A seasonal growth of the new supply volume in the segment of high-budget rent, which began in February, started to fall by May. On the whole, owners’ activity was rather high. In the conditions of price slack in the sale and purchase market, it was the rental business, that made it possible to gain stable income from real estate.

The demand in the segment in H1 2013 was also subject to the seasonality factor. Presnensky district became more popular among tenants (apartments in Moscow City center).

The average requested budget in H1 2013 settled at the level of $5, 850 per flat.

 In H1 2013 the elite rental residential market experienced the growth of the rental rate level. And the main growth was noted in February-April (the period of high activity in the market). The growth paces slowed down by the end of the season. The average level of rental rate reached the index of $9, 100 per flat per month. The growth for half a year accounted for 7% (2.3% growth for Q2). The leader by the average level of rental rate was Presnensky district.

• During H1 2013 the countryside rental segment went through another regular development coil: the growth of the supply and demand volumes at the beginning of spring, which is a traditional period of active search for accommodation both for summer and for a permanent residence—with a gradual decline of all the participants’ activity by the beginning of summer. 

The leader by the supply and demand volume was Rublevo-Uspenskoe direction. The average requested budget in the high-budget rental market equaled $14, 000 per house per month at the end of H1 2013.

At the end of June 2013 the average level of rental rate in the segment of high-budget countryside rent reached the index of $17, 000 per house per month. The growth for half a year amounted to 3%.

• As in the previous months of the current year, Q2 2013 did not bring any significant changes in the primary residential market of Moscow. Upon the supply volumes increase and a moderate level of demand, the price situation remained almost intact, the growth of prices since the beginning of the year constituted 1%. As of the end of June 2013 the average level of prices in new buildings on the newly annexed territories corresponded to 86, 300 rub. per sq.m. 
• During Q2 2013 the primary market of the Moscow Region increased by 133 new residential buildings with the aggregate area of 1.5 mln. sq.m. The indices of the supply volumes were preserved at a high level—as of the end of Q2 2013 the supply was represented by 67, 100 flats in 1, 235 buildings.

The supply prices did no go through any substantial changes. At the end of June 2013 the average price level in the ruble equivalent reached 72, 270 rub. per sq.m, which in practice corresponded to the level of the previous quarter.

However, the average dollar price declined by 5% against the weakening of the national currency against dollar and constituted $2, 237 per sq.m.

The development of the countryside residential market took place rather actively in H1 2013: 36 new cottage settlements entered the market for the past period, which corresponded to the analogous indices of the past years. And the overwhelming share of new settlements (55%) referred to the economy class, while 45% - to the business class.

The mid-distance belt—15-30 km from MKAD (55% of the new supply)- was under the most active development. The main products in the new supply, which have entered the market since the beginning of the year, are land plots without building contracts and townhouses (the share of each segment in the total volume of new supply amounts to 48 and 51% respectively).

The price situation in the residential countryside market remained stable in H1 2013: the growth of prices was insignificant. A fluctuating dynamics still took place in some projects: in the most in-demand settlements the average price level was gradually growing, in less successful projects, including completed ones, the decline of prices was observed (more often within the framework of some special promotional actions and programs). At the end of H1 2013 the average supply prices in the countryside residential market turned out to be the following: the price of 1 sq.m of a cottage (with account of the land price) amounted to $4, 850 in elite settlements, to $3, 350 in the business class settlements and to $1, 610 in the economy class settlements.

The main trends in the countryside residential property market in H1 2013:

• The growth of developers’ activity in the low-budget segment of countryside real estate;
• The development of the blocked residential space format, in multiformat projects as well;

The preservation of the main trends are forecasted in H2 2013: land plots without building contracts and townhouses predominantly in the economy and business class projects will be still the most popular ones. And the demand for cottages will be preserved in residential settlements and projects at a high readiness stage.