Residential real estate market overview Q3 2011

In accordance with the Federal State Statistics Service data, 28.3 mln. sq.m. of residential areas—45% of the planned annual volumes, were commissioned in Russia for January-August 2011.

The Moscow Region enjoyed the highest popularity by the residential space delivery paces for January-August 2011—2.9 mln. sq.m. were commissioned here for the past period. The Krasnodar Territory followed the Moscow Region by the delivery paces—2.1 mln. sq.m., and Tatarstan republic was at the third place —1.6 mln. sq.m of delivered residential space. 

By the results of January-August 2011, 923 thous. sq.m. were delivered in Moscow, therefore, the announced plans on the delivery of 2.5 mln.sq.m. have been fulfilled by 37%. By the results of three quarters of 2011, 329 thous. sq.m. have been delivered for the budgetary funds.

The primary market was in the process of increasing by new properties in Q3 2011, the majority of which referred to the economy and comfort class. As of September 2011, the supply volume in the primary market amounted to approx 1.1 mln.sq.m.

The number of registered deals in Q3 2011 displayed negative dynamics versus Q2 2011: the drop of buyers’ activity, traditional for the summer period caused a gradual decline of the number of concluded deals, which was observed for the whole quarter and intensified by September 2011. At the end of summer-beginning of autumn, buyers’ activity began to grow again, which will certainly reflect in the registration indices of transactions for October-November of the current year. Buyers’ activity growth was caused by both the seasonal factor (general autumn recovery), and the instability in the financial markets,  provoking  investors’ coming to the residential market. Against the background of the general decline of registered deals observed in Q3 2011, the number of deals with the participation of mortgage lending displayed stable growth.

The average supply price in the primary market became established at the level of 178, 650 rub. per sq.m. as of September 2011. The change for Q 3 2011 constituted –10% in dollars and +2% in rubles. Such an abrupt drop of price in dollars is conditioned by considerable increase of dollar rate against ruble. The growth of average price in the primary market since the beginning of the year has amounted to about 6% in rubles and 2.2% in dollars.

The average price level in the secondary residential market amounted to 186, 100 rubles per sq.m. ($5, 860 per sq.m.) by the results of September 2011.

The price increase by the results of the quarter reached +1.7% in rubles and –9.9% in dollars. The change of average price in the secondary residential market has constituted –1.6% in dollars and +2% in rubles since the beginning of the year .

By the end of Q3 2011, the supply volume in the primary market of apartments in Moscow increased by 8.6%. The market increased by new supply in “Marshal” MFC (building 7), “Mercury City” and 42, Komsomolsky pr. The average price in the primary market of apartments grew by 14.5% and reached $8, 470 per sq.m. by the results of Q3 2011. The average price was greatly affected by the change of the supply structure due to the delivery of new complexes to the market.

 In September 2011, the supply volume in the elite primary market of Moscow amounted to approx 850 apartments in 34 complexes. The market did not see new properties, and a gradual sale of apartments in the presented earlier complexes caused the decline of the supply volume by 11.5% per quarter. Currently, the growth of buyers’ activity is observed in the elite residential market of Moscow, which is expressed both in the number of incoming requests and demonstrations, and in the number of concluded deals. The situation came as the result of the traditional autumn recovery in the market, as well as unstable situation in the financial markets. By the end of Q3 2011, the average level of prices in the primary market of elite apartments became established at the level of $18, 400 per sq.m. and $23, 300 per sq.m. in the secondary market. By the results of the quarter, the decline of the average price by 2-3% is recorded in both segments. The ruble exchange rate fluctuation has affected the prices level greatly in 2 recent months. 

In Q3 2011, the stable growth, characteristic of this season was observed in the rental residential market: on the one hand, owners of apartments were very active, on the other hand, the number of requests on the part of potential tenants increased. However, the demand growth was not as considerable as in the previous years. By the results of Q3 2011, the average level of rental rate amounted to $8, 500 per apartment per month. The growth for the quarter reached 2.5%, since the beginning of the year—7.5%.

The main trend of the elite countryside rent segment in Q3 2011 was the supply growth. This trend is quite characteristic of the beginning of the autumn period. Still, the demand for the past period was not as high as in H1. By the results of Q3 2011, the average level of rental rate reached $15, 000 for a cottage per month. The growth for Q3 amounted to 3.5%, and to more than 11% since the beginning of the year.

 A noticeable demand recovery due to the buyers’ heighten interest in new buildings of “New Moscow”, private investors’ activization, as well as with the beginning of business activity was observed in the primary market of the Moscow Region. The price dynamics was positive, while the supply volumes remained almost intact —the increase in rubles for Q3 amounted to 4%, and the average price reached 65, 400 rubles per sq.m. Apartments in the towns and settlements of the Moscow vicinity (within 15km from MKAD), where the price level grew by 6%, were of the highest demand. The most considerable rise in prices was observed in new buildings within the annexed to the capital territories.

There were no fundamental changes of the supply structure in the countryside residential market in Q3 2011: the delivery of new settlements continued rather actively, at the same time the land plots without compulsory building contracts (about 80% in all the new projects) still dominated in the supply. All in all, 16 new settlements entered the market during the reporting period, the majority of which are located within 15-30 km from MKAD (35%).  

The price situation in the primary countryside residential real estate market remained stable in Q3 2011.

 Minor price fluctuations of supply were recorded in all the segments, however, they took place only due to the increase of projects readiness stage. Some supply price decline was traditionally observed in summer months in many settlements in the form of different promotion actions, discounts and special programs, closer to autumn, a number of developers announced a forthcoming growth of prices by 5-15% with an eye to buyers’ activity growth.

On the whole, the countryside real estate market is still under negative influence of the crisis and is recovering slower than the other segments. Despite the appearance of more high-quality projects, which offer for sale ready cottages and land plots with building contracts, land plots without building contracts still dominate in the total supply volume. 

At the same time, buyers’ changed preferences concerning the total budget of the purchase, as well as the main characteristics of households and settlements stimulate the demand growth for land plots without building contracts not only in the economy segment, but also in the higher class: the majority of requests today are requests for ready houses and land plots without building contracts in populated or in the surroundings of populated settlements.