Vedomosti: Elite Single Family Houses Sold Out With Discounts
07 April 2013
Vedomosti: Elite Single Family Houses Sold Out With Discounts
A square metre of an elite single family home outside Moscow can be bought at the price of metropolitan Khrushchyovka – from $4,000. What is different about it is that housing accommodations are incomparable by floor spaces. No busy traffic of longing consumers can be observed. Vice versa there is customer attrition, either to Moscow or abroad.
Elena, a glamorous metropolitan chick, leaving in Benilux, last summer gathered her friends to a “farewell party”. The first toast was: “My dear friends, we won’t see each other over the next two years from now, they start the reconstruction of Novorizhskoe highway.” Before the beginning of the construction works it took the girl about an hour and a half to get to the city.
Endless Road
Realtors selling expensive countryside houses name the problem with transport accessibility — or rather inaccessibility — the main deterrent of sales. Over the last few years, people fed up with traffic jams started to get rid of countryside real estate more often and more actively. They get rid of expensive close to Moscow cottages nearly in the first turn because traffic jams appear just near the capital.
“We observe that countryside residents are coming back to Moscow,” says Pavel Zdradovsky, General Director of Paul’s Yard Realty. ‘When you live near Kiev or Kaliningrad, it takes you half an hour to get to your downtown office. In the Moscow region one should have at least an hour and a half in hand”. However, he states, some have rented offices at the Moscow Ring Road. Businessmen working in the centre of Moscow seriously consider options of coming back; fortunately, on the primary market of the capital there are not only club houses but also residencies and even with private parks.
However, these houses are under construction yet, so their future inhabitants have some time to wait until children grow up to take them from nanny’s care and send to a kindergarten in the capital. “One of our customers leaving with his family in a guarded cottage settlement in Rublevka until recently was not eager to move to the centre of Moscow,” says Timur Sukharev, Chief Commercial Officer of Restavracia N. “Moscow traffic jams did not bother him so much because he can allow himself to come to work by 11 or 12 a.m. But now his children are growing up and in a couple of years when they start their studies at schools and different educational centres, members of the family will actually have no chance to see each other: children will be having their classes and adults, whose social life is connected with Moscow, will spend 4 hours a day in traffic jams.”
Untimely Luxury
As reported by OPIN, all in all as of the beginning of 2013 there were 1,175 of cottage and dacha settlements of all categories at all stages of implementation, sales were carried out in more than 760 settlements. The share of elite single family houses amounts to 15% and this indicator has been going down since 2008.
In 2012 only a few elite projects were launched in the market. As reported by Yekaterina Lobanova, head of Analytical Centre of OPIN, from all the last year novelties (all in all 140 new settlements of all levels and formats, including new stages of exiting projects) only two projects can be classified as elite ones: Azarovo and Polyanka Deluxe. The majority of projects (72%) are of economy class and this meets the demand. The same distribution is forecast also for 2013. Tatyana Alekseeva, Deputy General Director of Vesco Consulting, considers that the supply was supplemented with 198 countryside projects, 152 of which offer land plots with a minimum set of utility services. There appeared 15-20 such offers monthly in 2012. “The market again has chosen mainly the anti-crisis strategy, placing stakes on more liquid formats, i.e. land plots without a contract and townhouse,” Lobanova considers, even premium real estate developers now have proposals of land plots without a contract.
In the elite countryside real estate market there is stagnation, Welhome states. The majority of single family houses being sold in the 50-kilometre-zone from the Moscow Ring Road, according to Welhome calculations, have an area of 400-500 and over 700 square metres (24 and 23% from the total supply respectively). The fewest in the market (9%) are houses with a floor space up to 300 square metres. The average supply price is $4,740 for a square metre. According to IntermarkSavills, the average budget for an elite single family house is $4.8 million. Elite townhouses — they are offered more and more often — cost on average $2 million.
Welhome analysts note that developers reduced prices in order to attract potential buyers and speed up the pace of sales. “Prices have increased by 5-8% only in the most qualitative and interesting projects, for the rest of them developers offered multiple discounts,” analysts of Netrium Goup confirm.
A quarter of all premium class projects are located within 10 km from the Moscow Ring Road.
Svetlana Kapranova, Head of Sales of the project ParkVille Zhukovka, considers that notwithstanding the three-year price stagnation, there has emerged hope that the market will recover. “The problem is in a limited choice of vacant land plots, practically no such plots left, especially in the Rublevka area close to Moscow. That is why developers’ interest will not be satisfied,” she forecasts.
An interest in investment lands – vast areas – begins to arise, Alekseeva notes. Transactions are very few so far but the process is stepping up. Nowever the majority of new projects will be launched in the economy segment (land plots without a contract, townhouses at best).
Excessive Expectations
Houses on sale number in the thousands. But, according to Pavel Zdradovsky’s calculations, not more than 3% of them are marketable. “People with the budget of 2.5-3 million can look for a countryside house for several years and do not succeed in finding something suitable,” he says. According to realtors, buyers mostly seek for good houses for $1 million, maximum $2 million, but for this price not the quality they expect is proposed. The market is not homogenous: there are pre-crisis single family houses with a floor space of 1,400 square metres, there are outdated houses in previous dacha cooperatives.
Today buyers can choose from 1,800 items on Rublevskoe highway and from 1,500 on Novorizhskoe highway, Zdradovsky says. Alena Brigadnova, General Director of Fitch agency explains the fact that elite real estate supply has extended by forced sales and not only because “traffic jams are annoying and people do not want to spare time for a ride.” “Houses are usually sold when people emigrate from the country, forever,” the realtor testifies. ‘That is why here we can speak also about capital flight from the country.”
There are many resales in the countryside market, confirms Nina Reznichenko, Head of Out-of-Town Real Estate Department at IntermarkSavills. From time to time there appear new offers from banks: items from owners who took out a mortgage to make a purchase but failed to repay. Realtors wonder why notwithstanding the abundance of supply and stagnation in the countryside market, many owners of expensive real estate, especially in previous dacha cooperatives and places near Moscow still believe that their houses can be priced at the pre-crisis level.
However these houses are usually outdated and are uncapable of competing with modern cottage settlements. It is either problematic or impossible to sell them at pre-crisis prices. Reznichenko remembered that a couple of years ago her company was asked to estimate a house in a prestigious place not far from Moscow. The owner did not agree with the results of estimation believing that his house cost perhaps 50% more. Not long ago the same person again approached the agency and asked to sell his house at the same price which was announced to him two years ago. But realtors refused. “For two years the market has gone forward, and many things have changed,” Reznichenko explains.
Similar cases also occurred in practice of other agencies. Moreover, lately realtors more and more often convince owners, especially those who need to sell out-of-town real estate fast that a single family house already does not comply with the prestige of the place, and that is why in the trade only the price of the land should be taken into account. “The time of easy money has passed and large countryside estates investments to which are counted with seven zeros have become a heavy burden for their owners,” Brigadnova says. “Yet five years ago agencies fought for such exclusive projects. But now they don’t.” Moreover, even legendary Rublevka brokers knowing by heart all the cadastral numbers of land plots in Barvikha started to complain about sales slump and how difficult it is to conclude each transaction.
Sellers and their agents in the out-of-town market are many times more numerous than buyers. The competition is rather fierce, Andrey Solovyev, Head of Country Houses Department of Knight Frank, says. “Unlike previous years, finding a customer with ‘high” budget inspires wonder and excites admiration of colleagues,” he admits.
“There are dozens of companies, and probably thousands of brokers,” Alsu Khamidullina, Head of Country Real Estate Department of Contact Real Estate, echoes the colleague. “Very often one and the same customer can work with several companies. It complicates, by the way, the search for a house. All brokers have almost the same real property database and if suddenly some single family house turns out to be an exclusive one, a realtor who is selling it is unlikely to refuse from cooperation with a colleague in case the latter offers half of the commission fee to him.
As reported by IntermarkSavills, in 2012 in the segment of premium class countryside real estate 120 transactions were made, i.e. 20% more than in 2011; about fifty of them were purchases of single family houses and others were townhouses and land plots without a contract. In January 2013 there were 3 transactions concluded.
Source: Vedomosti