MAINDOOR: My dear Moscow

17 November 2014

MAINDOOR: My dear Moscow

Moscow looks more and more like a glass of latte done right: fluffy white cream at the top, a layer of milk in the middle and rich bracing taste at the bottom.

Moscow looks more and more like a glass of latte done right: fluffy white cream at the top, a layer of milk in the middle and rich bracing taste at the bottom. Same goes for expensive real estate and art properties. Now, in order to experience Moscow in its entirety, you have to drink it all the way to the bottom, without restricting yourself to the historic centre.

Victory through Surrender

Living in the middle of a large metropolitan area has for a long time been described by the famous oxymoron, ‘it’s good but bad.’ Sure, it’s prestigious, you’re right where it’s at but oftentimes it’s not really that comfortable. Timur Sukharev, the sales director for RESTAVRACIA N explains that the kinds of things that people want to see in their homes are changing and apartment blocks put smack in the middle of old neighbourhoods in central Moscow no longer meet the changing customer demands. ‘Apart from club houses and mansions in central Moscow there is now demand for residential areas complete with parks, stores, a day care centre, a fitness centre, in other words, people want to live not just in comfortable houses or apartments but in comfortable neighbourhoods.’

It comes as no surprise that people who are after comfortable living at all levels are willing to compromise and they’re no longer looking only at options available within the Garden Ring but also at those outside the Third Transport Ring. Constantine Kovalev, manager partner at Blackwood, stresses that the trend has to do with the lack of room in the central administrative district. ‘Today the high budget new construction segment real property that emphasises the status of its owners can be found in Moscow City, in the west, in the north west and in the south west of the city. Examples include Barkli Residence in Ordzhonikidze Street in the South Western Administrative District, the Setun Valley in western Moscow, the Pink Sails complex in the South Western Administrative District and a number of others.’ In addition, Gals has announced a premium class project called Heritage that will be sited on Transfiguration Square in the eastern administrative district of Moscow while OPIN is building its Rublevo Park in the Myakinskaya flood plains. Lots in that development start at RUR 17 million. And it would appear that projects like these represent a new trend. Buyers are looking at developments within a 20-30 minute drive of central Moscow but that give them a whole slew of extra goodies. ‘Developers offer a whole range of extras here like a resort infrastructure in an urban development, privacy, exclusive architecture, layouts, concierge service,’  Natalia Kartavtseva, deputy CEO at OPIN, enumerates.

Expats Leave, Investors Stay

At the same time, the cream of the crop isn’t going anywhere: there is still plenty of demand for apartments in central Moscow. Kalinka Group closed 57 deals in September (25% less than in 2013). It should be noted, however, that purchases in the historic districts in central Moscow involve completely different budgets and completely different buyers than premium developments away from the city centre.

Almost all brokers have noted an exodus of expats (according to the head of luxury real estate sales at BEST-Novostroy Oxana Diveeva it has nothing to do with the western sanctions because the trend started back in 2009), however, expats were primarily renting rather than buying premium real estate. ‘Foreigners  that were planning to buy real property in Moscow have put their deals on hold and are waiting for what’s gonna happen next in the market, ‘-says Olga Kuznetsova, vice president at RED Development. Thus, all hopes are now pinned on those who buy real property for themselves or for their kids but even more so on investors.

RESTAVRACIA N notes that buyers have become more cautious. The same trend is noted by Vespers: deals are being negotiated; however, people are waiting to see what’s gonna happen in the economy as a whole. Ekaterina Fonareva, sales director at Barkli, confirms that investors are in no hurry to make a decision, although, she is confident that the market isn’t going to collapse any time soon. ‘The situation with the debt burden of the developers as well as with the financing of construction projects being implemented under Law 2014 is very different today from what we saw during the 2008 crisis.’

Rouble = Success

Since deals in the secondary market are being concluded at significant discounts (up to 40% for five year payment plans according to Kalinka Group), brokers’ advice is to pay attention to the new construction sector where a lot of projects are being implemented. This reduces the risk for the investor and in addition gives investors the opportunity to save by investing early on and getting discounts and shares in the project and then make money as the project is nearing completion. ‘Developers are going to incentivise potential buyers to go ahead and make purchases by committing to fixed exchange rates and offering significant discounts for 100% upfront payments etc. We have a very lucrative offer for our clients where they can make a 20% down payment and pay the rest through the end of 2015, ‘ E.This strategy is popularising such projects as Literator, Wine House, Beijing Gardens, Garden Quarters. ‘These properties have been sales leaders for quite a long time and the prices there have been fixed in roubles, which is an important factor when FOREX rates are fluctuating widely. Plus, special prices were offered in those projects in September, ‘ Ekaterina Rumyantseva, chair of the board at Kalinka Group says.

However, Natalia Shichanina, sales director at Vesper believes that there is no significant drop in prices in the luxury real estate sector: ‘Discounts may be negotiated on a case by case basis.’ Timur Sukharev concurs, noting that in Knightsbridge Private Park prices were raised by 3-5% on October 1st, while discounts are negotiated with each prospect individually"  Fonareva says.

 

 

 

 

Bld. 1, 1 Usacheva Street, Moscow
Tel.: +7 495 542-99-99, Fax: +7 495 542-99-94