RBC REAL ESTATE: Billionaires Do Not Like to Live Next Door to Millionaires.

27 December 2013

RBC REAL ESTATE: Billionaires Do Not Like to Live Next Door to Millionaires.

Billionaires do not like to live next door to millionaires

Close neighbour is better than a distant relative"- the saying states. Indeed, if you have good neighbours – the living in the house becomes nice and easy; if you have bad neighbours – it sometimes becomes unbearable. Still in the modern metropolis the question of neighbour relations is observed not from the perspective of “bad or good” but in the context of uniformity of the social environment. Life in an apartment house is pleasant when you are surrounded by people who share your interests. Uniform social environment plays a significant role for buyers of premium accommodation. In the most expensive segment of the residential real estate of the Russian capital a mistake made with the choice of neighbours can cost tens of millions of rubles.


Social status of neighbours

“All people are equal” this Soviet slogan stated meaning that in one apartment block people with different status and education such as managers from regional management committees and workers from local poultry farms can get along with each other. Still some categories of people were a bit “more equal” if we can remember, for example, famous apartments of members of Central Committee on Leninsky avenue or political party members’ summer houses in Novoperedelkino or Rubliovka.

Today people prefer to live with equals and not to share space in an apartment house with those who have other interests in life. Of course, prices on real estate as well as real estate ranks have a great influence on this situation.

“Social environment of the residential complex is the average and very conventional category” -  Timur Sukharev, commercial director of Restavratsia N company, explains. – “It is created by people who live in this house, as well as by their financial and marital status and level of education. For example, in Knightsbridge Private Park, which is a premium residential block being built by our company, social environment is formed on the basis of certain conditions. The first one is family values: apartment square starts from 180 m2, there is a kindergarten and a park with playgrounds on the territory of the complex – it all shows that our project fully corresponds to the expectations of families with children. The second factor is, of course, the financial criterion: offering a start price of $ 19,000 for 1 m2 we clearly understand that our clients will be people with the income higher than average”.

“Any buyer would like to see similar neighbours with a similar income and status or even a bit higher, - Elena Yurgeneva, head of Premium residential real estate department of Knight Frank Russia & CIS, supports these explanations. – Usually, the social composition of the residents is defined by the location of the residential complex and its infrastructure, as well as the price level in complex, architectural design and decoration style of the public areas of the building”. According to the expert, for example, young people, who travelled a lot or studied in the United States or Europe, would prefer a house made of glass and metal. Classical facades with columns and abundance of fretwork in finishing would rather attract older people. “Judging from my experience this target group is not ready to overpay for modern architectural concept offered by a new celebrity – they prefer to pay for the time-tested classical designs”, - Elena Yurgeneva from Knight Frank specifies.

“Nobody has still cancelled the principle “money makes money”, - Ekaterina Rumyantseva, who is the chairman of the management board of Kalinka Real Estate Consulting Group, says meaning the importance of neighbours’ status for buyers of new real estate. The expert explains that the buyers are more interested in the sphere of activity of their neighbours rather than in their income. “Values from the West are actively adopted by our culture and today it is not polite to ask another person about his income, - Ekaterina Rumyantseva explains. – To share such information with anyone will be a serious breach of professional ethics from the broker’s side; it never happened in our company”.

It should be mentioned that in the elite accommodation segment in Moscow professional realtors know by name almost each of the residents who puts up an apartment for sale. And during the examination of the apartment realtors can tell the customer about the status of neighbours (provided that this information is not confidential) because, other things being equal, living among rich and influential people often becomes a decisive factor to make a purchase.

Pricing factor

Good neighbourhood has become an additional pricing factor on the premium real estate market in Moscow. In other words, neighbourhood with powerful and influential people affects the price of the real estate dramatically. In its own turn, if the neighbours are not as good as expected, it will become known sooner or later and the price may fall down. “It often occurs that people have to sell their apartment soon after the purchase, - Elena Yurgeneva says. – There can be several reasons: the sellers can either be unsatisfied with their neighbours (too noisy, constant repair works and so on) or, what happens even more often, with the activity (or inactivity) of the managing company. When the administration of the house is constantly changing together with the managing company, it can result in the household to be in decline and this, in its turn is reflected on the quality residents’ living: problems with the security, garbage removal, snow removal and repairs. In this case the residents start to actively sell their apartments (this as well is true for the suburban cottage settlements)”.

In this regard, the realtors do not advise to buy apartments in buildings where service officials and high-ranking employees of state corporations live in company-owned apartments, because such people are not likely to pay maintenance costs at commercial rates. The rest of the residents will have to bear higher costs for them and make major payments for the maintenance service of the building.

“There was a case during the practice of our company when neighbours shared their funds and bought together an apartment just that another customer whom they didn’t like could not buy it, - Ekaterina Rumyantseva from Kalinka Real Estate Consulting Group continues. – The house was initially built for the employees of one large oil and gas corporation and all the residents knew each other for a long time and got along with each other very well. And when one of the apartment owners decided to sell his apartment other residents did not want to have a stranger among them”.

 

Do Not Offer a Business Class!

As you know there are three classes of accommodation: economy class, business class and premium class. Each of these classes, in its turn, has its internal gradation. It is interesting that each segment has its own clear target group.

“Even a year or two ago apartments in residential complexes of business class were bought by medium-sized business owners and highly paid professional employees, - Ekaterina Rumyantseva gives an example. – For example, apartments which cost from $ 500 000 to           $ 1 000 000 were purchased by the owners of the retail stores networks as well as the owners of textile, apparel, fur and footwear enterprises and small industrial productions, - the expert explains. The target group for business-class real estate comprised top-managers of the banks, insurance companies, trust- and investment funds. Elite apartments were bought by the owners of large businesses, government officials of the federal level, famous athletes and representatives of show business”.

These days, however, the border between the price levels in the elite segment, according to Ekaterina Rumyantseva’s opinion, has become not so tough and clear. It has become more blurred. Some elite buildings offer quite small flats and apartments with the square of less than 80 m2 which reduces the overall budget of the bargain. As a result there is a partial mixing of the target groups. “The owner of the medium-sized business can now afford to buy a small flat, – the chairman of the management board of Kalinka Real Estate Consulting Group explains. – As well as the owner of a large business can purchase an apartment in a business-class building, of course, on condition that it is a high quality project with a vivid concept, good design decisions, beautiful architecture and spacious territory with nice infrastructure and amenities”.

Still, Elena Yurgeneva does not share this point of view. “The difference between an average family which lives in a new business-class building in the Western part of Moscow and the residents of Ostozhenka area is huge, - head of Premium residential real estate department of Knight Frank Russia & CIS states her opinion. – This includes the level of income and the lifestyle. Still during my own practice there were cases when wealthy families consciously decide for a “downgrade”: when, for example, they are expecting another child; then the prestige of the location or neighbours’ statuses are shifted to the background while the facilities for walking with a pram on the local area or presence of bike lanes and access to the extensive infrastructure oriented to kids’ leisure become prioritized”

It should be mentioned that the abovementioned discussion refers to individual elite houses in Moscow. However it becomes senseless when it comes to elite accommodation in the form of residential blocks. As an example, Knightsbridge Private Park block which is under construction includes several types of apartments: flats, terraced apartments and penthouses. On top of that this all is connected with a large (approximately 2 hectares) park. “Our residential complex ahs all conditions for a comfortable communication with neighbours, - Timur Shukharev says. – We did not artificially separate people – the child of the penthouse owner will go to the same kindergarten as the child of the usual flat owner. At the level of reception and entrance groups there are no strict divisions as well. On the contrary, the general infrastructure of the block includes a kindergarten, fitness centre and a park which helps all the residents of the block to be in a single comfortable and safe environment”.

We started this article with a saying and let’s finish it with another saying: “A good neighbour is better than a good house”.

Source: RBC REAL ESTATE

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