Residential Real Estate Review: Moscow, Q

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2 Residential Real Estate Table 1. Main indicators of residential real estate in Moscow, Q1 21. Main indicators Forecasted residential real estate commissioning volume in Moscow in 21, mln. sq.m. Estimated supply volume in the Moscow primary market in 29, mln. sq.m. Forecasted supply volume in the Moscow primary market in 21, mln. sq.m. Volume of sale-purchase transactions in Q1 21, number of deals Value 3 2,7 2, Forecasted deal volume in 21, number of deals 65 Cost of residential real estate in the primary market as of the end of Q1 21, k rub/sq.m. Cost of residential real estate in the secondary market as of the end of Q1 21, k rub/sq.m. Change in the cost of residential real estate in the primary market in Q1 21 Change in the cost of residential real estate in the secondary market in Q Supply % +2% The largest increase in the residential real estate construction volumes in Moscow was fixed in 27-4,8 mln. sq.m. In 29, 2,7 mln. sq.m. of residential real estate was commissioned in Moscow, which was 17% less than in the previous year. The city received around 1,2 mln. sq.m. for social needs. According to GVA Sawyer s estimates the supply volume in the primary residential real estate market in Moscow as of Q1 21 was around 2,7 mln. sq.m. The supply volume of residential real estate in Moscow shall remain at quite a high level during the year. However, there is a trend that the most liquid properties (mostly small-size flats) were in the highest demand in Q1 and little of them remains in the market. Picture 1. Dynamics of residential real estate commissioning volumes in Moscow and Moscow region during 26-29; forecast till f 28 f The first quarter of 21 is characterized by the first signs of market recovery. The prices in residential real estate market show a small growth. This is connected with seasonal factors and market recovery as a whole. Besides, mortgage deals have their positive influence on the demand dynamics. The number of requests from potential buyers to companies is considerably higher if compared to the previous period; the increase in the number of deals was 66% if compared to the similar period in 29. Generally it can be stated that the market indicators show positive dynamics. However, it is still early to say that the indicators are recovering up to the precrisis level Residential real estate commissioning volume in Moscow, k sq.m. Residential real estate commissioning volume in the Moscow region, k sq.m. Source: Federal State Statistics Service Economy class dwelling prevails in the supply structure by class. 2

3 Picture 2. Supply structure in the primary residential real estate market of Moscow by class 78% 7% 15% elite class business class economy class According to the data as of the end of 29 the South, South-West and West Administrative Districts prevail in the supply structure in the primary residential real estate market of Moscow. Picture 3. Supply structure in the primary residential real estate market of Moscow by districts 5% 2% 7% 9% 13% 12% 16% SAD WAD NAD CAD EAD NWAD NEAD SEAD SWAD The lowest supply volumes in the primary market are in the South-East and North-East Administrative Districts. In the mid-term, increase in the volumes of residential real estate in these districts is forecasted due to withdrawal of industrial enterprises from the territory and development of these districts, including residential development. In 21, VTB bank announced about its plans to grant loans to development companies for an overall amount of 2 billion rubles. Around 7% of the planned loan volumes fall on residential construction projects. The increase in lending volume for construction companies is intended to help developers in implementing construction projects. A number of developers have already announced about defrost of properties suspended during the crisis, for example: AFI Development, PIK, LSR, Glavstroy. Some developers announce about their intentions to buy new sites for residential projects development. Despite the crisis integrated development continues. Thus, for example, company Koalko is constructing infrastructure for the launch of a mass residential development in Bol shoye Domodedovo. Several independent projects are being realized within another integrated development project - А-11: a cottage settlement Letova roscha and blocks of flats Quarter A11 ; land plots without construction contracts are on sale for individual residential construction and implementation of Indigo industrial park is also in progress. The sales of flats in Quarter A11 officially began in November 29. Gross residential area shall be around 2k sq.m.; construction completion is planned in The prices as of March 21 are within the range of 57, 65, rub/sq.m. 2. Demand In Q1 21, deals were registered in Moscow, which is 2% more than in Q4 29. According to Rosreestr (the Federal Services of State Registration, Cadastre and Cartography) of Moscow there was 66% more deals in Q1 21 than in Q1 29. Despite this heavy growth in the number of deals, prices do not grow so fast. 3

4 Picture 4. Dynamics of sale-purchase deals during 27-29, number of deals Number of deals The main reason for these positive changes was mortgage credit easing, and as a result the share of deals with borrowing amounted to 22% of the overall volume. The demand is still focused on the houses, which shall be commissioned shortly, or on the offers in ready houses. The demand structure by flat types has not changed considerably: small-size 1- and 2-room flats are still in demand. Picture 5. Demand structure by flat types 37% 45% 1-room flat 2-room flat 3- and more room flat Economy class dwelling, which is the mass segment, still prevails in the demand structure by class; its share has increased during the crisis. Picture 6. Demand structure in the primary residential real estate market of Moscow by class 8% 5% 15% elite class business class economy class 3. Price situation The average price of 1 sq.m. in Moscow for the period from 22 through 28 increased fivefold. Price reduction began at the end of 28 and continued in 29. The reduction of early 29 was replaced by gradual stabilization and even slight recovery in the second part of the year. There was a small increase in the cost of dwelling in Q1 21, which was around 1-2% if compared to the previous period. In Q1 21, the average price of 1 sq.m. in the primary market of Moscow was 14k rubles, in the secondary market - 153k rubles. Picture 6. Dynamics of cost in the primary residential real estate market during 28-29, rub/sq.m cost in the primary residential real estate market, rub/sq.m cost in the secondary residential real estate market, rub/sq.m Source: data of Group of companies Real Estate Bulletin and Gde etot dom ( Where this house is? ) 4

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