Apartments in five-story buildings — at first glance, the product is unsightly: small, cramped, with many communal problems (there is a shared bathroom, no elevator and no garbage chute). But the demand for this housing has been and remains stable. Moreover, such apartments are bought not only by those who do not have enough money for something better, but also by private investors. We found out that this sector of the market is comparable to luxury housing in terms of profitability. True, the risks are much higher.
Waiting for demolition
The city authorities promise that in a few years Moscow will completely get rid of the five-story building. Already now, old panel houses with green courtyards and old women at the entrances liberate the territory for new monolithic buildings. Nevertheless, Khrushchevs are still represented quite widely in the secondary housing market: the volume of their supply in the secondary market for apartments in the capital almost exceeds the supply of other types of housing. It is clear that the main advantage of five-story buildings in the eyes of potential buyers has always been and remains their relative cheapness in comparison with good panel and even more monolithic houses, not to mention modern new buildings, which surpass five-story buildings in their consumer qualities several times. And nevertheless, apartments in houses formally intended for demolition are rented out, sold and bought. However, is it only the cheapness of this property that attracts buyers’ attention? Perhaps private investors have a secret calculation.
Let’s start with a small story – the same can be told by the inhabitants of literally any Moscow Khrushchev. Alexandra Nikolaevna Ivanova has been living on 9th Parkovaya Street for 30 years, since she and her husband moved into an apartment on the first floor of a brand new five-story building ten minutes from the Shchelkovskaya metro station. And green courtyards in their area are not a gift from noble investors, but the result of the activities of residents. “We were young and active,” recalls Alexandra Nikolaevna. “At subbotniks, all the yards around were planted with trees. Now maples and birches are flush with the roofs.” Alexandra Nikolaevna’s apartment has long been in need of major repairs. The pipes endlessly clog, the floors rotted, the window frames are dry. One could turn to granddaughters and nieces. But Alexandra Nikolaevna does not want.
“Why spend money on repairs if the house will be demolished,” she argues. “All residents are talking about demolition. It is not known exactly when this will happen. But everyone knows that for a year or two, there will be no five-story buildings in our area. If so, why waste money in an apartment? ”
Natalia, niece of Alexandra Nikolaevna, is of the same opinion. At 11th Parkova Street, she just re-pasted the wallpaper. It’s a pity to spend more money. True, all the same, from time to time you have to patch something: the house is old – one thing or the other constantly deteriorates. Sometimes Natalya even thinks: maybe sell? However, for the amount that she will help out for her three-room apartment, you can only buy a “kopeck piece”, if you do not move outside the Moscow Ring Road. Here is waiting for the promised resettlement.
The same thoughts do not leave residents of hundreds of five-story buildings throughout Moscow. The largest number of them today is concentrated in the north (“Rechnoy Vokzal”), south-west (“Profsoyuznaya”, Cheryomushki) and southeast of Moscow (“Tekstilshchiki”).
Exchange with surcharge
The program for the demolition of five-story and dilapidated housing was approved by a decree of the Moscow government on July 2, 2002. To date, there are practically no five-story buildings left in the Central and Southern districts of the capital, the Yugo-Vostochny will be freed from the “khrushchebs” in 2008, the Vostochny and Northeast – in 2009, and the North, South-Western and Zelenogradsky – in 2010.
Moreover, it should be noted that the program for the demolition of five-story buildings in Moscow is indeed being implemented. And the promised is quite possible to believe. Thus, any five-story building in Moscow is doomed to be demolished. The only question is timing.
This is where the fun begins. Oddly enough, apartments in Moscow five-story buildings only get more expensive over time. The price for them depends not only on the area, but also on the demolition period. The closer to the “fatal line”, the more expensive. According to experts, the cost of an apartment in a five-story building, for which the date of demolition is precisely known, grows by at least 10%. And today the share of such apartments in the secondary real estate market is not so small – about 18%.
Buyers of “doomed” apartments can be roughly divided into two categories. The first group includes people for whom the main advantage of housing is its cheapness. Five-story buildings are an ideal option for those wishing to purchase inexpensive living space in Moscow: for $ 90-120 thousand, you can look for a “one-room” or even a “two-story” apartment at an acceptable distance from the metro. There are many reasons for such low prices for modern Moscow, we will single out two main ones. These apartments are very uncomfortable and small. But they are cheap, largely due to their small area, because the absolute cost of an apartment in the capital in most cases is calculated by multiplying the number of square meters by a certain notional cost.
Another category of buyers is private investors. They have a long-range scope: they know that an unprepossessing, cheap apartment in Khrushchev will turn into new housing in a year or two, which will cost much more. Indeed, at will, the owner of the living space in the demolished house can receive compensation for it in money or square meters. In the first case, he is reimbursed for the cost of the apartment at the market price plus the cost of all costs associated with the purchase of new housing and moving (commission of the real estate company, which will have to pay for the search for a new apartment, wages of movers, etc.).
If a person chooses compensation “in kind”, then in accordance with the new Housing Code and the law “Guarantees of the city of Moscow for persons vacating living quarters” he is provided with an apartment in the same area as the house intended for demolition. The exceptions are Zelenograd and the Central Administrative District: in them apartments are given within the district. Which, however, is not bad at all for residents of the central part of the city: a square meter of roads in all parts of the Central Administrative District.
The best part for the settler is that the apartment provided must have as many rooms as the one that the person has lost. Moreover, the requirement for the corresponding number of rooms does not in any way depend on the actual size of the apartment and its layout. Obviously, most of the migrants noticeably gain in footage. For comparison: the standard size of a one-room apartment in old houses is 30-32 sq. m, two-room – 45-50 sq. m. In modern new economy class buildings, the average size of “odnushki” – 40-45 square meters. m, “kopeck piece” – 55-70 sq. m. That is, an experienced investor, with good skills and possessing the necessary insider information, maybe buying an apartment in a demolished five-story building on time (that is, before the closure of sales in the condemned house), win simply on the number of square meters. They can run in various variations from 10 to 20. Multiply by the same averaged $ 4 thousand per square meter and we get an amount of about $ 50-60 thousand, which the investor gets virtually guaranteed.
For an additional footage, a person either pays nothing, or the surcharge is minimal. The city actually donates this area to the former owner for the right to demolish the house in which he lived. This gift becomes a net profit for buyers of old apartments. Note that the amount of profit does not depend in any way on the consumer qualities of an apartment: residents of the first floors, for example, receive new apartments on a general basis..
And the benefit is not only in footage. The cost of new housing is a priori higher than that of the old one. The price of the most modest one-room apartments in new buildings starts at around $ 110 thousand. The cost of new buildings is growing before our eyes as new floors appear, and, despite today’s stabilization, experts still predict an increase in the cost of new buildings by at least 15% by the end of the year. So, with a careful choice of options, such an operation can bring tangible profits in a short time..
Today you can buy a two-room apartment in Khrushchev, five minutes away by public transport from the Shchelkovskaya metro station for $ 122,000. Ten minutes from the same station, the price of a kopeck piece in a building under construction today is about $ 183,000. The area of the first is 42 sq. m, the second – 72.2 sq. m.
Risks and calculations
Despite the attractiveness of this type of investment, this path has its pitfalls. Firstly, with such a transaction, it is easy to get wrong with the timing. The new Housing Code requires residents to be warned of demolition at least a year in advance. However, everyone knows that the requirements of the law in our reality are sometimes refracted in the most unpredictable way. More than once, realtors had to deal with the fact that people were informed about the eviction literally a month before the demolition of the house. It’s very simple: as soon as an investor is found, the authorities begin to rush. However, becoming the owner of such information is not at all as difficult as it might seem at first glance. Specialists at the prefecture level are still involved in various preparatory measures preceding the signing of the Moscow government decree on the recognition of the building as emergency or subject to demolition within the framework of any city program. Getting to know them will be useful for any novice investor. Their services are inexpensive, sometimes it is enough joint trips to the restaurant. And the information received from them can be truly invaluable. Although they are not omniscient either: the project can be slowed down even in the highest echelons of bureaucratic power – people are working everywhere who get their share of the process, and if someone is outnumbered, then the draft resolution may get lost. By chance.
So the schedules are adhered to, but flexible. The demolition date is both approaching and receding. That is, expectations that in a year you will move to a new apartment may not be justified, and you will have to fight for another couple of years with leaking pipes and drafts..
Although this can be taken into account even at the purchase stage. It should be borne in mind that the order depends not only on the schedules of the mayor’s office, but also on the popularity of the area. For example, in Cheryomushki, demolition is much more active than anywhere else in Maryina Roshcha. If the area is in demand by developers for new development, then five-story buildings there are demolished quickly.
Another important point: an apartment as compensation is provided to a person only if he does not own another home. Otherwise, monetary compensation will become a “consolation prize”. And, as a rule, this amount is incommensurably lower than the real cost of an apartment on the market. Although, in fact, there have not yet been cases in Moscow history when someone decided to use the right to receive monetary compensation for the demolition of a house. In any case, the realtors and lawyers we interviewed cannot recall anything like that. And we could not find any precedents of litigation. The reason for this is seen in the extremely unsettled procedure for calculating this very compensation. There are no norms, the concept of “market valuation” is quite loose. Four years ago, one of the settlers decided to ask for the real market value of his three-room apartment in the city center, and even taking into account the good repairs made in it just two years ago. But he was clearly explained that the maximum that he can count on is the amount calculated by multiplying the square meters of the total area of the apartment by some average cost per square meter in the capital. The man understood everything correctly and took the due with a new apartment.
Finally, there is a possibility that the apartment provided to replace the lost one will still not be in your area. In 90% of cases, the law is respected, but still there were precedents when a person, against his will, was given an apartment not where he lived before. And no courts helped. Such situations are an exception, but no one is immune from them..
The procedure itself for buying an apartment in a house subject to demolition is still carried out in the same manner as purchasing an apartment in any other house. In this case, no restrictions are established by law. But when a decree on the demolition of the house is issued and its resettlement begins, the registration of transactions on this object ceases. When this event comes, it is difficult to predict. The timing depends solely on the decision of the local passport office – at what point he stops registering in these apartments. There are no general established rules for this. And passport offices are trying to do this ahead of time, otherwise they have to face the main problem of resettled houses – a sharp increase in divorces and the number of registered relatives. Note that representatives of the city authorities have learned quite effectively to prove that the divorce is fictitious, and the registration of a relative took place after the registration in the house was “closed”.
This is due to the fact that there is such a subtlety in the Moscow housing legislation: tenants of five-story buildings can register to improve their living conditions if there is less than 10 square meters for each registered tenant. m of living space. For communal apartments the figure is 15 sq. m. It should be noted that this category of tenants during the resettlement receives new apartments out of turn. It is also important that citizens living in one apartment, united by signs of kinship or properties, but having their own sources of income, a separate budget and conducting a separate economy, if they have their will, are recognized as different families. And accordingly, they are subject to separate registration as those in need of improvement in housing conditions. That is, if parents and their adult child and their family live in the same apartment, they can independently apply for improving their living conditions. In addition, it is forbidden to lodge in one room adult citizens of different sex without their written consent (if they are not spouses). The area allocated for one person, according to the law of the city of Moscow, is 18 sq. m. How does it work in reality? Take, for example, the average family (husband, wife and their adult son) living in a five-story building in a one-room apartment. Such a family should be given a two-room apartment. Let’s complicate the situation. The son got married and registered his wife with him. He and his parents applied separately to improve their living conditions. In this case, they can count on two apartments. If you also prescribe a grandmother who urgently needed care, then you can get three. There is probably no need to complicate further, the logic is already clear.
As is clear from the example repeatedly cited by the head of the Moscow construction complex Vladimir Resin, once representatives of the department of municipal housing dealing with the resettlement of houses to be demolished had to face the following option: 14 tenants were registered in a one-room apartment. Moreover, all were registered on a completely legal basis. From which the conclusion follows: there is no limit to human cunning, who benefits from any state freebie. And conclusion number two: even in a stable market, when prices do not rise, but for a number of categories of housing they even decrease, specialists who are familiar with the intricacies of legislation and have carefully studied the problem always have the opportunity to make good money. That’s why they are specialists.