Overview of the Moscow real estate market in February 2011

Recommendation points

• In the secondary housing market, the situation remains quite stable
• The market for new buildings noticeably revived in February
• What will happen next

The past February added a lot of intrigue to a rather complicated situation in the domestic real estate market. On the one hand, there are circumstances in which the cost of housing should go up, and quite rapidly. The crisis is already receding.

Mikhail Brovkin. Kotelnicheskaya embankment. 2005

Mortgage lending began to revive, which is becoming more and more affordable. One cannot but take into account the rise in oil prices, prices for black gold hit records in February. All this against the background of low rates of new housing construction in the capital, it would seem, should have pushed apartment prices up. But in spite of everything, the price per square meter is in no hurry to grow.

In the secondary housing market, the situation remains quite stable

According to the analytical center “Indicators of the real estate market”, in February 2011 the index of housing prices in the capital increased by almost 1% from $ 4530 to $ 4573 per square meter, that is, the growth is minimal and is at the inflation level. This, in turn, may also be due to the decline in the dollar exchange rate in February. As for the ruble prices for apartments in Moscow, they remain in place. So in February, the average price per square meter in Moscow in ruble terms was about 135 thousand rubles per square meter.

Economy-class housing is in greatest demand in Moscow.

If we consider the price change by type of housing, then the situation is not uniform. The largest price increase is observed in low-cost segments: panel houses (+ 1.3%), including old housing stock, 1-room (+ 1.2%) and 2-room (+ 1.1%) apartments. In expensive modern monolithic-brick houses, there is even a decrease in prices (-0.9%), there is almost no increase in the segment of multi-room apartments (+0.2). Consequently, as in January, economy-class housing is in the greatest demand in Moscow. Inexpensive apartments are being washed out of the market and the growth rate of prices for apartments in the lower price category is increasing.

The cost of apartments in the districts of the capital in February is characterized by similar dynamics – the biggest plus was noted in inexpensive residential areas: Yuzhnoye Medvedkovo, Severnoye Medvedkovo, Perovo, Babushkinskaya, Shchukino, Tushinskaya, Zhulebino, Metrogorodok, Pokrovskoye-Streshnevo, Bogorodskoye, etc. The increase in prices in these areas averaged 1.8% to 2.2%. At the same time, in many expensive districts of the center of Moscow, prices in February turned out to be even in the red, for example: Marxist, Pushkinskaya, Tverskaya, Kurskaya, Chekhovskaya, Aleksandrovsky Garden, Mayakovskaya, Frunzenskaya, Lenin Library, Sportivnaya, Smolenskaya, Khamovniki, Taganskaya, Chkalovskaya, Arbatskaya , Borovitskaya (from -1% to -0.4%).

If we consider the dynamics of apartment prices in February 2011 by districts of Moscow: Central District unchanged, Western District – in a slight minus (-0.2%). The cheapest districts are in the greatest plus: all districts outside the Moscow Ring Road (+ 1.9%), as well as the Eastern District (+ 1.0%) and the North-Eastern District (+ 1.4%).

The market for new buildings noticeably revived in February

After a slight decrease in activity on the capital’s market of new buildings noted in January, February, as it was actually predicted, was marked by a noticeable activation of both developers and potential buyers. According to analysts of the Azbuka Zhilya company, in February 2011, the potential demand for new buildings, which was determined by the number of requests from potential buyers, both in Moscow and in the Moscow region, increased by 10-15% compared to January.

Yuri Pimenov. The wedding is on tomorrow’s street. 1962

According to researchers, this fact is also due to the fact that at the end of January, a significant part of the clients who turned to them simply did not have time to make a decision to buy a home, and postponed the transaction to February. As a result, the number of apartments purchased in new buildings more than doubled in February relative to January.

In addition, in February, some developers brought their new properties to the market. As a result, the number of new residential buildings under construction in the open sale in Moscow increased by 1.8%, and almost reached 370 units, the number of apartments offered on the market compared with January, in turn, increased by 3.4%.

According to Artyom Rzhavsky, head of the consulting and analytics department of the Azbuka Zhilya agency, developers in the Moscow region have begun to promote new projects even more actively. At the same time, the demand for the existing proposed objects here significantly exceeds the metropolitan indicators. Thus, according to the company, in February 2011 on the market of new buildings in the Moscow region, both the number of proposed properties (approximately 700) and the number of apartments for sale increased by 2.3% compared to the previous month..

It is also worth noting that in February in Moscow, sales in several luxury residential complexes were resumed. This led to the fact that the average price per sq. m in new buildings in the capital increased by 2.5% compared to January: taking into account housing of higher price categories, the price was at around 211 thousand rubles.

According to many experts, there is no direct relationship between the dynamics of oil prices and real estate prices..

No similar trends were observed in the Moscow region. In the Moscow region, the most demanded housing is still economy class apartments. Some of the standing facilities have moved to a higher stage of readiness. At the same time, several new projects entered the market, which compensated for the pace of price dynamics.

At the end of February 2011, the average price per sq. m in new buildings in the Moscow region amounted to 63.1 thousand rubles. Consequently, the price remained at the January level.

Why house prices are not skyrocketing in the wake of rising oil prices and a noticeable recovery in the financial sector?

First, the market does not immediately react to these factors, there is a time lag. If by the end of February oil rose in price to record levels ($ 120 per barrel of Brent), then this will affect the real estate market only after a few months. But even here it is not so simple. As you know, oil began to rise in price at the end of last summer, when by the end of 2010 it rose from $ 70 per barrel to $ 95, that is, the growth was already 35%. At the same time, there were no significant price jumps on the real estate market both in autumn and in winter..

According to many experts, there is no direct relationship between the dynamics of oil prices and real estate prices. Undoubtedly, they are interconnected within the general macroeconomics. However, this relationship is non-linear and not so simple that it would be possible to derive any exact pattern of the influence of the price of black gold on real estate in Russia. If we analyze the general situation, in recent years, real estate and oil more often showed not the opposite dynamics, but repeated each other.

As for the current deficit of new buildings in the capital, the picture is not unambiguous here either. Indeed, the volume of commissioning of new housing in Moscow over the past few years has significantly decreased from 4.8 sq. m. in 2007 to 1.8 million square meters. m in 2010. However, it should be noted that out of 4.5 – 4.8 million sq. M., Which were built before the crisis, only about 1.5 million sq. M. Were released for free sale on the market. The remaining 70 – 80% were for social housing, built at the expense of budgetary funds. Consequently, the volume of supply of new housing on the market remained at about the same level as before the crisis.

What do we have as a result? It would seem that there are many reasons for the rise in prices, but upon closer examination, their objective impact on the Russian real estate market is very controversial..

What will happen next

From all of the above, we can conclude that in the coming months, there is no reason to expect a sharp jump in prices per square meter in Moscow, and indeed throughout Russia. It is quite possible that the current growth rates of average price indicators of about 1-2% per month will be observed. Note that a change in the exchange rate will make its own adjustments to the price level. If the dollar continues to weaken, then with an increase in ruble housing prices in the capital by 1%, the rise in prices in dollar terms may be – 2-3%, or even more.

In the second half of 2011, according to some experts, one can expect a more intensive rise in prices, which will mainly fall on economy-class housing. First, it may be related to the elections, because this is the behavior of prices that was observed during the elections in 2004 and 2008. Secondly, the impact on the domestic real estate market of global inflation, which is gaining momentum due to the unjustified printing of unsupported money, is quite possible. In such conditions, real estate can begin to win back it at a faster pace. In this case, the dynamics of ruble prices will reflect the situation more objectively, in the dollar price.

In general, sharp jumps in real estate prices in the capital throughout the year should not be expected.