According to the countryside market overview, prepared by Blackwood, the majority of new projects, which entered the countryside residential real estate market of Moscow Region in 2010, are located along the Novorizhskoe highway (24% of the total supply volume).

 The structure of new settlements, which entered the market during the 1st half of 2010, by directions and distance from MKAD, %

Source: Blackwood data

In autumn 2008, when developers first said that they planned to put their projects on hold, buyers had all reasons to worry that the house in which they bought their apartment would ever be finished. The elite segment was no exception. The share of deals made in the primary market fell dramatically.

However, the segment of elite new buildings wasn’t harmed from the construction point of view as many properties delivered during the peak period of the financial crisis were under active construction and today they’re either completed or close to completion. Take a look at the following examples: Tverskoy RC by Capital Group Company, Italian Quarter complex of elite mansions, a joint project by Insigma Company and Guta Development, Granatny 6 RC by KFS Group and Inteco, Four Suns RC by Legion Development Group of Companies.

On the whole, all major developers successfully navigated through the crisis events by reaching agreements with banks to restructure their current credits and acquiring new loans. The right pricing policy and active construction helped the developers attract buyers during the crisis.

However, despite the developers’ reputation and high construction paces, the buyers stayed on guard against the uncompleted buildings.

Starting from 2010, the buyers kept coming back into the primary market, which has become one of the principal trends of the elite property market. The sales statistics of Blackwood Company show that the number of deals in the primary market is ever-growing: in Q1 2010 the share of the transactions in the primary market amounted to 35% in the overall number of sale transactions but this share amounted to as much as 50% in April-May 2010. Last year, this share didn’t exceed 10%. 

Among the complexes enjoying the highest popularity are: Italian Quarter, Garden Quarters, Four Suns and City of Capitals.

According to the Consulting and Research Department of Blackwood Company, the price of 1 sq. m. in new elite residential buildings amounted to $17,400 in May 2010. The average price level dropped 3,6% due to the dollar rate fluctuations.still, the average prices fixed in rubles experienced some small growth, first of all, due to changes in the supply pattern. Developers didn’t raise prices in the new elite buildings last month. The average price in the secondary elite market reached $22,900 per sq. m. in May 2010.

            Dynamics of average price of 1 sq. m. of elite residential space in Moscow

Source: Blackwood information

In May 2010, the supply volume in the elite primary market amounted to 167,3 thous. sq. m. of residential space in 31 residential complexes. The supply volume decreased by 9% as sales in several elite complexes were temporarily stopped.

As far as demand is concerned, the number of incoming requests to Blackwood declined versus previous spring months since the vacation season is approaching and the market traditionally sees a drop in buyer activity. However, the number of signed deals in April-May exceeds the results of Q1 2010 by 22%. The number of transactions in the primary market is growing: if in Q1 2010 the share of the transactions in the primary market amounted to 35% in the overall number of transactions carried out by Blackwood Company, this share amounted to as much as 50% in April-May 2010, which shows that buyers’ trust is increasing.

             Demand dynamics* in the residential market, % to the basic period

*- incoming requests to Blackwood, January - 100%

Source: incoming requests to Blackwood

Starting from the second half of 2009, the average prices in the elite primary market started growing. By the end of Q1 2009, the average price in the elite primary market rose 7,7% versus the minimum reached in August 2009. However, this growth was accounted for by the fact that the apartments with the highest liquidity were sold out.

 As expected, in spring several developers raised prices directly in price lists seeing buoyancy in the market. Thus, the prices of some apartments in Ostozhenka Park Palace RC recently approved by the State Commission were raised 5-20%. In April 2010, the prices were increased in Italian Quarter RC highly popular amongst buyers (the average price rose 10%).  Besides, the prices were readjusted in Trilogiya RC (the average price rose 10%) and in the complex located at 20 B. Ovchinnikovsky Lane approved by the State Commission (the average price increase amounts to 14%). Apart from these complexes, the prices were raised in Garden Quarters RC (the average price increase reaches approx 13%) which obtained approval of the state expertise. Currently, it’s planned to pass from preliminary booking to official sales. 

The prices in such complexes as Aquamarine RC, the RC at 16/23/15 Eropkinsky Lane, Imperial House RC, the House in Pokrovsky Boulevard, etc. remained unchanged.  

Considering the price readjustment, the average price in the primary elite buildings rose almost 3% in April 2010 reaching $18,050 per sq. m., equal to the growth rates of the whole first quarter 2010.

All in all, the expected trend of price growth in the elite market, first of all, in complexes close to completion and with good sale dynamics will continue to develop in the short term. This is the last chance for the buyers who wish to purchase upscale real estate at distressed prices and they may miss out unless they hurry up. It’s highly possible that the prices in the best in class properties and in those close to completion will reach the pre-crisis level by the end of the year as available apartments are purchased up and become a “scarcity”.

As of April 2010, the growth in the elite primary market amounted to 2,8% and in the elite secondary market – to 0,6%. In April 2010, the price of 1 sq. m. amounted to $18,050 per sq. m. in the primary residential market and $22,860 in the secondary market, the Consulting and Research Department of Blackwood Company says.

After the market bottomed out, the average price growth reached 11% in the primary residential market and 3% in the secondary market. Even though the prices maintain stable growth, they are still below the pre-crisis level, by 12% in the primary market and by 7% in the secondary market.

             Dynamics of average price of 1 sq. m. of elite residential space in Moscow

Source: Blackwood information

In April 2010, 184,6 thous. sq. m. of residential space in 36 residential complexes were available in the elite primary market. Most new elite buildings are located in Khamovniki (Ostozhenka and Prechistenka Streets), Presnensky and Arbat sub-districts.

The overall share of the elite supply in the primary resideetial market of Moscow amounts to approx 15%.

              Supply pattern in the elite primary market of Moscow, sq. m.

Source: Blackwood information

The buyer activity was high. The most sough-after apartments were those measuring 100-150 sq. m. priced at $1-2 million.  

             Demand pattern in terms of budget, % of the total number of requests in April 2010.

Source: Blackwood information

Source: Blackwood information

The prices in the elite primary market reached their peak by September 2008. Due to the negative impact of the financial crisis, they dropped 19% over 11 months. However, the market showed the first signs of recovery in autumn 2009. As of Q1 2010, the average price in the elite primary residential market amounted to $17,550 per sq. m. Some stabilization took place in the market, demand began to escalate, and the prices showed a slight monthly growth. If in late 2009 the prices grew as the cheapest apartments were sold out, today the prices are raised directly in price lists. Still, the average prices are still below their pre-crisis level.

 As the distribution of apartments by the average price shows, over 65% of apartments in primary residential buildings were offered for $15,000 per sq. m. in March 2010, while their share didn’t exceed 35% in late 2008.

   Graph. Comparative dynamics of distribution of elite primary apartments by average price per 1 sq. m

Source: Blackwood information

The most expensive apartments in

Moscow , March 2010

Name	Address	Sub-  district	Area, sq. m.	Price, $	Price,   $ per sq. m.
Ostozhenka 11	Ostozhenka 11/17-12/13	Khamovniki (Ostozhenka)	826,2	28 917 000	35 000
Smolensky	1st Smolensky Lane 19	Khamovniki	715,0	26 787 115	37 464
	Granatny Lane 6	Presnensky	507,7	21 600 097	42 545

Source: Blackwood information

Today we can say that the market is recovering, and the elite segment is no exception: new supply is growing, developers announce new projects, the average prices stabilize, the prices rise in some residential complexes, buyers are showing more activity, etc.

You can find out more about the latest trends in the elite primary market of Moscow in our new Research called The Analysis of Trends in the Elite Primary Market of Moscow, Q1 2010 which includes information about construction dynamics, volume and structure indexes of supply, new supply and projects in the pipeline, price and demand dynamics, buyer’s portrait and his requirements to elite primary buildings, market trends and perspectives. 

The Research also contains full information about the elite buildings of  Moscow and various graphic materials: maps, graphs, spreadsheets and analytical comments on all the data.

Исследование ориентировано как на профессиональных участников рынка (девелоперов, аналитиков, риэлторов, консультантов), так и на потенциальных покупателей элитной жилой недвижимости, желающих получить наиболее полную картину рынка элитного жилья. Также оно будет интересно компаниям, для которых девелоперские проекты в элитном сегменте являются новым перспективным направлением деятельности.

The number of signed transactions confirms that the demand in the elite real estate market is actively growing. The number of transactions made in Q1 2010 was 60% more than in the corresponding period of 2009, Blackwood’s experts say.

All these transactions are made mainly in the secondary market. In our sales statistics, the share of primary market transactions rose to 35% in Q1 2010 while last year, it was only 10%.

Properties close to completion are in the highest demand. Still, seeing that relatively cheap and affordable apartments in residential complexes close to completion are quickly sold out, buyers begin to consider complexes at earlier construction stages but with apartments at lower prices. However, the crucial factor in this case is their construction dynamics.

We should say that the primary segment shows signs of recovery. The activity of developers intensifies as the financial circumstances of construction companies stabilized and the credit situation in general improved (more possibilities to obtain construction loans, interest rate decrease).

Currently most developers reassess their assets and reconsider project concepts considering the new market reality as well as select priority construction areas. The projects which were put on hold are coming back into the market. Thus, sales commenced in the Italian Quarter Residential Complex in late 2009. The construction of the Afanasievsky Residential Complex resumed in Q1 2010.

Land plots without labor contracts became “the product” of 2009: the share of projects offering this kind of land amounted to 78% of the overall amount of supply in 2009.

However, mass delivery of the projects offering land plots without labor contracts may have a few negative consequences: the growing share of low-quality supply, numerous uncompleted construction projects and chaotic residential development in Moscow Region. Still, we should also underline the positive impact of this trend as it helped developers cover their incurred losses, pay off credits or generate profit in times of the economic crisis. Besides, active implementation of such projects by many developers gave an impetus to the active growth of the economy segment of the countryside residential market which had experienced a sharp lack of supply prior to the crisis. Besides, the land plots without labor contracts were offered in numerous up-scale settlements which let this market segment avoid total stagnation.

 Still, the countryside market of Moscow Region is coping with the negative impact of the crisis and it is far from saturation. Therefore, we expect the number of projects offering the land plots without labor contracts to grow throughout 2010. Yet, today we see the first positive signs in the countryside market. Selling the land plots without labor contracts is likely to become the tool which will move the market onto a whole new level. After the market is saturated with affordable products, demand will shift and quality projects will see higher demand. Successful and timely sales of such plots today allow developers to focus on more sophisticated projects and offer buyers land plots with labor contracts and completed houses.

We believe that the economy class segment will continue to grow the fastest as it is the least saturated but potential buyers will also want to see projects with better quality. They will inevitably return to the high-budget segment in the mid-term perspective.

As a result, the developers that first started selling the land plots without labor contracts will find themselves in the most advantageous position in the growing market.   

The high level of security in elite houses depends upon many factors, one of them is a fenced territory which can only be accessed by the residents. Should there be any office or other premises in the first floors of the building, the access is provided from the street so that strangers don’t cross the territory of the house.

In terms of access security, the interior territories of the elite buildings offered fro sale in the market meet all the requirements. However, sometimes it may become difficult to provide recreation in the interior yards of many modern elite buildings. Considering the high density of residential development, a fenced yard under security surveillance in the city center becomes a luxury rather than a norm. Sometimes these yards occupy a very small territory which can only be used by the residents.

We should say that buyers have high requirements to the organization of interior space of residential complexes.

When asked about land improvement, the buyers say that the territory should be fenced and landscaped, provided with a playground and a special recreation zone. Besides, it’s important that the territory and the facades of the buildings should be provided with a lighting system.

Graph. Buyers’ preferences regarding territory beautification, % of the overall number of respondents[1]

Source: Blackwood information

Currently, primary apartments in 35 elite complexes are available. Only 40% of them can boast their own adjacent territory, the others comprise small interior yards cannot fully satisfy potential buyers’ requirements. In terms of the interior territory, the following complexes enjoy the most advantageous position:

1. The Garden Quarters RC;

Initially, it was assumed that each yard in this complex will have its own alleys, boulevards, pedestrian roads with landscape design. The architects believe that such yards will help create the favorable ecological situation in the urban neighborhood.

2. The Four Suns RC;

Landscaped territory under security surveillance is 2,5 ha.

3. The Afanasievsky RC;

It’s planned to set up a playground and promenade area.

[1] According to the survey conducted by Blackwood among buyers of elite properties in 2009.

In early 2010, demand in the elite residential market continued to rise under the seasonality factors and overall market renovation. Thus, the number of incoming requests for purchase of residential space in Blackwood doubled in Q1 2010 versus the corresponding period in 2009.

Dynamics demand* in the up-scale residential market, %