New premium property market. Moscow. January 2014

In January 2014, a new offer was launched in the newly built premium property market: apartment sales were started in the third block of Sadoviy kvartaly. The property is a prime neighborhood in the district of Khamovniki comprising residential buildings, schools, a business center and other infrastructure facilities. The construction of the third block for 315 apartments measuring 41.5 thousand square meters overall is planned to be completed in 2017.

By late January 2014, the capacity of the newly built premium property market was around 212 thousand square meters of apartments (or 1,500 apartments) and 94.6 thousand square meters of suites (or 640 suites). Considering the new capacity put on the market, the offer grew 14.5% in the premium apartment segment, and declined 2.1% month-on-month in the suite segment due to the current sales.

The share of suites in the newly built premium property market was down month-on-month to 31% of the total offer in the market.

Premium residential developments are located not only in Moscow’s central districts, but also outside the center, in such comfortable districts as, for example, Donskoy (Southern Administrative District), Ramenki (Western Administrative District) and Shchukino (Northwestern Administrative District). Districts outside the Central Administrative District account for a half of the offer in the newly built premium property market.

In the Central Administrative District, the Khamovniki District where large residential developments are put on the market leads the market in terms of offer. Khamovniki accounts for 80% of the total offer in the Central Administrative District.
So far, premium suites are only offered in the Central Administrative District. The Presnensky District is leading the market in terms of offer (towers of Moscow International Business Center “Moscow-City”): 78% of the total offer in the premium suite market.

In January 2014, the price performance was mainly affected by the rising USD / RUB exchange rate. New ruble-denominated apartment / suite developments account for 60% of sales in the premium segment. The ruble’s depreciation pushed down the prices for apartments / suites in these developments. No pricelist changes were, however, recorded in the USD-denominated segment. The ruble rate “freezing” was a logical step for a number of projects. In particular, Barkli Corporation fixed its exchange rate at 34 rubles.

In January 2014, the average offer price in the new premium segment was $14,300 per square meter for residential developments of the Central Administrative District (-13.3% month-on-month), and $13,570 per square meter for suites in the Central Administrative District (-6.4% month-on-month). The average offer price for new premium apartments outside the Central Administrative District was $12,150 per square meter (-5.1% month-on-month).

The biggest decline (-13.3% in USD and 7% in RUB) was posted by new residential property in the Central Administrative District as new offers entered the market at starting prices.

January 2014 recorded a drop in the market activity on the buyer side. This is due to the seasonal factor (the typical January slack after the New Year holidays) and a highly volatile exchange rate. Currency fluctuations affect the property market’s development in two opposite ways. On the one hand, homes grow more attractive as the only investment option on the back of upheavals in the foreign exchange and financial markets.

On the other side, when exchange rates get highly volatile, demand is “put on hold”: buyers take on a waiting stance due to the uncertainty as to how the economic situation will develop further, while prices for USD-denominated property are growing.

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