2011 country real estate market · q4 2007 q4 2008 q4 2009 q4 2010 q4 2011 cottage on zhdanovskoe...

2011 COUNTRY REAL ESTATE MARKET Saint Petersburg

EXECUTIVE SUMMARY• In2011mostdevelopersfocusedonsellinglandplotsincottagesettlements.Thetotalmarket

stockofcottagesettlementsconstructedbydevelopers,especiallyinthepremiumsegment,remainednearlyunchanged.Thesalesofsomenewprojectsoriginallyscheduledtostartin2011wereputoffto2012.

• Latein2011,asubstantialincreasewasseenindemandforcountrysidepropertiesintheupperpricesegment,whichresultedinajumpinthesalesnumberofsuchproperties.Nevertheless,annualsalesinthesegmentmorethanhalvedascomparedto2010.

• Thepriceindexdidnotshowanyapparenttrendsduringtheyear,howeverthereweresomeoccasionalslightdropsoftheindexresultingfromdiscountsandspecialoffersonsomeprojects.Ingeneral,bytheendof2011,averageaskingpricesgrewby11%ascomparedtoQ42010.

OVERVIEW

Knight Frank

2011COUNTRY REAL ESTATE MARKET Saint Petersburg

2

In2011,thesuburbanrealestateprimeresidentialmarketdevelopedmoderately.Mostdeveloperswaiteduntilsupplyofvacantpropertiesdecreasesfurtherandtheremainingpropertiesaresold,beforelaunchingnewsalescampaigns.SeverallandmarkprojectsareexpectedtoenterthemarketinH12012:thosewillbealmostcommissionedcottagesettlementsinpopularlocations.Besides,commissioningandtake-upamountsin2011werebelowthosereportedin2010.Thecountryhousepropertypurchaserprofileisgraduallychanging:averagecustomerbecomesyounger,showsincreasingtechnicalcompetenceandmakeshighdemandsofquality.

Key events

• Thekeyeventof2011thathadaneffectontheentireout-of-timeprimeresidential

marketwasthecompletionofseverallarge-scaletransportinfrastructureprojects.ThoseincludedthecommissioningofthetunnelundertheGulfofFinlandwhichhelpedtoachievethefullcompletionoftheRingroad;renovationofPriozerskoyeHighway,includingtheSkotnoye-Agalatovojunction,andcompletionofthe1stphaseoftheKievskoyeHighwayrenovationprojectwithjunctionsbuiltatmajorintersections.Theimprovedtransportconnectionsandaccessibilityofsomeareasledtohighdemandforpermanentcountryhousesandgeneralpopularityofcountrylifestyle.

• Inmanyprimecottagesettlementssaleswerestoppedonthefinalstageaftertheprojecthadbeencommissionedandownershadmovedin,andonly2-3housesremainedunsold–mostsuchdevelopmentsreportednosalesatallin2011.Atthesametime,thereissustainedinterestfrombuyersinseveralcottagesettlementsoftheupperpricesegment.Duringtheyear,thetotalmarketstockdroppeddownto97housesavailableforsaleontheopenmarket.

• In2011,twomorenewprojectsenteredthemarket;thesearelocatedintheprestigiousareawithinthe«GoldenTriangle»ofKurortnydistrict:VillaPremiumandGrandVill.Inaddition,fullyfurnishedhouseswereofferedforsalelocatedinTerijokiyachtclub,amodernpropertylocatedinZelenogorsk.

Supply

In2011,thelargestshareofout-of-townprimeresidentialmarketsupplywasconcentratedinKurortnydistrict,wheresixnewcottagesettlementswerebuilt.AsignificantshareofsupplyistraditionallyconcentratedinVsevolozhskydistrict.Vyborgskydistrictrepresentstheleastshare:theyareprimarilyconcentratednearLeninskoyeandRoschinovillages.

Ontheotherhand,suburbanresidentialdevelopmentsinKurortnydistrictareusuallymarketedasclub-likepropertiesandeachcomprisesnomorethan20countryhouseproperties,therefore,despitethenewsupplyofcottagesettlements,Kurortnydistrict

COUNTRY REAL ESTATE MARKET

Elizaveta Conway

HeadofResidential,

KnightFrankSt.Petersburg

«Both year-end market performance

indicators and expert opinions show that

the amount of quality supply has dropped

to a minimum. Last year there were many

examples of buyers facing a limited choice:

shopping for a suitable property often took

as long as several months. Buyers have

become more particular about their choice

of house: before buying a country house

property they consult technical experts,

designers and lawyers for a comprehensive

assessment of the property; at the same

time, customers pay attention to factors

such as convenience of transport access,

location image, social infrastructure.»

Main indicators Change*

Numberofprimecottagesettlements 14

Totalnumberofhousesinprimecottagesettlementswithsalesinprogress

369

Numberofcountryrealestatepropertiesavailableforpurchase

97

Numberofhousessold 19

Numberofprimecountryhousesettlementsscheduledtoenterthemarket

4

*Changeascomparedto2010

Source:KnightFrankResearch,2012

www.knightfrank.ru

3

COUNTRY REAL ESTATE MARKET

stillfacesthelackofout-of-townhousing,soin2011Vsevolozhskydistrictwasthenumberoneintermsofthenumberofcountryhouseproperties(53%).

Thetrendofmarketentriesperformedbyprojectsatthefinalconstructionstagecontinuedthroughouttheyear.However,someoftheseprojectshavenotbeenofferedforsaleontheopenmarket,asownersarewaitingforthemarkettogrow.

Atthesametime,suspendeddevelopmentprojectsstillremaininsomelocations,largelyasaconsequenceofahighconcentrationofprojectsunderconstructionorinprojectingthatappearedoverthelastseveralyears.

Nochangeswereseeninthesocialinfrastructureofsuburbanproperties:mostdevelopersdonotprovidesocialamenitieswithinthedevelopmentstheybuild,insteadofrelyingontheexternalinfrastructurewhichisnotalwaysconvenientlylocated.ThissegmentislargelyunderdevelopedintheLeningradregion,andisgraduallyemerginginlarge-scalehousingprojectsinalowerpricerange.

Demand

DespitethehighlevelsreportedinQ42011,thedeclineindemandobservedinthefirstthreequartershadanegativeeffectontheannualresult.Newcountryhousedevelopmentssold19houses,whichis50%

lessascomparedto2010.Thedeclineinnumberofofferedforsalehousestookplacemainlyduetogradualtake-upinseveralcottagesettlements.Newdevelopmentsmadenosignificantcontributiontotheoverallsupplyofhousingduetotheirsmallscale.

Qualitativechangesofthepurchaser ’sprofilewereregisteredinthecountryrealestatemarket,includingtheupper-pricesegment.Expertsagreethataveragebuyerhasbecomeyounger.Ontheotherhand,mostlyduetotheinvolvementofvarioustechnicalspecialists,propertyselectionprocesshasbecomeverymeticulous,resultinginincreasedsearchinganddecision-makingperiod.

Prime country house settlements, sales of which started in 2011

Project Address Numberofhouses Price,$mln

VillaPremium Kurortnydistrict,Solnechnoye 9 2.6–3.6

GrandVill Kurortnydistrict,Komarovo 11 0.9–1.2

Terijoki Kurortnydistrict,Zelenogorsk 9 1.8–2.3

Source:KnightFrankResearch,2012

Vyborgsky district

Kurortny district

Vsevolozhsky district

Source: Knight Frank Research, 2012

Distribution of supply by districts, 2011 %

21%

36%

43%

2011COUNTRY REAL ESTATE MARKET Saint Petersburg

4

Commercial Terms

Duringtheyear,countryrealestatedevelopersofferedarangeofdiscountsandspecialofferstoencouragepotentialpurchasers,howeverasoftheyear-endaveragepriceintheUSdollartermsroseby11%ascomparedto2010.Pricegrowthwasmainlyseenfortheprojectsthatwereactivelymarketedduringtheyear.

Forecast

Initially,mostdeveloperswereskepticalabouttheprospectsforcountryprimeresidentialmarketin2011;asaresult,fewprojectsenteredthemarketduringthereportingperiod:manydevelopershadawait-and-seeattitudetowardsstartingnewdevelopmentprojects.

Theshiftindemandtowardscheaperhousingseensince2008year-endmademanydeveloperswithexperienceinprimeresidentialprojectsconsiderdiversifyingtheirportfoliosandincludemoreaffordableresidentialprojects.However,in2012developmentactivityintheprimesectorwillcontinue:newcountryresidentialprojectsareexpectedtobeannouncedtothemarket,andnewcountryrealestatepropertytypeswillbepresentedtothemarket.

Pricesareexpectedtorisemoderately,anddeveloperswillusemarketingtoolsmoreintensivelytopromotetheirprojects.

Source: Knight Frank Research, 2012

Distribution of sold properties in new cottage settlements by districts, 2011 %

60

50

40

30

20

10

0

Vyborgsky district

Vsevolozhsky district

Kurortny district

Source: Knight Frank Research, 2012

Average price of elite cottage has a positive trendthds. $

2,000

1,900

1,800

1,700

1,600

1,500

1,400

1,300

1,200

1,000

Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011

CottageonZhdanovskoelake,Vsevolozhskydistrict

OVERVIEW

Europe

Austria

Belgium

CrechRepublic

France

Germany

Ireland

Italy

Monaco

Poland

Portugal

Romania

Russia

Spain

Switzerland

TheNetherlands

UK

Ukraine

Africa

Botswana

Kenya

Malawi

Nigeria

Tanzania

Uganda

Zimbabwe

Zambia

SouthAfrica

Middle East

Bahrain

UAE

Asia Pacific

Australia

Cambodia

China

India

Indonesia

Malaysia

NewZealand

Singapore

SouthKorea

Thailand

Vietnam

Americas & Canada

Bermuda

Caribbean

Canada

USA

EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestate

market.TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses244officesin

43countriesacrosssixcontinents.

KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor116years.

After16years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidential

realestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesin

Russiahavealreadymadeuseofthecompany’sservices.

ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru

© Knight Frank 2012

Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,

viewandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossor

damageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankin

relationtoparticularpropertiesorprojects.

ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.

MOSCOW

Russia,119021,11TimuraFrunzeStr.Phone:+7(495)9810000Fax:+7(495)9810011

ST.PETERSBURG

Russia,191025,3BMayakovskogoStr.Phone:+7(812)3632222Fax:+7(812)3632223

KYIV

Ukraine,04071,39-41HoryvaStr.Phone:+380(44)5456122Fax:+380(44)5456122

Office Real EstateStanislavTikhonovPartnerstas.tikhonov@ru.knightfrank.com

Warehouse Real Estate, landViacheslavKholopovDirectorviacheslav.kholopov@ru.knightfrank.com

Retail Real EstateSergeyGipshRegionalRetailDirector,Partnersergey.gipsh@ru.knightfrank.com

Residential Real EstateElenaYurgenevaDirectorelena.yurgeneva@ru.knightfrank.com

International Investments HeikoDavidsPartnerheiko.davids@ru.knightfrank.com

Professional Consulting ServicesKonstantinRomanovPartner,Directorkonstantin.romanov@ru.knightfrank.com

Financial Markets and InvestingEvgeniySemyonovPartner,Directorevgeniy.semyonov@ru.knightfrank.com

Valuation ServicesOlgaKochetovaDirectorolga.kochetova@ru.knightfrank.com

Marketing, PR, Market Research, HRMariaKotovaPartner,ExecutiveDirectormaria.kotova@ru.knightfrank.com

Business DevelopmentAndreyPetrovPartnerandrey.petrov@ru.knightfrank.com

Saint PetersburgNikolaiPashkovGeneralDirectornikolai.pashkov@ru.knightfrank.com

KyivYaroslavaChapkoBusinessDevelopmentDirectoryaroslava.chapko@ua.knightfrank.com