OVERVIEW
Q1 2011ELITE RESIDENTIAL REAL ESTATE MARKET Moscow
Knight Frank
EXECUTIVE SUMMARY• HighactivitywasobservedonMoscow’seliteresidentialrealestatemarketinQ12011.Averagepricesontheprimary
marketgrew10.7%,surpassing«pre-crisis»indicators.InMarch2011arecordnumberofdealswasrecordedfor2010-2011.
• Forthefirsttime,theaveragepriceofsupplyontheprimarymarketsurpassedtheaveragepricepersquaremeteronthesecondarymarket.Suchagrowthinpriceswasfacilitatedbyincreasedattentionfrombuyerstothemarketforelitenewbuilds:ThequantityofdealswithnewbuildsinQ12011surpassedthequantityofdealsonthesecondarymarkettwofold.
• Apricecorrectioncontinuesonthesecondarymarket.Asignificantincreaseinthevolumeofsupplywasobserved.Thesecondarymarketpracticallystoppedbeingfilledbyapartmentslessthan$2mln:InQ12011theshareofsuchapartmentsinnewsupplyequalledonly6%,andthisconsideringashareintotalsupplyof11%.Basicsupplyonthesecondarymarketnowstartsat$2mlnandhigher.
• AsmallgrowthwasobservedinherentalmarketduringMarch,afterafallthathasbeencontinuingsinceOctober2010.
Q1 2011 ELITE RESIDENTIAL REAL ESTATE MARKET Moscow
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OneofthemaineventsofQ1ontheeliteresidentialrealestatemarketwasanannouncementfrоmS.Sobyanin,Moscow’smayor,aboutabanonconstructionofresidencesinsidetheThirdTransportRing.Thisbandoesnotrefertoprojectsthathavealreadybegunconstruction,aswellasprojectswithprepareddocumentation.Thisbanhasalreadybeenreflectedontheelite
apartmentmarket:Bytheendofthequarter,buyeractivitygrewtorecordindicatorsfor2010and2011andinMarch68dealsinelitenewbuildswereclosed.Manydevelopersarehaveoperationallyreactedtotheincreaseindemand,havingincreasedpricesalreadybytheendofthemonth.ThatinAprilafurtherincreaseinpricesfromtheremainingdevelopersawaitsusisnotexcluded.
MOSCOW. ELITE RESIDENTIAL REAL ESTATE MARKET
Key indicators. Urban real estate
Market segment
Average prices, $/sq m; rental rates, $/month
Change in average prices / rental rates, %
March 2011 Q1 2011 For March 2011 For Q1 2011 For 12 months
Primarymarket
23,084 22,403 2.5 10,7 18,9
Secondarymarket
22,225 22,248 0.2 -2,61 -9,7
Rental* 6,439 6,400 0.9 -5,7 -2,5
*Ratespresentedforapartmentswithatotalareaof80-150sqmwithhigh-qualityfurnishingsSource:KnightFrankResearch,2011
Almost 80% of deals in Q1 on the primary market were closed with budgets up to $5 mln, with the most popular apartments remaining those with prices from $1 to 3 mln, as usual.
Distribution of deals on the primary market based on budget limitations
less than $1 mln
from $1 to 3 mln
from $3 to 5 mln
Source: Knight Frank Research, 2011
4% 11%
58%
19%
4%4%
from $5 to 7 mln
from $7 to 9 mln
more than $9 mln
The average price of supply on the primary market sharply increased, having surpassed the average price of supply on the secondary market for the first time. This was facilitated by both a traditional removal of cheap supply and an increase in prices from many developers $/sq m
25 000
24 500
24 000
23 500
23 000
22 500
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21 500
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20 500
20 000
19 500
19 000
15000
20000
25000
Primary market Secondary market
Source: Knight Frank Research, 2011
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Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
2010 2011
Elena Yourgeneva DirectorofResidential
«Right now on the market a distinct increased demand from buyers of elite residences is being observed as sales in new projects are going actively and much of the best supply is already leaving the market. To those who are planning to acquire apartments in the near future, we recommend not prolonging this questions, as selection with each day decreases and prices increase.
The growth in average prices during Q1 has already surpassed the growth for all of 2010. We anticipate prices to grow on average 15% during H1 and to 25% for the year. With regards to the most new projects that have recently entered the market, prices are growing significantly at higher rates and supply is contracting perennially due to the large attention of buyers on such projects.»
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Notinallcomplexesontheprimarymarketwasthegrowthinaveragepricesfacilitatedbyachangeinpricingpoliciesbydevelopers.Inaseriesofprojects,pricingremainedatthelevelsof2010,butthankstoaremovalofcheapsupplyaveragepricesgrew.
According to totals from Q1, average prices on the elite new-build market surpassed «pre-crisis» indicators.
Atthemarket’speakin2008theaveragepriceontheprimarymarketwasequalto$22,762persqm,andbytheendofMarch2011thisindicatorreached$23,084perspm.Growthforthequarteraccordingtototalsequalled10.7%,whichishigherthantheindicatorforallof2010(in2010averagepricesontheprimarymarketgrew7.6%).Thetotalvalueofsoldapartmentsequalledapproximately$410mln,whichisalmosthalfofthetotalvalueofapartmentssoldduring2010.
Avisiblyexpressedgrowthperiodbeganontheeliteresidentialmarket.Developersarebeginningtoliftprices,becausetheyarenotreadytosellthecurrentvolumesatpricesof2009-2010.Workforallprojectsonthemarketwasstartedpriortothecrisisandsalespriceswereincludedintheeconomicsoftheseprojectsthatwerehigherthanthoseseenin2009-2010.
Currently,seeingtheincreaseddemand,developersarecorrectingpricesbyincreasingtheminpreparationforamarketentryatthoseindicatorlevelsincludedintheprojectseconomics.
PRIMARY MARKET
Prices of supply. Change
Average prices, $/sq m Change in average prices, %
March 2011 Q1 2011 For March 2011 For Q1 2011 For 12 months
23,084 22,403 2,5 10,7 18,9
Source:KnightFrankResearch,2011
The largest growth in average prices for Q1 2011 was recorded in «Impersky Dom», a residential complex, at 27.5%, with «Legenda Tsvetnogo» not far behind at 25.4%
Source: Knight Frank Research, 2011
Italyanskiy kvartal, Fadeeva st., 4
Chetyre Solnca,Tatarskaya Bolshaya
st., 13
Sadovye kvartaly,Efremova st., 12
Afanasyevsky, Afanasyevsky Bolshoy
lane, 24
Legenda Tsvetnogo, Tverskoy blv., 2
Imperskiy dom,
Yakimanskiy lane, 6
0 10 20 30
27,5%
25,4%
16,2%
10,4%
10%
9,5%
%
Total area of sold apartments Average price on the primary market
Source: Knight Frank Research, 2011
In contrast to the splash of sales at the end of the summer and beginning of autumn in 2009, caused by a lowering in prices practically to their minimum, as well as by sever al sales events conducted by developers, a growth in sales during Q1 2011 occurred on a background of a growth in prices
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17 000III II III IV
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2011
$/sq m ‘000 sq m,
Olga Bogoroditskaya Director,KeyClientManagement
«Today we observe a situation that is characteristic for “pre-crisis” markets. In many new projects that are already in the beginning phases, 25-50% of apartments are sold. During the crisis, buyers preferred to buy residences in complexes with a high level of completion, but now we see a restoration of trust towards developers and a larger quality of deals in new projects»
Q1 2011 ELITE RESIDENTIAL REAL ESTATE MARKET Moscow
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InQ12011,thefiveprojectsintheprimarymarketwiththehighestsaleswere:Italyanskiykvartal,LegendaTsvetnogo,Trilogiya,Sadovyekvartaly,ChetyreSolnca.GrowthinaveragepriceofTSPforthequarterequalled15,1%.
InQ12011,saleswereopenedinfourprojects,amongwhichthreeprojectsthatareenteringthemarketforthefirsttime:BarkliVirginHouse(Zachatevsky1stlane,8),BarkliPark(SovetskoyArmiist.,6),aresidentialcomplex
onTrubetskayaMalayast.,28,bld.2,aswellasaresidentialcomplexlocatedatBurdenkost.,11,whichchangeditsdeveloperandopenedsalesafterredevelopmentoftheproject.
Q1 2011
SalesinTSPasshareinthetotalquantityofsalesontheprimarymarket
62%
AveragepricesofsupplyinTSP,$/sqm
15,308
AveragepricesofpurchasesinTSP,$/sqm
12,507
AveragevalueofpurchasedapartmentsinTSP,$
1,870,000
Source:KnightFrankResearch,2011
Map of the new projects
Source:KnightFrankResearch,2011
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Dubrovka
Okhotny Ryad
Ul. 1905 Goda
Krasnopresnenskaya
TaganskayaKievskaya
StudencheskayaKutuzovskaya
Sportivnaya
Leninsky Prospekt
Vorobievi Gory
Smolenskaya
Park Kulturi
Frunzenskaya
Shabolovskaya
Kropotkinskaya
Polyanka
Oktyabrskaya
Paveletskaya
Tretyakovskaya
Begovaya
Chistie Prudy
Arbatskaya
Mayakovskaya
Belorusskaya
Tsvetnoy Bulvar
Mendeleevskaya
Novoslobodskaya
Kurskaya
Krasnye Vorota
Komsomolskaya
Prospekt Mira
Sukharevskaya
Rizhskaya
Kitay Gorod
Borovitskaya
Pl. Revolutsii
Lubyanka
Chekhovskaya
Baumanskaya
KrasnoselskayaElektrozavodskaya
Sokolniki
Savelovskaya
Marksistskaya
Dobryninskaya
Serpukhovskaya
Proletarskaya
Volgogradsky Prospekt
Rimskaya
Dynamo
Avtozavodskaya
Kozhukhovskaya
Tulskaya
Vistavochnaya
Mezhdunarodnaya
Turgenevskaya
SretenskiyBulvar
Trubnaya
Barrikadnaya
Third Transport Ring
Garden Ring
Leninsk
y Av.
Kutuzovsky Av.
Leningradsky Av.
Tverskaya st.
Novy Arbat st.
Vernadsk
ogo Av.
Mytnaya st.
Enthuziastov hw.
Taganskaya st.Marksistskaya st.
Novoslobodskaya st.
Mir
a A
v.
Rusakovskaya st
.
Barkli Park
Trubetskaya Malaya st., 28, bld. 2
Burdenko st. 11
Barkli Virgin House
Market pulse, TSP (Top Selling Projects)* +15,1%
Distribution of apartments sold in TSP by area
less than 120 m2
from 120 to 180 m2
Source: Knight Frank Research, 2011
*Five complexes with the largest quantities of sales
for the quarter comprise the TSP (Top-Selling
Projects). The index is calculated quarterly.
5%
29%
28%
38%
from 180 to 220 m2
more than 300 m2
15000
20000
25000
Source: Knight Frank Research, 2011
The total area of apartments in complexes that have entered the market equalled about 35,000 sq m in Q1 2011, which is about 25% of the total supply in December 2010. The change in the volume of supply on the primary market of elite residential real estate in Moscow'000 sq m
165
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145
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125
120Sep Oct Nov Dec Jan Feb Mar
2010 2011
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AccordingtototalsfromQ12011,supplyinthelowerpricesegmentcontinuedtocontractandbytheendofMarchtheshareofsuchapartmentsequalled11%ofthetotalsupply,comparedto15%attheendof2010.Onecanconfidentlysaythatatthegivenmomentqualitysupplyonthesecondarymarketbeginsat$2mln.
Thevolumeofsupplyonthesecondarymarketofeliteresidentialrealestategrew35.8%duringQ12011.AccordingtotheconditionattheendofMarch2011,thequantityofapartmentsforsaleonthesecondarymarketwasabout820.Suchagrowthinsupplyisexplainedf irstandforemostbyadecreaseinthenumber
ofdeals:InQ12011thequantityofapartmentssoldonthesecondarymarketwas68%lesscomparedtotheanalogicalperiodof2010.
Asontheprimarymarket,theshareofdealswithlargeapartmentswithanareaofmorethan220sqmwassufficientlygreat:InQ1201131%ofdealswithsimilarapartmentswereclosedonthesecondarymarket.44%ofsoldapartmentswereinbudget$2-4mln.
SECONDARY MARKET
Prices of supply. Changes
Average prices, $/sq m Change in average prices, %
March 2011 Q1 2011 For March 2011 For Q1 2011 For 12 months
22,225 22,248 0,2 -2,61 -9,7
Source:KnightFrankResearch,2011
The Arbat area is occupying the leading position according to the number of deals on the secondary market as usual, which is facilitated by both a wide selection of secondary supply and a small assortment on the primary market. During Q1 2011, only one complex held sales on the primary market there
Source: Knight Frank Research, 2011
Arbat
Zamoskvorechye
Ostojenka
Tverskoy
Yakimanka
Chistye Prudy
Plushikha
Sretenka
Presnya
Khamovniki
Prechistenka
0 5 10 15 20 25
4%
4%
1%
1%
7%
7%
11%
7%
20%
13%
23%
%
Apartments with a value of $2-4 mln prevailed in the structure of new supply for Q1 2011. The entrance of supply with a value of less than $2 mln practically stopped%
New supply on the secondary market
Total supply on the secondary market
Source: Knight Frank Research, 2011
60
50
40
30
20
10
0more than $8 mln
$6-8 mln_
$4-6 mln_
$2-4 mln_
$1-2mln_
less than $1 mln
Distribution of sold apartments by price
less than $1 mln
from $1 to 3 mln
from $3 to 5 mln
3%
20%
44%
17%
14%
from $5 to 7 mln
from $7 to 9 mln
more than $9 mln
2%
Source: Knight Frank Research, 2011
Distribution of sold apartments by area
less than 100 m2
from 100 to 140 m2
from 140 to 180 m2
11%
13%
34%11%
31%
from 180 to 220 m2
more than 220 m2
Source: Knight Frank Research, 2011
Q1 2011 ELITE RESIDENTIAL REAL ESTATE MARKET Moscow
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Averagerentalratesdecreased5.7%inQ12011andinMarch2011reached$6,439permonth,whichis2.7%lessthantheanalogousindicatorfromMarch2010.Moreover,inMarch2011a9%increaseinrentalrateswasobserved.RatesreturnedtothelevelofMay2010.Thequantityofapartmentsofferedforrentismoderatelydecliningasusual ,whichleadstoasmall ,yetstabledemand.
MOSCOW. ELITE APARTMENT RENTAL MARKET
Rates*. Changes
Average rental rates, $/month Change in average rental rates, %
March 2011 Q1 2011 For March 2011 For Q1 2011 For 12 months
6,439 6,400 0,9 -5,7 -2,5
*Ratesareofferedforapartmentswithatotalareaof80-150sqmwithhigh-qualityfurnishingsSource:KnightFrankResearch,2011
In Q1 2011, the geographic distribution of supply practically did not endure any changes compared to the analogous period of 2010.
The leading area is Tversky, which did not change and whose market share equals 21% as before. Supply in Sretenky and Khamovniky significantly grew. Supply decreased in Patriarshie Prudy and Arbat
Q1 2011
Q1 2010
Source: Knight Frank Research, 2011
Tverskoy
Arbat
Chistie Prudy
Presnenskiy
Zamoskvorechye
Sretenka
Khamovniki
Patriarshie Prudy
Ostojenka
Tagansky
%0 5 10 15 20 25
Source: Knight Frank Research, 2011
By the end of January, average rental rates for elite apartments ended their fall and in March 2011 a small growth was recorded$/month
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The quantity of apartments up for rent decreased 6.2% according to totals from Q1 2011Apartments
Source: Knight Frank Research, 2011
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2009 2010 2011
The distribution of supply on the rental market for elite apartments at the end of Q1 2011 by area
from 80 to 100 m2
from 101 to 150 m2
Source: Knight Frank Research, 2011
12%
25%
46%
17%
from 151 to 200 m2
from 201 to 500 m2
7
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