M

INTERMARKQUARTERLY

REPORT

AUTUMN 2014

Moscow Housing Market

Immigration News

Our News

1 www.intermarkrelocation.ru

I have arrived to Russia as a young professional a few years back. I am originally Russian but never having to live here it took me some time to integrate into the Russian way! I have to admit it wasn’t all that predictable but it never seems to amaze me how eager Russia is to grow!

Once I began working it dawned on me that so many professions that we consider as young adults in Europe have only recently arrived to Russia and there were no PR schools or marketing degrees till very recently to train the young that all the big western companies rely on so much now. I guess I will forever be proud to see how adaptable and inventive the Russian spirit is. These things don’t happen overnight but it is evident that the young professionals of today are more ambitious and capable than ever before.

It is sometimes a little strange to see certain Euro-pean trends been adapted here, take for example the Hipsters movement. The Hipsters of Russia remind me of my grandparents in Omsk. The country is in and out of trends without even skip-

ping half a generation; it’s hard not to be impressed!

The biggest achievement of Russia I feel is how the new generation seeks to organize for them-selves an exciting living. Park Gorkogo never ceaces to amaze me. There you can join the skaters, the rollerbladers, the kiters, the yogis! Film buffs have their own open air cinema with a fantastic program. The ball dancers have their own stage and the hip hop artists have their own following. Not to mention the food and the Jazz festivals. To me it seems Russia wants to have everything that Europe has to offer but the approach is so idealist and eager that we do it bigger and better and it’s all new and exciting and a crime not to participate!

For expats coming over here Russia seems to be more accessible. Russia is still a challenge but no longer a twisted mystery! I have noticed that on arrival, as with most places, it takes time to get used to a new location; Moscow can bring out some resistance in people at first however so often it turns into - if not love - then an addiction.

We Live in the Now!

Valeria VolkonskaiaRelocation Consultant

I have arrived to Russia as a young professional a few years back. I am originally Russian but never having to live here it took me some time to integrate into the Russian way! I have to admit it wasn’t all that predictable but it never seems to amaze me how eager Russia is to grow.

2 www.intermarkrelocation.ru .intermarkrelocation.ru

2 .intermarkrelocation.ru

2 .intermarkrelocation.ru

Azerbaijan & Kazakhstan made easy

We are happy to announce that Intermark Relocation now provides full range of Relocation and Immigra-

tion services in Kazakhstan & Azerbaijan.

Work permit?

Housing?

Schooling?

Relocation and Immigration services we provide in both regions are diverse, as we respond to each and every need the assignees may have when moving to Kazakhstan or Azerbaijan. Quality - wherever you are! We are highly committed to

preserving the same high quality standard of services our clients and customers are so accustomed to in Russia.

We will be very glad to support you in these unique and promis-ing countries and are looking forward to working in new palces! We are happy to answer any questions or provide you with any

additional information.

Our team will cover it all!

Moscow Housing Market (first half 2014)

"The upward trend of the properties in the prime rental market, noted already in the middle of last year, continues in the first half of the current year. The increasing number of the available residential properties in Moscow resulted in the escalation of the competi-tion among the landlords that adjusted their rental value. This mostly influenced the rents for the residential housing located outside the city center. "

Marina Morozova. Project Manager/Senior Relocation Consultant

According to Intermark Relocation the overall market demand weakened by 4% over the past half of the year.

Such negative growth has been driven by few factors, including the current unstable political situation. However, the ongoing tenant activity stays a good indicator for 2014.

Following the results of the last year, it can be concluded that tenants slightly adjusted their budgets, but their preferences stay unchangeable.

Chart 1.1 Dynamics of demand of Moscow’s prime rental market (first half of 2014)

The international occupiers have kept their quota in the Moscow prime market. At the moment they are accounting for the 68% of all tenants.

The segment of non-citizens from the CIS countries currently reached 10%, following the 6% last year. At the moment the market is also witnessing the increasing pool of tenants from Ukraine. The share of tenants from Russia resulted for 22% of all applicants, which is 5% less compared with 2013.

The demand structure by the figure of tenants between the age groups of 30 to 35, 35 to 40 and 40 to 45 years old constitutes, at practically the same level. This age groups together account for the 60% of the prime lettings market.

The overwhelming majority of tenants are couples with the 60% of all applicants for the Intermark Relo-cation company; 43% of tenants have children and a quarter of them — at least two children. From this perspective, the presence of a good school nearby is among the deciding factors of the choice of the future residence.

Who rents?

Demand reviewed at the end of the first half of the year

3 www.intermarkrelocation.ru

I II III IV V VI VII VIII IX X XI XII I II III IV V VI I II III IV V VIVII VIII IX X XI XII

150%

140%

130%

120%

110%

100%

90%

80%

70%

2012 2013 2014

The number of the apartments available for lease accelerates from month to month, a certain statement that can be concluded by the end of the half period of the 2014.

(As a result, for the period from January to June 2014 the volume of deals increased 17%)For the landlords it results towards more competition in the prime rental housing market. In the middle

of this summer they have to make a choice if they are ready to go below the desirable rental rate or to wait longer for any attractive offer.

The first six months of 2014 resulted 16% growth in the number of properties in prime rental estate including the apartments which are in the market for the first time. Such properties are highly popular among the prospective tenants and are primarily considered by them. Such strong rental market segment shows its current popularity as a business and its attractiveness for the real estate investors.

What is being rented?

Supply, competition increases

www.intermarkrelocation.ru 4

According to the latest analysis, the main market demand lies with the apartments with the rental value of up to $ 4000 per month for a property.

The apartments with 2 to 3 bedrooms happen to be the most demanded among the prospective tenants and account for 36% of all the requested properties for lease. Only 5% of clients are interested in a studio apartment.

Furnished apartments continue to be of a strong value and are listed as necessary criteria among 80 %. Almost every second tenant desires a parking space located at the residence.

The demand is focused on inner locations such as Tverskaya-Kremlin, Arbat-Kropotkinskaya, Zamoskvorechie and Krasnopresnenskaya-Barrikadnaya and outside the city center in the Leningradsky Prospect area.

Chart 1.2 Supply analysis of the high-budget segment of the residential rental market in Moscow in terms of number of rooms (first half of 2014)

Chart 1.3 Segmentation of the demand according to the rental value of the properties in Moscow’s prime rental market (first half of 2014)

studio5%

3 bedroom26% 4 bedroom and more15%

1 bedroom24% 2 bedroom30%

>$150006%

$10000-$150008%

$8000-$100008%

$6000-$800014%

$4000-$600022%

<$400042%

The main market share of the property offers (almost 40%) is represented by the two bedroom apart-ments, in contrast to the least popular studio apartments that do not exceed 2% of the available properties. Therefore the situation fully expresses the preferences for the accommodations in Moscow.

The apartments for lease have an average floor area of 120 to 150 square meters and make 22% of the overall offers. However they don’t dominate too strongly and the properties with different lay-outs are also available in the prime lease market.

Despite the significant increase in the supply of the vacant apartments, most of them still predominate in the same residential hubs of the city as the year before. Every fifth apartment for lease is situated in the Arbat-Kropotkinskaya district. Other popular for the tenancies are Tverskaya Street and the Kremlin, Leninsky Prospekt, Lubyanka and Kitay-Gorod, Leningradsky Prospekt and Zamoskvorechie, where the supply is more or less represented evenly.

Chart 2.2 Territorial structure of supply in the residential rental market of Moscow (first half of 2014)

Chart 2.3 Segmentation of the supply according to the rental price of the properties in Moscow’s prime rental market (first half of 2014)

5 www.intermarkrelocation.ru

Chart 2.1 Dynamics of the of supply of Moscow’s prime rental market (January 2012 – 100%)

7%

11% <$400030%

$4000-$600023%

14%

>$15000

$8000-$10000

15% $10000-$15000

$6000-$8000

I II III IV V VI VII VIII IX X XI XII I II III IV V VI I II III IV V VIVII VIII IX X XI XII

100%

110%

90%

120%

80%

70%

60%

50%

40%

2012 2013 2014

0% 10%5% 15% 20% 25%

Arbat-Kropotkinskaya

Tverskaya-Kremlin

Leninsky Prospect

Lubyanka/Kitay-Gorod

Leningradsky Prospect

Zamoskvorechye

Krasnopresnenskaya

Kutuzovsky Prospect

Patriarshie Prudy

Tsvetnoy Boulevard

Kunsevo

Frunzenskaya

Taganskaya

Prospect Mira

Others

An average asking price decreased by 4% in compari-son with 2013 and amounted 7,500 US Dollars per month. Considering a significant increase in supply, this figure shows that due to the overwhelming compe-tition, some landlords have been forced to adjust their asking prices.

The annual lease rate in 2014 slowed down by 1.5% in comparison with the same period of the previous year and led to the value of 670 US Dollars per square meter per year.

The significant majority of the supply in the prime leasing market situated in Arbat-Kropotkinskaya, Krasnopresnenskaya-Barrikadnaya (taking into consid-eration the high-class apartments in "Moscow-City" building) and Patriarchy Prudy areas. During the first half of 2014 the rental rates experienced some fluctua-tions in both directions depending on the location. The largest rental value was observed in the districts of Kitay-Gorod, Tsvetnoy Boulevard and Patriarchy Prudy.

Average asking price for the tenancy showed no growth and at the moment is 6, 900 US. Dollars per month.

Table 3.1 Segmentation of the asking price according to the particular area in Moscow’s prime rental market (first half of 2014)

Budgets: the latest development

6

Chart 3.2 Dynamics of the average asking price for the tenancy in Moscow’s prime rental market (first half of 2014)

I II III IV V VI VII VIII IX X XI XII I II III IV V VI I II III IV V VIVII VIII IX X XI XII6 000$

6 500$

7 000$

7 500$

8 000$

8 500$

2012 2013 2014

10 123$

8 815$

8 310$

8 053$

7 600$

7 335$

7 238$

6 271$

6 185$

6 036$

5 234$

4 772$

4 128$

4 083$

5%

-2%

6%

7%

5%

0%

-3%

7%

-8%

-3%

-6%

1%

-2%

-1%

Arbat-Kropotkinskaya

Krasnopresnenskaya

Patriarshy Prudy

Lubyanka/Kitay-Gorod

Kuntsevo

Tverskaya-Kremlin

Zamoskvorechye

Tsvetnoy Boulevard

Leningradsky Prospekt

Frunzenskaya

Leninsky Prospekt

Kutuzovsky Prospekt

Others

Taganskaya

Area $/monthChange(to dec. 2013)

www.intermarkrelocation.ru .intermarkrelocation.ru .intermarkrelocation.ru

Immigration Overview

The development of the Russian migration law under the Concept of the State Migration Policy of the Russian Federation Through 2025 and in accordance with the Plan on Implementation of the Concept in 2012-2015 (first stage), approved by the Russian Government, is in full swing.

www.intermarkrelocation.ru 7

Employment Migration: Status quo

The main objectives of the Russian current migration policy are:

assisting in the innovation development and the competitiveness of the Russian economy and in meeting its requirements in labour force;

protecting the national labour market and ensur-ing the priority right of the Russian nationals to be employed;

counteracting illegal migration.

At the first stage of the Concept implementa-tion (2012-2015), the legislative and the execu-tive bodies of the Russian Federation are mainly concentrated on:

creating effective mechanisms of evaluation of foreign labour force demand of the Russian economy;

improving the procedure of quota allocation and other mechanisms of foreign labour employment (for example, on the basis of patents);

adopting diverse programs for short-term and long-term migration, i.e. different methods of employment, selection and usage of foreign labour force and different regimes of stay for different categories of foreign nationals (highly qualified specialists/qualified specialists of deficient and highly demanded professions at the Russian labour market);

improving of the control system over foreign nationals’ entry and stay in the Russian Federation;

strengthening the responsibility for violation of the migration legislation;

setting up the Centers of assistancein migration to Russia and medical expertise of expatriates (including those abroad).

The first two years of the state authorities’ activity in the realization of the long-term Concept of the State Migration Policy have resulted in adopting the number of legislative acts that have changed substantially the terms and conditions of entry, stay and employment of foreign nationals in the Russian Federation.

The most significant developments in employ-ment migration law that came into force in 2014 are the following:

this category of Employers are exempt from Quota and Corporate Work Permit obtaining;

work Permits (issued for up to 3 years) are appli-cable to several regions;

the given order is eligible provided both foreign specialists and employers meet several require-ments (salary, qualification, work experience, number of workers employed etc.).

The new order of Work Permit obtaining has been introduced for foreign specialists employed in Representative offices, Branch offices and Subsidiaries of commercial enti-ties registered in WTO member states (Federal Law dated December 28, 2013 №390 –FZ , effective from January 10, 2014).

Ekaterina MoskalevaSenior Immigration Department

when applying for Temporary Residence Permit or Permanent Residence Permit some categories of foreign nationals are the exception from the above requirement including highly qualified specialists and their accompanying family members (who apply for Permanent Residence Permit);

when applying for Work Permits highly qualified specialists and their accompanying family members (as well as some other categories of foreign nation-als) are the exception from the above requirement;

certificates proving the knowledge of the Russian language, history and the basis of the Russian Federation legislation will be issued by accredited educational institutions (starting from September 1, 2014).

legal entities and individual entrepreneurs (but not only Russian private persons) will be able to employ foreign specialist from visa free regime countries;

patents will be issued for up to 1 month with the following extension, but for not more than 1 year and will be applicable to one region;

government of the Russian Federation, local authorities and FMS will be able to stop issuance of Patents in a certain region in accordance with the current situation in the labour market.

the procedure of notifying the Tax authorities on TIN obtaining for highly qualified specialists was eliminated (Federal Law dated July 23, 2013 № 248 -FZ).

notifications on salary, employment/civil-law agreement termination as well as on unpaid leave with the duration period for more than 1 calendar month are submitted to Federal Migration Service or its territorial department quarterly, not later than the last working day of the month following the financial quarter [the Order of FMS N 182].

State authorities are monitoring the new laws enforcement and evaluate their effectiveness on migration situation with the aim to work out further amendments of migration programs and working out new ones. Law making process as the important part of the long term Russian state migration policy is in progress.

8 www.intermarkrelocation.ru .intermarkrelocation.ru

Foreign specialists with the annual income of 1 mln roubles working for state accredited IT companies have been added to the category of “ Highly Quali-fied Specialists” (Federal Law dated June 23, 2014 №164-FZ, effective from June 24, 2014).

Foreign Highly Qualified Specialists have received the right to be employed by Representative offices of foreign entities (accredited in the Russian Federation) (Federal Law dated May 05, 2014 №106-FZ, comes into force on January 1, 2015).

The new rule has been introduced that requires foreign nationals to prove (by a Certificate) their knowledge of the Rus-sian language, history and the basis of the Russian Federation legislation when applying for Work Permit or Patent, Temporary Residence Permit and Perma-nent Residence Permit (Federal Law dated April 20, 2014 №74-FZ, comes into force on January 1, 2015).

The new order of employing foreign nationals from the visa free regime coun-tries on the basis of Patent is under consideration in the State Duma (the Bill №535567-6).

The new order of state authorities’ noti-fications on highly qualified specialists’ employment has been accepted.

www.intermarkrelocation.ru 9

Driving in Moscow

Special Digest

New Materials

Dear Friends,When in Moscow, you practically can’t avoid the infamous Moscow traffic: every now

and then you will find yourself driving a car or sitting in the passenger’s seat, crossing the road or using public transport. The safety of the road users is regulated by a wide set of traffic safety regulations. Most of the traffic rules in Russia are not that different from those in the EU or the US, but there are some specific aspects in the Russian traffic regu-lations that you should be aware of.

Therefore, we decided to create for you a special convenient and clear brochure «Driving in Moscow»So now driving in Moscow is easy!

In Russia, they say: "There is no bad weather, all kind of weather is great!"

There are so many activities which can be offered every day in Moscow! You have no right to sit at home! And with our seasonal digest you will find hundreds of places where you can have!

There are:- Restaurants- Sports- ParksAnd many others + lots of interesting fact!

SPRINGTIME TO WAKE UP

SUMMER*New section

“Moscow restaurants”

GET READY FOR

Winter in Moscow

What to do?

7/1 Kropotkinsky PereulokMoscow, Russia, 119034

+7 495 502 95 53www.intermarkrelocation.ru

© Intermark Group, Inc. 2014