Having outstripped suburban Moscow, Moscow took the first place among Russia’s regions in terms of the amount of housing put into use in the first quarter of this year.
According to data from Rosstat, 1.183 million square meters of housing were put into use in the capital from January through March. Thus, the growth over the same period of last year was 1.3 percent, which is 12.5 percent from the total amount of floor space put into use in Russia. Moscow Oblast, last year’s leader, lags behind Moscow by 100,000 square meters. The increased number of offerings on the primary real estate market has become one of the main reasons for reduction in prices. The Director of the “Indicators of the Real Estate Market” Analytical Center Oleg Repchenko comments on the situation for RG.
“The leveling off of the market that occurred late last year is neither a temporary hold-back nor a seasonal phenomenon, but serious stagnation following the record price increase from 2005-2006. Prices for housing since the beginning of spring have begun to slip downward at an increasing rate. This means that the stagnation of the Moscow real estate market may turn out to be even more significant than in 2004. Recently, average prices for apartments in Moscow have fallen by 0.5 percent from 4218 to 4195 conditional currency units (US dollars) per square meter. It would seem to be insignificant, but one must consider at least three factors.
First of all, sellers have begun to reconsider the concept of the conditional currency unit used to express prices for both new construction and secondary housing. Whereas in the period of high demand, sellers used to set the exchange rate themselves, for example, at 28.29 or even 30 rubles to the dollar, now more and more often it is the exchange rate set by the Central Bank on the day the apartment is sold. This translates into a more substantial correction in real estate prices.
Second, one should not disregard the fact that the general market indicators are formed from the price of very expensive housing, average-price housing and economy-class real estate. Expensive housing in the capital is not yet falling in price, though signs of a price correction are beginning to appear here as well. But prices for economy-class real estate, fortunately, continue to fall: in separate districts the reduction reaches 2-3 percent per month. Some apartments have abruptly fallen in price by as much as 5 percent. First and foremost, prices for ordinary panel buildings are falling (apartments in 9-14-storey buildings), along with modern panel (16 storey buildings and higher, with large kitchens), and pre-engineered buildings.
Third, prices are falling on the primary real estate market. We’re talking about the emergence of a mass of discounts when a selected variant is paid for quickly, interest-free financing and other special deals. In order to sell an apartment in a new building, sellers now need to offer a discount of about 5-10 percent, and sometimes more.
All of this makes it possible to confirm that the real correction in prices for apartments in Moscow is actually greater than the statistics suggest. The number of offerings on the secondary market is also rising. First and foremost this has to do with an increase in the duration of the apartment presentation periods. Currently, an apartment offered by an agency stays in the databases for at least 2-3 months, whereas earlier it used to be 1-2 weeks. In order to sell an apartment in such conditions, it is necessary to offer a substantial discount, possibly even more than the traditional 3-5 percent.
The Moscow real estate market will pick up no earlier than in late summer or early autumn, or perhaps by the end of the year. We can realistically expect prices for apartments in Moscow to fall by 5-10 percent per month.
Prices have fallen most rapidly in the:
- Northwest,
- Northeast,
- East,
- and Southeast of Moscow.
The neighborhoods with the greatest price declines are:
- Shabolovka,
- Tyoply Stan,
- Solntsevo,
- Next to the Metro Stations Tulskaya, Nagatinskaya, and Nagornaya,
- and on Leninsky Prospekt.
Author: Olga IGNATOVA
Source: Rossyskaya Gazeta and Nedelya