Real estate prices in Russia — including rents — fell heavily during the economic collapse. But as the wider economy recovers, demand and prices in 2010 should follow, particularly with the resumption of credit flow. See the following article from Property Wire for more on this.
Property prices have dropped 25% in Moscow in the downturn and rents are down by up to 50% but the real estate market is now poised for a recovery, it is claimed.
Industry commentators are also pointing out that credit crisis has weeded out the poorer operators and with GDP expected to grow by 3% in 2010; buyers are at least showing signs of returning to the property market with real estate players seeing signs of activity.
Before the global downturn the real estate market was booming in Russia with luxury apartments in the capital city selling for between $15,000 and $40,000 per square meter depending on location. The average price per square meter was $6,500 per month but at the top end $20,000 per month was possible.
Prices were driven upwards by a lack of quality accommodation but the credit crunch has had a profound effect. Unemployment affected the low and middle end and those who would normally buy at the luxury end of the market just seemed to disappear.
Real estate agents report that the market started slowing at the end of 2008 and accelerated through to March. ‘Demand was very, very low, especially on the sales side and across all budgets,’ said Maxim Mokeyev, executive director of Evans Real Estate.
Many real estate companies and developers suffered during the downturn and either heavily downsizing or went out of business but this has been good for the industry according to Konstantin Kovalev, managing director of Blackwood Real Estate. ‘In most of the cases it was a really healthy cleaning of the market from all non-professional and non-effective companies,’ he explained.
Rent prices, especially in the elite segment, plummeted up to 50%, due to personal incomes dropping, bonuses being cut and clients having to relocate to more modest apartments. But sales prices didn’t drop as much as rental prices. Kovalev said this was because low supply always commands a premium price, especially in exclusive areas such as the center of Moscow.
The industry reckons that demand is now starting to grow again and in the next three years prices will recover. Positive signs include stock market growth, mortgage loans coming back, and a halt in declining incomes, according to Inna Ignatkina, executive director of MIAN.
‘We are seeing the first signs of a period of price stability. An increase in the number of potential customer applications has been registered in practically all major Russian cities not just in Moscow,’ Ignatkina added.
Industry sources also point to moves to restart mortgage lending as being a key to the recovery with most banks resuming loans for new-construction property purchases. Sberbank, Russia’s largest lender, has also seen credits return to levels not seen since November last year as down payment requirements have been reduced and interest rates have fallen.
Andrey Semenyuk, deputy general director of the Mortgage Agency, said mortgage volumes fell by more than 75% in 2009 but he expects a rebound from 130 to 135 billion Roubles to more than 250 billion in 2010.
‘The market is gradually coming back to life and the third quarter of 2009 shows that on the one hand mortgages are becoming more available and interest rates are coming down, and on the other hand people are more confident in their abilities to buy housing and pay off a mortgage,’ he explained.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.