RATING OF RUSSIAN CITIES BY ELITE REAL ESTATE PRICE STABILITY

Research company MAR Consult has made a rating of Russian cities with the most crisis-resistant prices per square meter in tower buildings of deluxe class. In this market research specialists of the company learned how average price per square meter in elite new buildings had changed during the year starting October 2008. The following complex of methods was used for data collection: analysis of official statistics and experts’ survey (realtors and developers).

The research was conducted in cities of federal significance – Moscow and St. Petersburg, Sochi (future capital of Olympic Games 2014), and major cities of federal regions – Novosibirsk, Rostov-on-Don, Khabarovsk, Yekaterinburg and Nizhny Novgorod.

The year of crisis had negatively affected elite real estate prices in all cities. Price in dollars had decreased by more than a quarter in most of the cities. However, such decrease was primarily caused by the fall of the relative value of dollar compared to ruble. Average price per square meter of elite real estate in rubles had decreased less considerably.

Sochi’s elite real estate market was the least influenced by the crisis. The average price per square meter in rubles had increased by 5% since October 2008. Pre-Olympic expectations of investors and serious plans of city’s infrastructure development did not let the average price per square meter fall under 244,000 rubles. Moreover, there was still a deficit in elite housing in the city. Only one housing complex of such class was completed since the beginning of 2009. Housing complex “Millennium Tower” had remained the most expensive elite building in Sochi. Price in rubles for apartments there had increased by 10% during the year.

Second place was taken by Rostov-on-Don where price for the elite real estate in rubles had increased by 4.3%.

The maximum change in price had occurred in St. Petersburg (-20.5%), Nizhny Novgorod (-10%) and Moscow (-9.7%). As a result of such decrease many Moscow and St. Petersburg developers preferred to withdraw some unique apartments and penthouses from the active market. Unlike players on the economy class real estate market elite developers may afford waiting until full recovery of the demand and then reenter the market with exclusive offers priced at the pre-crisis level.

In general the volume of completed areas in the elite real estate sector had dropped considerably during the crisis period. Developers had focused their attention on the completion of properties which were started before the crisis and were slow to start new developments which lead to a decrease in offer on the primary elite real estate market. However, according to experts the demand for deluxe class real estate was recovering unlike other segments of the real estate. In general researchers have already noticed a slowdown in the elite real estate price reduction. Elite segment is also expected to be the first to recover from the crisis. Some experts have already made forecasts that dynamics of price per square meter of elite real estate would become positive in the first half of 2010.