2011 residential market - microsoft

2011

RESIDENTIALMARKET Moscow

EXECUTIVE SUMMARY• In2011therewasahighactivityonMoscow’sluxuryrealestatemarket.IntheQ1therewas

arecordofprimarymarketbargainsquantityforlasttwoyears.RiseofbargainsquantitytookplacetogetherwiththepricegrowthcausedbyMoscowauthorities’announcementofprohibitionofbuildinginthehistoricalcenter.

• Insummary,averagepriceincreasingonprimarymarketwas18%.Onsecondarymarkettherewerequiteinsignificantsqmaveragepriceswingsanditalmosthadnotchangedincomparisonwith2010.

• Averagebargaincostonsecondarymarketexceededthecorrespondingindexonprimarymarketfor51%,reaching$4.1millionand$2.7millionrespectively.

OVERVIEW

2011 RESIDENTIAL MARKETMoscow

2

In2011therewasastrictincreasingonLuxuryrealestatemarketofMoscow,newprojectsthathadbeenimmediatelypaidattentiontobybuyersappeared,developingofHousingComplexeswasgoingonduetimeterms,andsellsinnewprojectsweremadeaccordingto214FederalLaw.IntheQ1of2011arecordhighquantityofdealsonprimarymarketforlasttwoyearswasregistered.Itisespeciallyinterestingbecausethisyearsuchanactivityrocketingwasgoingontogetherwithpricesincreasingandnottheopposite,asitwasthelastyears.ItwascausedbyappearingofnewinterestingprojectsandbytheMoscowAuthorities’announcementofbuildingsinsidetheThirdTransportRingprohibition.Inspiteofthefactthattheprohibitionwasnotdocumentedyet,theauthoritieshadreviewedsomeconcludedinvestmentcontractsandcancelledtheagreementsonsomeprojects,whichhadnotbegundevelopingforthemoment.Andtherewerealmostnonewbuildingquotesgiven.Sothat’swhytheprohibitionactuallycametoforce.

Secondarymarketincreasingseemstogoonsmoothlyaftercorrectionending,andasfortheprimarymarket,itisbelieved

todevelopdynamically,thecheapestsupplyinnewprojectsleavethemarketveryquicklyandaveragepriceswillrise.

RESIDENTIAL MARKET

Main indices. City real estate

Segment Average prices, $/sq mRent rates, $/month

Average prices change/ Rent rates, %

December2011

Q42011

December2011

Q42011

2011

Primarymarket

24,574 24,375+1.2 +2.8 +17.9

Secondarymarket

22,785 22,854 -0.3

-0.7

-0.2

Rent* 6,157 6,194

-1.19

-0.01

-9.8

Elena YurgenevaResidentialRealEstateDepartmentDirector,KnightFrank

"Inthebeginningof2011,expertsplayedsafeintheirforecasts,that’swhyitisgreat,thateventually,theyearappearedtobeverysuccessfulforusandforthewholemarket.I’dliketomentionthatthedemandforhigh-endproperties,forwhichKnightFrankisexclusiveconsultantorsalesagent,remainedhigh.Therecipeofsuccessisverysimpleforeverymegapolisoftheworld,beitMoscow,LondonorNewYork:thelocationoftheprojectinthecitycenter,itsinterestingarchitecturalconcept,moderntechnologicalfacilities,highqualityinfrastructureandrightpricing–thesearethefactorsthatguaranteeitssuccess.Butactually,therearenotsomanyexamplesofallthesefactorscombination.Thisgivesusthereasontoforecasthighbuyers’interestforoneofKnightFrank’sexclusiveprojects–aLuxuryClubHouseonBurdenkostreet."

Source: Knight Frank Research, 2012

Average prices on Luxury Residential market of Moscow in dynamics$/sq m

25,000

24,000

23,000

22,000

21,000

20,000

19,000

18,000

2010

Primary market Secondary market

dec. jan . feb . march apr . may june july aug. sept. oct. nov. dec.

2011

www.knightfrank.ru

3

In20116newobjectsenteredthemarket:BarkliVirginHouseon1-yZachiatyevskiylane,BarkliParkonSovietskoyArmiist.,SmolenskyDeLuxeon1-ySmolenskylane.,HC«Literator»onL’vaTolstogost.23,HConBourdenkost.11,andalsoahousingcomplexonM.Troubetskoy28.Generallyinnewprojectstherewillbe576flatswithtotalspaceof83,400sqm.ComplexBarkliPark,whichenteredthemarketintheQ1of2011wasmostlypopularamongbuyers:bytheendofQ2BarkliParkgottheleadingplacebyquantityofsoldflatsandthirdplaceforthetotalof2011.

ThemostexpansivedistrictfortodayisPatriarshiyePrudy.Averageflatpriceonprimarymarkethereismorethan$10million,withaveragesquaremetercostof34,071$/sqm.Yakimankadistrictisonthesecondplacewithanaverageflatpriceof$8.7million.ThelastplaceinlistbelongstoKhamovnikidistrict,withaverageflatpriceof$1.95million,andaveragesquaremeterpriceof15,088$/sqm.

Average flat price on luxury real estate primary market depending on districtand average space of flats

District Average flat price, $

Average space,

sq m Average prices change in 12 months (arrows)

PatriarshiyePrudy 10,160,000 298 -17.7%

Yakimanka 8,782,648 321 +66.5%

Prechistenka 6,091,955 276 +6.7%

Ostozhenka 6,076,865 171 +0.5%

Arbat 4,847,918 200 +47.1%

ChistyePrudy 3,668,618 125 +7.2%

Zamoskvorechye 3,258,281 191 +36.5%

Tverskoy 2,232,011 151 +10.2%

Khamovniki 1,956,499 144 +10.2%

Source:KnightFrankResearch,2012


Notwithstanding the sales openings in new projects in 2011, supply on primary market continues to decrease and has almost reached the level of 2007.Primary market, flats supply change dynamicsnumber of flats

1,400

1,200

1,000

800

600

400

200

0

2007 2008 2009 2010 2011

Average square meter price of luxury residential on primary market in different districts



4

Primary market. Supply

Intheendof2011therewere753flatsinprimarymarketofluxuryrealestate’ssupply,it’s9%lessthanitwasinthebeginningof2011.During2011,notwithstandingthenewprojects’marketentering,supplyonluxuryrealestateprimarymarketwasdecreasing.ThemaximumsupplylevelwasachievedinFebruary,butbecauseofrecorddemandofnew-builthouses,newflatswereimmediatelygobbledupbymarket.Inautumnsupplyreacheditsminimumforlastthreeyearsandonlyafternewbigproject’s“Literator”enteringthemarketinDecember,supplysignificantlyincreased.

Averagepriceincreasingofluxuryrealestateprimarymarketin2011was17.9%.Themostsignificantgrowthtookplacein1Q,wheninadditiontobuyers’recordactivitydevelopershadrisenpricesinalmostallprojects.BytheendofMarch2011averagesupplypriceonprimarymarketexceededthepre-crisismaximumlevel(22,762$/sqminSeptember2008)andachievedthelevelof23,084$/sqm.

BecauseoftheUSDcoursepeakinginAugust,averagesupplypricetoSeptemberdecreasedfor0.8%incomparisontoJuly.Ithappenedbecauseinmarket’sbiggestprojectspriceswerefixedinRUB.Inautumn,whenitbecameclearthatUSDcoursewouldnotreturntoitssummerlevel,developershadrevisedtheprices–

insomeprojectspriceshadbeenincreased,andinsomeprojectspricesweretransferredtoUSD.

Inadditiontopricesincreasingaveragepricegrowthwascausedbysomedepletionofthecheapestsupply,especiallyinnewprojects.


Prices growth is caused majorly by supply decreasing, especially in the lower price segmentnumber of flats

1,000

900

800

700

600

500

400

300

200

100

0 jan. feb. march apr. may june july aug. sept . oct. nov. dec.

Supply, number of flats The average offer price, $/sq m

$/sq m

25,000

24,500

24,000

23,500

23,000

22,500

22,000

21,500

21,000

20,500

20,000

Supply price. Dynamics

Average prices, $/sq m Average prices changes, %

December2011

Q42011 2011 December2011

Q42011 2011

24,574 24,375 23,607 1.2 2.8 17.9



Maximum prices increasing on luxury real estate primary market of Moscow in 2011 was in Housing Complex Impersky Dom – 58%

Increase in the average cost per square meter in 2011,%

Impersky Dom,6 Yakimanskiy lane

Afanasievskiy,24 Afanasievskiy

lane

Chetyre Solntsa13 Bolshaya

Tatarskaya St

Legenda Tsvetnogo2 Tsvetnoy Blvd

Barkli Virgin House8/9 1st

Zachatievskiy lane

0% 20% 40% 60% 80%

58%

43%

23%

23%

22%

www.knightfrank.ru

5

Primary market. Supply

Notwithstandingthenewprojects’enteringthemarket,bytheendof2011Moscow’sLuxuryresidentialmarket’ssupplydidnotspreadindirectiontodevelopingprojectsortoprojectsonthebeginningstageofdeveloping.Ithappenedsobecausenewprojectsareverypopularamongbuyersandnew-builtsupplyindevelopingbuildingsisdepletedquickly.

Space

Bytheendof2011quantityofflatswithfloorspaceof120–150sqmdecreasedfor25%–it’sthemostpopularamongbuyersfloorspaceandsupplyinthissegmentisdecreasingsecondyearinarow(in2010decreasingwas19%).Becauseofnewprojectsenteringthemarket,supplyofsmallerflatswithfloorspacebelow120sqmincreased,butitseemsthatmostofthemwillbesoldduringthefirsthalfoftheyearasthemajorpartofthemissituatedinnewproject,wheresalesbegunonlyintheendofDecember.

Budget

Mainpartofprimarymarket’ssupplystillconsistsofflatsofpricefrom1$million

to4$million,thissupply’sratiois74%.Thelastyearquantityofflatsinthispricesegmentincreasedfor21%,whileflatsofpricelessthan1$millionarequiterare,theirquantityhasdecreasedfor40%inayear.

In2011somereallyexpensiveflatsinLuxurynew-builtprojectsweresold,thatcauseddecreasingofsupplyinthemostexpansivesegmentfor40%.

23%

The offer on the primary market through building phases %

30%

23%

Pit, the foundation

Monolithic frame work

Decoration

Complete


30%

17%

Offer distribution in the primary market as of the end of 2011, depending on the area%

12%

25%

Under 120 sq m

120–150 sq m

150–180 sq m


17%

25%

180–220 sq m

Over 220 sq m

21%

Offer distribution in the primary market as of the end of 2011, depending on cost%

12%

40%

Under $1 mln

$1–2 mln

$2–4 mln

$4–6 mln


4%

35%

$6–8 mln

Over $8 mln

4%5%

Change of quantity of apartments, Depending on the area, In comparison with 2010

Under120sqm +12%

120–150sqm -25%

150–180sqm -1%

180–220sqm +1%

Over220sqm -12%


Change of quantity of apartments Depending on cost, In comparison with 2010

Under$1mln -40%

$1–2mln +19%

$2–4mln +2%

$4–6mln -21%

$6–8mln +48%

Over$8mln -40%



6

Averagepriceofsqmboughtin2011is27.5%lowerthansqmsupplyaverageprice.

Unliketheaveragesupplypricethatwasincreasingallthe2011,averagebuyingpricedynamicswasclearlydecreasing.Ifinthefirsthalfoftheyearaveragesqmpriceinboughtflatwas18,500$/sqm(maximumwasinFebruary–23,815$/sqm),thaninthesecondhalfaveragepricecameto15,330$/sqm.

Оlga Bogoroditskaya Residential, Director Key Client ManagementKnightFrank

"2011sellsshowedthatbuyers’interest

todevelopingprojectshadincreased

significantly.Itwascausedbyseveral

factors:attractiveinvestmentprices,share

participationcontractsigning,possibilities

ofmortgagelending.30%offlatsweresold

insomehousingcomplexesonthefirst

developmentstages.Becauseoftherisen

demand,manydevelopersstartedtorise

theprices.Though,somedevelopersset

pricesforthereadyhouseonthebeginning

developmentstage,andsellsgoonquite

activelythen.Pricesgrowthonprimary

marketwas18%lastyear.Generally,market

returnedtothepre-crisiswayofprice

determination–pricesgrowthisrelated

todevelopingstageandcouldbecorrected

duetoobject’sdemandincreasing.

Consequently,themostinterestingsupply

issoldalreadyonthefoundationpitstage".


In March 2011 a record for the last two years quantity of flats was soldnumber of rooms

80

70

60

50

40

30

20

10

0

Quantity of the sold apartments Average cost of square meter in the sold apartments in the primary market

$/sq m

30,000

25,000

20,000

15,000

10,000

5,000

0 jan. feb. march apr. may june july aug. sept. oct. nov. dec.

Buying price. Dynamics

Average prices, $/sq m Average prices change, %

December2011

Q42011 2011December

2011Q42011 2011

11,665 14,170 17,104 -30.5 -25.3 -10.4


BarkliVirginHouse,1stZachatievskiylane Source: Knight Frank Research, 2012

The total cost of the sold apartments in the primary market of elite real estate of Moscow for 2011 has made $1,1 bln$ mln

250

200

150

100

50

0

Total cost of the sold apartments Average cost of the sold apartment

$ mln

6

5

4

3

2

1

0 jan. feb. march apr. may june july aug. sept. oct. nov. dec.

www.knightfrank.ru

7

Primary market. Demand

In2011averagebuyingpriceonLuxurynew-builtmarketwas$2,772,462,significantdeviationstookplaceinFebruary–$5,169,715,thatis86%higher,thanaverageannualindex,andinApril–44%.Bytheendoftheyear,inDecember2010,averagesoldflatspricewasjust$1,667,474thatis50%lessthanaverageindex.

MostofdealsweredoneinTverskoyandKhamovnikidistricts,thankstohighinterestforprojectsonactivedevelopingstage.Interesttosuchhousingcomplexesiscausedmostlybytwofactors:attractivepriceandgoodinvestmentopportunities(flats’pricessignificantlyincreaseafterhousingcomplexdevelopingfinishes).

Floorspace

Mostofboughtflatsonluxurynew-builtmarketin2011werelessthan120sqm.Usuallysuchflatsareboughtforinvestmentpurposes,smallfloorspaceflatsareusuallyboughtintheverybeginningofsales,whenthepricesarequitelowyet.Thisyear,severalnewprojectsenteredthemarket.Thissmallspacesupplyintheseprojectswassoldoutliterallyinoneortwomonthsfromthesalesbeginning.Quantityofsoldflatswithspaceof120–180sqmincreasedincomparisonwith2010.

Budget

Onluxurynew-builtmarketbuyersprefernotexpansivesupply,mostofboughtflats(55%)werenotmoreexpensivethan$2million.Thisindexisaliketotheindexof2010withonedifferencethatsellsunder$1millionratiosignificantlydecreasedtogetherwithdecreasingofsupplyinthisbudgetsegment.Dealsratioofsuchflats(under$1million)wasonly6%(in2010–17%).Demandofmoreexpansiveflatsincreased,itisprovedbygrowthofquantityandratioof$2–$4millionbudgetdeals.Themostexpansiveflats(from$6million)dealsratiostaysquitestably.


Distribution of transactions in the primary market for 2011 on areas of Moscow%

Tverskoy

Khamovniki

Zamoskvorechye

Ostojenka

Patriarshie Prudi

Presnenskiy

Yakimanka

Arbat

Prechistenka

Chistiye Prudi

0% 10% 20% 30% 40% 50%

38%

25%

11%

7%

5%

4%

3%

3%

2%

2%

Distribution of the apartments sold in 2011 on the area%

19%

32%

Under 120 sq m

120–150 sq m

150–180 sq m


12%

18%

180–220 sq m

Over 220 sq m

19%


Share of sales in five most sold complexes in the primary market following the results of 2011 in total of sales in the primary market%

0% 10% 20% 30%

24%

17%

14%

7%

5%

SadovyeKvartaly

ItalyanskyKvartal

Barkli Park

ChetyreSolntsa

Legenda Tsvetnogo

Distribution of the apartments sold in 2011 at cost%

8%

48%

Under $1 mln

$1–2 mln

$2–4 mln

$4–6 mln


6%

30%

$6–8 mln

Over $8 mln

4%4%


8

Secondary market

Moscow’sluxuryrealestatesecondarymarketsqmaveragepricedecreasinghadstartedinApril2010andendedinFebruary2011.Duringthefollowing7monthstherewasastrictgrowthwithsmallswings.InQ4sqmaveragepricedecreasedfor0.7%mainlybecauseofmanyobjectsofexpensivesupplyrecallingduetoindefinitepoliticalsituationinRussia.IntheendoftheyearsqmaveragepriceindexwasalmostequaltoindexofDecember2010.

Morethan60%ofsoldin2011flatswerelessthan$4million.Averagepriceofsoldflatin2011onMoscow’sluxuryresidentialsecondarymarketwas$4.1million.

Supply prices. Dynamics

Average prices, $/sq m Average prices change, %

December2011

Q42011

2011 December2011

Q42011

2011

22,785 22,854 22,581 -0.3 -0.7 -0.2


Olga Tarakanova Residential, Head of City SaleKnightFrank

"Itisknown,thatallbuiltobjectsmorallyandphysicallygooutofdate.Newprojectsthattotallysatisfytoallcurrentdemandsappearonmarket.Pricesofdevelopingprojectsaresignificantly(upto2times)lower,thanpricesofalreadybuiltones.Buyerusuallystandsbychoice–whethertobuyaflatinareadyprojectandpay1.5-2timesmore,ortobuyaflatinahigherqualitydeveloping-projectinthesamedistrictbysignificantlylowerpriceandwaitforitforayearorayearandahalf.Whatisthesumthatclientsarereadytooverpayfortoday-readiness?Whilethesituationwithdevelopment-financinghasstabilizedthelastyear,trust-crisishadpassedand,asaresult,thechoiceapproachchanged.Buyersaremoreandmoreofteninterestedinwhatcausessuchhighpricesinsecondarymarketandwhydon’ttheyrelatetopricesonprimarymarketinthesamedistrict.Theanswerisunbelievablyeasy–usuallyownersstatethevalueoftheirflatsinaverysubjectiveway.Thewantedflatpriceargumentationconsistsofhowmuchproblemsdidthepreviousownerhadwithit,howmucheffortsdidhemakeforfinishing,whatmemoriesdoestheownerhaswithhisflatandsoonwithsuchimmaterialfactors.Whereas,theflatmaypresentonmarketforyears,thatsignificantlydecreasesthechancestosellituntiloverratedflatsownersfinallychilldowntomoreadequateprices.Duringthat,situationonmarketforalongexpositionperiodmaychangesomuch,thatchancestoselltheflatforanormalpricewouldbemuchlower,thantheycouldbeintheverybeginning…"


Moscow’s luxury real estate secondary market sq m average price change dynamics$/sq m

23,200

23,000

22,800

22,600

22,400

22,200

22,000

21,800 jan. feb. march apr . may june july aug. sept. oct. nov. dec.


Offer distribution at cost practically hasn't changed for 2011 From appreciable trends it is possible to allocate reduction of the offer in cost to $1 million and increase in a share of apartments in cost of $1-4 millionOffer distribution in the secondary market as of the end 2011 and 2010, depending on cost

%

50

40

30

20

10

0 Under $1 mln $1–2 mln $2–4 mln $4–6 mln $6–8 mln Over $8 mln

2010 2011

OVERVIEW

Europe

Austria

Belgium

CrechRepublic

France

Germany

Ireland

Italy

Monaco

Poland

Portugal

Romania

Russia

Spain

Switzerland

TheNetherlands

UK

Ukraine

Africa

Botswana

Kenya

Malawi

Nigeria

Tanzania

Uganda

Zimbabwe

Zambia

SouthAfrica

Middle East

Bahrain

UAE

Asia Pacific

Australia

Cambodia

China

India

Indonesia

Malaysia

NewZealand

Singapore

SouthKorea

Thailand

Vietnam

Americas & Canada

Bermuda

Caribbean

Canada

USA

EstablishedinLondonmorethanacenturyago,KnightFrankistherenownedleaderoftheinternationalrealestate

market.TogetherwithNewmarkCompany,KnightFrank’sstrategicpartner,thecompanyencompasses244officesin

43countriesacrosssixcontinents.

KnightFrankhasbeenasymbolofprofessionalismfortensofthousandsofclientsallovertheworldfor116years.

After16years,KnightFrankhasbecometheleadingcompanyinthecommercial,warehouse,retailandresidential

realestatesegmentsoftheRussianrealestatemarket.Morethan500largeRussianandinternationalcompaniesin

Russiahavealreadymadeuseofthecompany’sservices.

ThisandotherKnightFrankoverviewscanbefoundonthecompanywebsitewww.knightfrank.ru

© Knight Frank 2012

Thisoverviewispublishedforgeneralinformationonly.Althoughhighstandardshavebeenusedinthepreparationoftheinformation,analysis,

viewandprojectionspresentedinthisreport,nolegalresponsibilitycanbeacceptedbyKnightFrankResearchorKnightFrankforanylossor

damageresultantfromthecontentsofthisdocument.Asageneralreport,thismaterialdoesnotnecessarilyrepresenttheviewofKnightFrankin

relationtoparticularpropertiesorprojects.

ReproductionofthisreportinwholeorinpartisallowedwithproperreferencetoKnightFrank.

MOSCOW

Russia,119021,11TimuraFrunzeStr.Phone:+7(495)9810000Fax:+7(495)9810011

ST.PETERSBURG

Russia,191025,3BMayakovskogoStr.Phone:+7(812)3632222Fax:+7(812)3632223

KYIV

Ukraine,04071,39-41HoryvaStr.Phone:+380(44)5456122Fax:+380(44)5456122

Office Real [email protected]

Warehouse Real Estate, landViacheslavKholopovDirectorviacheslav.kholopov@ru.knightfrank.com

Retail Real EstateSergeyGipshRegionalRetailDirector,[email protected]

Residential Real [email protected]

International Investments [email protected]

Professional Consulting ServicesKonstantinRomanovPartner,[email protected]

Financial Markets and InvestingEvgeniySemyonovPartner,[email protected]

Valuation [email protected]

Marketing, PR, Market Research, HRMariaKotovaPartner,[email protected]

Business [email protected]

Saint PetersburgNikolaiPashkovGeneralDirectornikolai.pashkov@ru.knightfrank.com

KyivYaroslavaChapkoBusinessDevelopmentDirectoryaroslava.chapko@ua.knightfrank.com

2011 residential market - microsoft

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