Elite realty market is growing but service lags behind

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Elite realty market is growing but service lags behind
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Peculiarities of the Russian elite real estate market 

Since the beginning of 2017 buoyancy has been observed on the real estate market. A number of new projects have appeared. The total volume of offers has grown by 16%. Does this fact prove that the situation is changing? Though such a conclusion is rather ahead of time, it gives some hope.

The elite has stepped up

Presently, the Moscow elite realty market comprises 33 residential compounds, 54 buildings, and 1 147 lots. 95% of the offers have a budget  of over 50 m roubles ($834,000). There are also cheaper variants, the minimal of which is 25 m roubles ($417,000). 40% of the demand is 100—150 sq. m large housing, 34% is about 100 sq. m, 8% is from 200 to 300 sq. m, and a little more than 1% includes flats and houses of more than 300 sq. m. According to Sergei Kolosnotsin, Residential Realty Department Director of the PENNY LANE REALTY company, the most expensive flat was sold for $20 m, and the most expensive house for $30 m.

The elite realty sector may serve as a kind of barometer showing the trends of the market. During the crisis this sector fell significantly, but the situation is changing.

According to Roman Popov, Strategic Consulting Department Director of the Kalinka Group, buyers have become more active, and since the beginning of the year more than 220 deals have been set up. This is 6% more than during the same period of 2016.

How was the result achieved? Firstly, due to new offers, and secondly, due to discounts which sometimes reach 10% —20%.  In 2016 the average price for 1 sq. m was 880,000 roub. (≈$15,000), whilst presently it has decreased to 737,000 roub. (≈$12.300).

Prices also behave differently; in some projects they go up and in others they go down. Even in one and the same house they may float. Any detail is important: a price may differ manifold depending on the view from your window.

Elite realty market is growing but service lags behind


Mortgage saves money

One more novelty that has appeared lately is the increase of purchases with mortgages. Their share adds up to about half of the total number of bargains. However, the reason for the use of this tool is quite different than in other sectors.

The thing is that more often people use mortgages not because they do not have their own money, but because it is invested in business, and it is easier for them to get a loan than to withdraw the money. They take a mortgage for rather a short period of time, and sometimes even pay it back ahead of schedule.

The current elite-class realty market in Russia is focused on the buyer. And the buyer has changed a lot and has become competent and demanding. He wants a seller to observe all the standards characteristic of this type of realty.


Peculiarity of elite house construction

Elite housing preserves its status, but this does not mean that nothing changes. The boundaries between different classes of realty are dithering. 

— In about 10 years, the Moscow residential stock will look different, Diana Nelipovskaya, Sales Director of the Pioneer GC, predicts.

Elite-class realty is gradually moving away from the centre of the city, and there are even several compounds outside the MRR where the flats sell well. Mostly, however,  elite housing is built in the centre.

A characteristic feature of this is that developers try to erect houses together with the surroundings that are of great importance, including parking spaces, schools and nurseries, etc. All these factors influence the price.

Elite realty market is growing but service lags behind


Young people prevail

The image of the buyer has changed lately. Ten years ago they were mainly top officials and representatives of large businesses. Presently, the community has become younger and more educated. They have travelled abroad and know what elite realty looks like, and some of them even own it abroad. They do not want to have anything worse in Russia.

Many of them consider time to be the most important resource, and do not therefore want to deal with any repairs but instead want to move into a ready-to-live flat.

As such, 13% of all lots are sold completely finished these days. The buyers also carefully check every centimetre of the new-bought realty. 


But service is weak

Market participants remark that it is elite realty purchasers who appreciate services most of all and, in turn, enjoy different innovations that lead to its becoming cheaper. However, according to Sergei Menn, Commercial Director of the Domopult company, in many elite houses their service is at the same level as 10-15 years ago.

The quality of the service lags behind modern standards, and there are few additional services. In the USA the annual market is evaluated as much as $30—35 bln, and in Russia it is at an embryonic stage. But these services are demanded, with the greatest being required by the young: they want to get services based on digital technologies.

On the whole, the situation on the market makes developers feel positive, and they hope for the growth of prices, with some of them even setting their sights on the maximum amount.

Vladimir GURVICH