Demand and rental prices formation in the III-IV quater of 2014

The main tendency marked by real estate market experts is the demand decrease in exclusive market with budget around 7.000 euro per month and demand rise for qualitative rentals with budget 3.000-5.000 euro per month. 

According to news portal RIA Novosti these tendencies are resulted by the foreign companies business activity reduction on the ground of sanctions applied in Russia, in particular the last wave of sanctions touched the foreign top-managers. The segment of tenants with high budgets in the bulk of current lease contracts decreased aproxximitely in twice.

For the time being there are the following tendencies in the elite real estate market:

  • Foreign tenants quits expensive apartments despite the penalties for the preliminary contract breakdowns and embark on cheaper premises searching but with characteristics close to the luxury apartments they used to reside before. They are ready to compromise only in the quality of apartment finishing, fit out and equipment.  
  • The greatest demand is registered traditionally in the prestigious locations in the calm lanes of residential central Moscow in the nearest proximity to the Kremlin, namely: Golden Mile – Ostozhenka Street and adjoin lanes, Kropotkinskaya metro area, lanes adjoin to Old Arbat, Smolenskaya and Park Kultury within the Garden Ring, Patriarchy Ponds, Chisty Ponds and Zamoskvorechiye.  
  • The main inflow of elite real estate market customers with budgets in amount of 3.000-5000 euro are the employees of the embassies located in the abovementioned areas. 

It is worth noting that the main requirements to the rentals for various embassies employees are quite the same thus there is the shortage of the premises with the following characteristics: 

  1. Brick/monolith buildings located in calm central streets of Moscow. 
  2. Total area from 100 to 170 sq. m depending on the family composition of the diplomat delegated in Moscow. 
  3. Room quantity: at least three. Premises must have at least 2 isolated bedroom and separated (not studio type) living room.
  4. Apartment shouldn’t be overcharged with furniture or should be offered unfurnished.  
  5. The walls should be painted light, preferably not wall-papered. 
  6. Preferably flats with at least 1.5 bathrooms.  
  7. Concierge/ security are preferable. 
  8. Renovated entrance is a preference. 
  9. Fixed parking stall is a preference. 
Rentals with above-mentioned characteristics used to be of great demand before the last crises wave and the recent tendencies of demand switch to the qualitative inexpensive apartments with rental rates about 3.000-5.000 euro provokes an acute shortage of such rentals.

Landlord tactics in the conditions of demand redistribution 

The owners of premises in the budget around 3000 - 5000 euro, being aware of the qualitative inexpensive options shortage are not willing to provide tenants with discounts and to accept unprofitable lease contract terms.

The owners of more expensive real estate reluctantly and slightly compromise or prefer to freeze the offer until the better economic situation would be established as they conceive that they wouldn’t cover wear and tear costs by letting out their expensive property for moderate rental rates.

Landlords dealing with rental business professionally sell out exclusive premises and buy cheap flats: instead of one expensive apartment in Moscow center they acquire five cheap flats in the outskirts where the demand is permanently great. Thus the quantity of qualitative offers in rental market is reducing while sales market is reach in exclusive real estate offers with premium location.

One more interesting tendency is marked by real estate experts: the most expensive luxury properties above 10.000-12.000 euro are of great demand now as rich Ukrainian residents moved to Russia because of economical worsening in their motherland. Demand for luxury apartments has increased half as much in the area of Golden mile and Tverskaya. 

Concerning the future tendencies in elite realty segment annalists assert that the above-mentioned tendencies will remain the same at least until the end of 2014.
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