Moscow, like any other major city, is overpopulated. This is not surprising given that a thriving center of economic activity always attracts people. In an attempt to prove that it does not have boundless resources, Moscow erects natural barriers to the endless flow of newcomers and prices have become the main instrument in this fight for survival.
The Russian capital is one of the ten most expensive cities in the world, so it takes no small funds and some considerable imagination to settle in Moscow. An analysis of the local real estate market is particularly illuminating. It is becoming increasingly difficult with every year to buy an apartment in Moscow. All around the world, real estate prices increase by an annual average of 10-20%. In contrast, Moscow prices have shot up 100% in the last two years, which is something even the most efficient business would be hard put to copy. Last year brought the biggest surprise, as it was the most lucrative year for the real estate market in history. Prices for apartments in new housing developments rose by an average of 20%, while the secondary market housing was up by 22%. Obviously, this sharp increase would have never happened without an inflated demand for housing. Prospective buyers particularly sought either the simplest apartments in the lowest price segment or elite apartments and they are evidently in short supply.
Last year's summer banking crisis in Russia interrupted this upward trend. There were fears that another financial crisis loomed, which would have pulled down other economic sectors with it. To protect their savings, people started to withdraw money from investment projects. This left real estate market short of funds and led to a certain correction, although it did not surrender its positions. Price growth slowed, but apartments did not become cheaper. By fall, demand had heated up to the previous levels, although the market had stabilized and the prices stopped jumping like crazy. Today, the average price for a square meter in the city is about $1,800-2,000. This, though, is an approximate figure. In reality, the price of housing is determined by its quality, type and location. For instance, apartments in 5-, 9-, 12- and 14-storey panel buildings in districts far away from the center of the city, and in 5-storey brick buildings, normally cost $1,600-1,800 per sq. meter. Apartments in new 22-storey panel buildings cost a bit more -- $1,800-1,900 per sq. meter. Prices in brick buildings higher than five storeys are higher. An apartment in a 9-storey brick building goes for $1,700-2,500 per sq. meter, whereas in 6-, 8-, 10- and 12-storey buildings you will have to pay $1,800-3,000 per sq. meter. However, in 15-storey and higher buildings the price, for some reason, is lower and stands at $1,600-1,900 per sq. meter. The center of Moscow is a completely different story. It has its own pricing policy. The average price is $2,500-3,000 per sq. meter.
At the same time, analysts from Blackwood Real Estate point out that prices for elite apartments on the secondary market could continue rising despite average market trends. The specifics of buyers' behavior explain this phenomenon. If a wealthy individual decides to buy an apartment in a building he likes, he will do it no matter what. As a result, central districts like Tverskaya Street, Arbat, Ostozhenka, and Patriarch Ponds saw some apartments going for $12,000 per square meter or more last year.
Construction companies regulate the prices for new housing developments, which means it is difficult to find cheaper apartments there. On the other hand, you can invest money in an apartment at the so-called zero cycle, when the construction of a building has not started yet or there is only the foundation pit at the site. In this case, the future apartment costs about 40% less than it would if you were buying it upon completion. However, there are many "undercurrents" in this situation. For example, the IRN analytical center recently conducted a study of the new housing development market in Moscow. It turned out that construction companies start selling about 20% of new developments right after receiving construction permits and long before even digging foundation pits. "Developers, in essence, sell long-term futures or, figuratively speaking, air," believes IRN director Oleg Repchenko. "It is quite obvious that if a construction company lacks the funds to start construction, the project later might die before being completed," says Yury Kochetkov, another real estate market analyst.
However, you do not have to live in Moscow to work there. The Moscow region features a number of attractive satellite towns with developed infrastructure. The average price for a square meter in the Moscow region is about $930.
And if living in Moscow or its surroundings is not the ultimate goal of your life, it is wiser to find a place somewhere in the provinces, for example, in Penza or Ulyanovsk. According to Alexander Dikov, the director of the Real Estate Center company in Ulyanovsk, the average price of a square meter in new apartments in Ulyanovsk is $400, and $390 on the secondary market.
Potential buyers can certainly wait for a more favorable situation on the real estate market. After all, could prices suddenly start falling? Experts do not believe this will happen. Analysts from the Institute of Urban Economics conducted a projected evaluation of the dynamics of solvent demand for housing and mortgages until 2010. According to their estimates, if reforms in the construction and mortgage spheres do not stall, prices for housing will grow by 60% by 2010 in comparison with 2003.
