BFM.RU: Living within means: tenants of luxury apartments increasingly seek cheaper housing options.

"The crisis has dealt a painful blow to the luxury rental market. The mass exodus of expats and layoffs among middle and upper-level managers have resulted in a significant loss of potential renters in this segment. This trend began to emerge in the spring and remains relevant even on the eve of the business activity season. The supply in the market already significantly exceeds the demand, and according to experts, it has increased not only due to available vacancies but also because of the emergence of previously unlisted properties that owners kept as a reserve and have now decided to use to improve their financial situation. Moreover, experts claim that there is an increasing number of illiquid options in the luxury segment, often with an inflated price.

Natalya Demidova

Head of the Luxury Rental Department at Contact Real Estate

"Currently, the market is definitely operating at a slower pace. Since the first crisis indications in the Russian economy, people have started to abandon their expensive apartments and search for more affordable options. We are witnessing a transition from larger to smaller properties, and tenants' preferences are focused only on cost reduction. It is clear that the luxury segment has also experienced a decline. At the moment, figuratively speaking, one and a half individuals create demand in the market. The most significant decline has been observed in the budget range of $5,000 to $10,000, within which the main demand was concentrated among managers who were affected by layoffs: bank employees, top managers, and IT company employees. In other words, the Russian managerial workforce, which has become scarce due to layoffs, has stopped indulging themselves and switched to more affordable rental options."

Despite the economic difficulties, there is still demand for luxury housing from those who are accustomed to a certain standard of living and are willing to pay for it. However, now that renters have a wide selection of options in terms of price and quality, property owners have to compete with each other primarily by reducing rental rates. Realtors say that owners of properties with a reasonable price and quality ratio have no problem finding tenants. Such options can be rented out after the first viewing.

However, a prolonged exposure period does not always indicate the illiquidity of a property. A high price, combined with appropriate quality, also prolongs the decision-making process for tenants. For example, it is believed that a good three-room apartment priced at 100,000 rubles per month will be rented out within three weeks, while if the cost fluctuates around 200,000 to 300,000 rubles, finding a tenant may take one and a half months. If the budget reaches $10,000 to $20,000, such a property may remain vacant for three months to six months.

As for rental rates, according to market participants, they have finally stabilized in the past couple of months. Owners are no longer making large-scale reductions, but there is no talk of an increase either. Traditionally, the most expensive area is considered to be Khamovniki, where depending on the specific location, a 200-square-meter apartment can be rented for $10,000 to $25,000 per month. The average budget for a similar size property on Tverskaya, Arbat, and Patriarch's Ponds is $10,000 to $15,000 per month. However, on Chistye Prudy and in the Presnensky district, excluding Moscow City, such an apartment can cost between $3,000 and $9,000 per month."

Yulia Kovaleva

Head of the Rental Department at Kalinka Group

«Price floors for rent rates were reached in February-March of this year, up until now they were stable and unchanged. Compared to last year, dollar prices have decreased by 30-40%, while ruble prices have remained at the same level, and there is a growth of up to 10-15% for high-quality apartments. The least in demand are Stalin-era buildings - many of them lack parking, which is a key criterion for our clients when choosing housing. Such apartments are mostly rented by single individuals or couples who do not own a car. The most in demand are monolithic modern buildings with fenced territories and underground parking. Apartments in exclusive elite buildings are practically taken off the market right away».