Developers have seen enough of luxury

Expensive apartments have been built less in Moscow

Developers of premium apartments have significantly reduced the introduction of new projects to the market. The reason is a decrease in demand, which prevents developers from selling off space even for completed objects, as well as a decrease in the number of available sites and the continuing uncertainty in the legal status of apartments. Developers support the demand for inexpensive apartments by bringing lots with an extremely small area to the market.

In 2022, the construction of slightly more than 1 thousand premium apartments was launched in Moscow, which is almost 11% less year-on-year.

As a result, the share of the format in the expensive segment of real estate decreased to 31%, while in 2021 it accounted for 42% (the rest of the volume is traditional apartments), Bon Ton calculated.

This data is also confirmed by the NF Group. According to analysts, before the pandemic, apartments accounted for up to 50% in the structure of offers in the premium segment.

In the entire volume of housing under construction, apartments of various price segments in the capital account for 14%, and premium lots occupy 17% in them, said Metrium Premium. According to various estimates, the capital accounts for 70-75% of all premium apartment complexes under construction in the country, St. Petersburg accounts for up to 15%, the rest is distributed among other million-plus cities.

Kalinka founder Ekaterina Rumyantseva considers the decline in the share of apartment complexes in the premium segment a temporary phenomenon: "In all crises, developers reduce the commissioning of such facilities due to narrow demand." The number of potential buyers is now declining in all segments, confirms Alexander Andrianov, Vice President of GloraX. Sergey Nyukhalov, Deputy Sales Director of Granel Group, says that many people bought premium apartments for rent, including expats and tourists, who have become significantly fewer in Moscow since last spring.

However, there is no reduction in their share in the mass market of apartments, says Anna Radzhabova, director of the Metrium Premium Luxury real estate Department. In her opinion, developers of inexpensive facilities support demand by bringing projects with extremely compact lots to the market, for example, with an area of less than 10 sq. m.

Another reason for the reduction of new projects of premium apartment complexes is the shortage of free sites for construction in prestigious locations, Ms. Radzhabova notes, allowing for a further decrease in the share of such facilities in Moscow. Bon Ton notes a large volume of unsold expensive lots in complexes under construction or already commissioned. So, now 3.2 thousand apartments and apartments with a total area of 322.1 thousand square meters are on sale in the primary premium market of Moscow — this is more year-on-year by 84.6% and 83.5%, respectively.

However, neither the drop in demand nor the signs of overstocking of the segment seriously affected prices. According to Valery Tsvetkov, Managing director of Bon Ton, the average cost of expensive apartments in almost completed facilities now amounts to 863.7 thousand rubles per 1 sq. m, which is 10% more expensive than in projects that are just entering the market.

As a result, developers are not ready to completely abandon the construction of expensive apartment complexes even during the crisis.