Buyers of suburban new buildings are shifting to the secondary market.

Over the past 2-3 years, sales in the premium suburban real estate secondary market have been declining. Owners of properties were pricing them inadequately for the crisis period, and the sizes and layouts were not meeting the buyers' preferences. Buyers preferred land with or without construction or new ready-made homes in the primary market, which offered a more interesting selection. However, developers have significantly reduced the number of new projects. Four years ago, there were 101 elite settlements, whereas now there are only 67, according to Valentin Zuev, the leading expert at Villagio Estate. Zuev states that only a few developments can boast a diverse selection, with only 10% of settlements showing dynamic sales. Most complexes have already been sold at 80-90%, and the remaining 10-20% of properties are considered illiquid due to factors such as excessive or insufficient area, unfavorable location, inconvenient layouts, outdated architecture, poor construction quality, etc. According to Sergey Kolosnitsyn, director of the residential property department at Penny Lane Realty, at the end of 2016, 38.2% of sales in the suburban market were accounted for by primary sales, while 61.8% were from the secondary market. In comparison, the figures were the opposite in 2013: 66.3% and 33.7% respectively. The company estimates that 60% of all transactions in the segment above 15 million rubles are made in the secondary market. Olga Bakhmetieva, director of the suburban real estate department at Tweed, states that in the previous year, 45% of transactions made by their company were in the elite segment and the secondary market, increasing to 60% in 2016. The primary market is no longer the driving force of demand, according to Timur Saifutdinov, the CEO of Point Estate. He states that it has become only an entry point for those who can only afford the land. According to Saifutdinov, 45% of transactions in the primary market in 2016 were in the segment of land without construction. Now, owners successfully compete with developers due to their readiness to negotiate. For example, one of their clients, who started selling a house in Novaya Riga in an established settlement for $11 million three years ago, is now willing to sell it for $4.5 million. Nadezhda Khazova, CEO of the agency "Usadba," also knows of properties that are listed for $8-9 million but sell for $5-6 million. A few years ago, according to Evgenia Panova, head of the suburban real estate department at Vesco Realty, they were approached by the owner of a magnificent mansion with an area of 1,500 square meters, a pool, and luxurious interiors, on a large forest plot located 40 km from Moscow along Simferopolskoye Highway. The owner estimated their investment at $6 million and wanted to sell it for $7 million. Finally, a month ago, the house was sold for $1.5 million. A fundamental ancestral estate with an area of 800 square meters on Novorizhskoye Highway (25 km from Moscow Ring Road) had an owner who invested at least $3 million but sold it for $1.1 million. Similar examples inspire potential buyers, but Panova notes that there are still few good, quality, and thought-out homes that are move-in ready. Well-designed properties are sold within 3-4 months, but quick sales are rare and become legendary. More often, buyers withdraw from deals after making a down payment. Reasons for withdrawal include changing their mind, finding another property, feeling that they overpaid, etc., according to Alsu Khamidullina, head of the suburban real estate department at Contact Real Estate. The need for any remodeling or repairs significantly reduces the chances of a sale, says Svetlana Volskaya, head of the sales department at "Na Kievskoy" office of "Miel". Fewer properties are being taken off the market compared to those being listed for sale. One reason is that investing in suburban real estate does not yield profits at this time, and it is expensive to maintain. Many owners are selling their homes at a significant discount to make more profitable investments or simply get rid of burdensome property. On average, the cost of maintaining a 600-700 square meter house on Rublevka amounts to 200,000-250,000 rubles per month, according to Point Estate. The secondary market is gradually replenishing and updating its offerings. According to Point Estate, there are around 3,000 residential properties in the elite secondary market. Approximately 700 houses were put up for sale last year. The old stock and Rublyovka palaces have not undergone any major changes; the majority of offerings still consist of overpriced houses. Saifutdinov states that the future of such offerings will gradually move down the class hierarchy, transitioning from the elite class to the business class. On the other hand, according to Zuev, there is a quality offering from small developers and owners. Panova agrees, stating that micro-developers buy new plots every year and build houses. They personally oversee the finishing work and furnishings and sell them at a good profit, thanks to the use of their own construction teams, skillful planning, and well-acquired plots. Typically, such houses are built in prestigious settlements and are sold at a higher price than houses where the owner acts as the designer. As an example, Panova mentions a house in Knyazhye Ozero on Novaya Riga: a 500 square meter house on a 40-acre plot sold for $3 million within three months, "1.5-3 times more expensive than similar houses in the same settlement," she adds. This type of offering is now competing with the most expensive segment of the primary market, says Saifutdinov, attracting financially capable and demanding clients.

Houses built for personal use, in which the owners lived for some time, sell well. In this case, quality was not spared, and it shows, explains Panova. Many deliberately look for such an offer, although it is not easy: the tastes and concepts of comfort, layout, and style of the buyer and seller must coincide.

According to Kolosnitsyn, there are several settlements on almost every suburban route that attract the main demand on the secondary market. On Rublevo-Uspenskoe Highway, it's "Gorki-8," "Lesnye Prostori," "Nikolino," "Polesye," "Azarovo" ("Lesnoye Lapino"). But there are few large-scale projects on Rublevo-Uspenskoe Highway, so clients also consider offers in settlements such as Gorki-2, Zhukovka, Barvikha, Lapino, Molodenovo, Razdory, Semenkovo, Soloslovo, Tagnikovo, Usovo, Uspenskoye, and Shulgino. Hamidullina says that it is difficult to buy a new house with finishing touches in a modern settlement on Rublevo-Uspenskoe Highway for $3-5 million, but there are offers on the secondary market for $3 million for 450-700 sq. m on 15-25 acres turnkey.

Among the settlements where people purchase second-hand houses on Novorizhskoye Highway are "Nikolskaya Sloboda," "Pavlovo," and "Greenfield," according to Inna Leshchiner, Director of the Country Real Estate Development Department at Kalinka Group. Hamidullina also mentioned "Millennium Park" and "Monteville" in the same area. Penny Lane Realty adds Madison Park, "Green Hill," "Istra Country Club," "Knyazhye Ozero," "Novakhovo," "Benelux Residences," and "Monolit" to the list.

According to Anastasia Mogilatova, CEO of Welhome, clients on Novorizhskoye Highway are looking for turnkey houses with an area of 400-500 sq. m on plots of land of 20-25 acres for $1.5-2.3 million. According to Penny Lane Realty, popular locations on Kaluzhskoye Highway include "Antonovka," "Primeville," and "Soglasiye 2"; on Kievskoye Highway - "Grafskie Prudy" and "Promenad"; on Mozhaiskoye Highway - "Zapadnaya Residency"; and on Pyatnitskoye Highway - "Angelovo-Residence," "Blagoveschenka," and "Rosinka."

Falling Budget

Many of the houses currently for sale were built during the "prosperous years" with great enthusiasm. Now buyers are more modest: they pay attention to cottages up to 500-700 sq. m on plots no larger than 30 acres, with quality external and internal finishes, without frills, and with well-thought-out layouts, says Mogilatova. Kolosnitsyn believes that after considering the cost and price of maintaining a house, the client is more likely to choose a 250-300 sq. m house on 10-15 acres. However, it cannot be said that small houses are actively sought after. According to Point Estate data, in 2016, the main volume of demand on the primary market was for 400-500 sq. m houses - 29% of transactions. Houses with an area of 300-400 sq. m were preferred by 20% of buyers. Properties smaller than 300 sq. m interested 6.5%. Sales of half of the houses in the luxury market have not yet materialized, reassures Saifutdinov. However, many have considered buying a single-story cottage for more comfortable living, added Mogilatova.

According to 2016 statistics (Tweed), the average budget in the secondary market for luxury country real estate is about 80 million rubles, or $1.2 million (compared to about $1.6 million in 2015). The majority of transactions were in the range of up to $4 million, while purchases above $10 million were rare.