Luxury class sale

According to Point Estate, the average price of offers in the primary elite market in Moscow in September 2017 was 676,000 rubles per square meter, which is 13 percent lower than the level in September 2016. Contact Real Estate calculated that the price decrease for the same period was 7 percent (from 784,897 to 730,192 rubles per square meter). Since the beginning of last year, ruble prices have already decreased by 22 percent. At the same time, the volume of offers has increased by 51 percent, from 1,415 square meters to 2,138. Experts cite different reasons for the price decrease. "The structure of the offers is changing, with sales in seven new projects opening this year at starting prices, which are always below the market average," explains Ekaterina Rumyantseva, Chairman of the Board of Directors of Kalinka Group. "Traditionally, promotions and discounts are offered in the summer to stimulate sales. Discounts of up to 20 percent were offered in some new projects, while in other properties, prices increased by 11 percent, indicating the absence of a unified pricing dynamic." According to calculations by Lyudmila Potapova, Director of the Elite Residential Real Estate Department at Knight Frank, sales were launched in 13 new complexes in the first 10 months of 2017, and the volume of offers also increased due to the new supply of already ongoing projects. For example, new phases were released in projects such as "Sadovye Kvartaly" and Depre Loft. "Actual price decreases were only observed in a few projects, where prices were adjusted downwards to bring them closer to market value. Prices in the apartment complex "Zvezdy Arbat" were reduced by up to 20 percent," she notes. Irina Kalinina, Managing Partner of Point Estate, noted a price decrease of 20-24 percent on average in June 2017 in the Smolensky de luxe and "Klenoviy Dom" residential complexes. Another factor that influenced the price decrease, according to Lyudmila Potapova, was the active marketing policy of developers, who conducted stimulating promotions. For example, KR-Properties offered discounts on apartments in Depre Loft and "Rassvet Loft Studio" complexes. In the summer, "Donstroy" announced the start of a promotion in the Barrin House residential complex. At the same time, according to Vyacheslav Antropov, Development Director at Contact Real Estate, the buyer demand is growing actively. In October, 61 deals were concluded in the elite new construction market in Moscow, which is 50 percent higher than the same period in 2016. A total of 430 deals have been concluded since the beginning of 2017, also exceeding last year's figures. "Currently, buyers of luxury housing are benefiting, while developers find themselves in a difficult situation of serious competition," he says. "New projects continue to be added to the market at attractive prices, which allows investors to make profitable purchases."

It is true that not all properties are becoming cheaper, and some are even increasing in price. Ekaterina Rumyantseva notes the planned price increase in premium properties that were in the early stages of construction and showed good sales dynamics over the year. These include, for example, the A-Residence complex of luxury apartments, the elite house "Renome", Malaya Ordynka, 19, and the Residence on Pokrovsky Boulevard. "In the Aristocrat residential complex, the average price has increased by 21% over the year, partially due to changes in the supply structure (sales of the most expensive and larger apartments) and partially due to planned price increases resulting from the progress of construction. Prices for different apartments have increased by 5-17%," adds Irina Kalinina.

Despite the increase in prices for some properties, the overall trend is downward. And this trend is most pronounced during the pre-New Year promotions, which have already started. "New Year discounts from developers are traditional seasonal events that stimulate sales," says Ekaterina Rumyantseva. "It should be noted that in most cases, discounts are offered only on certain lots, not the entire property. The size of the New Year discounts can be around 10-15%."

On the secondary market, there are no New Year promotions, of course. However, as Vyacheslav Antropov claims, apartment owners become more accommodating towards the end of the year and agree to discounts.

According to experts' forecasts, significant price reductions should not be expected in the next year. Ekaterina Rumyantseva believes that the situation will not change much in the first half of the year, and the market will remain stable. "The introduction of amendments to the DDU (equity participation agreement) will also affect the situation in the second half of the year, making developers' lives more difficult. It is difficult to predict how the market will react to this," she says.

Ludmila Potapova also does not expect drastic changes. In her opinion, prices in the most successful complexes will show a slight positive trend, but the average indicator is likely to continue to decline, which will also be associated with the active entry of new projects into the market.

However, according to Vyacheslav Antropov's forecast, prices in the luxury market will continue to decline at the beginning of next year: "The supply volume is already oversaturated - out of 58 new construction projects, only about 30 are currently being successfully implemented. By the end of this year, the market will continue to be replenished with new projects, leading to further price reductions."