Expat Housing Market 2014
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Transcript of Expat Housing Market 2014
M
M
EXPATHOUSING REVIEW
2013: Review & Conclusions
2014: Tendencies & Forecast
Overall supply figures for 2013 show an optimistic 27% of increase in available properties – which is good news after the alarming 34% decrease last year. At the same time supply is still consider-ably below the level of 2009-2011 which results in shortage of quality properties, particularly of larger size and in the most popu-lar areas. The growth of supply in 2013 is also influenced to a large extent by newly built residential complexes in Moscow city – some small and medium sized investors have entered the market with a significant number of rental properties of various sizes in these complexes.
Supply has grown in 2013 by 27% - which is a new and posi-tive trend compared to 2012, when it has shown a decrease of 34%. Budget and room struc-ture of supply remained similar to last year, whereas there are different dynamics in supply in different areas.
Territorial structure of supply in the residential rental market of Moscow (high-budget segment), December 2013
SUPPLYSUPPLY
Property supply: areas
20% 25%15%10%5%0%
Arbat-Kropotkinskaya
Lubyanka-Kitay-Gorod
Zamoskvorechye
Tverskaya-Kremlin
Leningradsky Prospect
Leninsky Prospect
Kuntsevo
Krasnopresnenskaya
Patriarshie Prudy
Kutuzovsky Prospect
Others
Tsvetnoy Boulevard
2012 2013
Supply of properties for rent: 2009-2013
I II III IV V VI VIIVIII IX X XI XII
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%I II III IV V VI VIIVIII IX X XI XII I II III IV V VI VIIVIII IX X XI XII I II III IV V VI VIIVIII IX X XI XII I II III IV V VI VIIVIII IX X XI XII
2009 2010 2011 2012 2013
- 1 -
Diagram 1.2
Diagram 1.1
•
•
Historically in Moscow there is a huge shortage of large apartments – this connected with the Soviet part of history when people were just not supposed to live in apartments larger than 70 sq.m. and 2 bedroom. Since 20 years of real estate market evolution developers started to build more larger apartments but the disproportion is still there.
Another reason that large apartments are low in supply is that despite high rental prices sale prices are even higher – and investment income is not that high – 3-5% annually. For comparison inflation rate is circa 10%, and bank interest for sum of money equivalent to price of Moscow apartment – 8-10%. This is why there are few professional landlords on the Moscow – mostly people rent apartments they do not live in because they do not want to sell for some reason.
Reasons for low supply of large apartments in Moscow
Supply analysis of the high-budget segment of the residential rental market in Moscow in terms of number of rooms, December 2013
Analysis of supply – number of bedrooms
1 bedroom4 bedroom
4+ bedroom
19%
2 bedroom40%
3 bedroom19%
13.5%
7.1% 1.8% studiostudio
1 bedroom
2 bedroom
0.5%
38.4%
16.8%
27.9% 3 bedroom
4 bedroom
4+ bedroom
9.7%
6.6%
2012 2013
Asking prices in 2013 have been quite stable with an annual increase of 8% compared to 2012.
Average rental rate
21021102 2013
$ 8 500
$ 8 000
$ 7 500
$ 7 000
$ 6 500
$ 6 000I II III IV V VI VIIVIII IX X XIXII I II III IV V VI VIIVIII IX X XI XII I II III IV V VI VIIVIII IX X XI XII
- 2 -
Dynamics of asking prices, 2011-2013
Diagram 1.3
Diagram 1.4
Another new trend of 2013: companies resumed hiring and bringing to Russia new top and high level managers. Majority of these were accompanied by their families with children vs. single moves. In figures: 42% vs. 58% respec-tively, which accounts for 12% growth in family moves.
2013 – for the first time in the past 4 years – has seen actual growth of the expatriate population coming into Russia vs. local hires and Russians. This year overall figures are 70% vs. 30% respectively.
The same tendency – more families with children looking for larger apartments/houses which in the Russian market are typically unfurnished – accounts for growth in the demand for unfurnished accommodation. At the same time due to high import duties overall the demand for unfurnished properties is still low – only 14% vs. 86% demand for furnished accommodation.
Structure of demand – tenant profile
2012
2011
2013
Russian/CIS
65% 35%
60% 40%
66% 34%
InternationalAssignee
DEMANDDEMAND
Overall demand in 2013 has remained at the same level as in 2012 – with a marginal 4% decrease. It has been characterized by regular seasonal peaks connected with the school calendar – with most active months in April, July and September – period when most families are relocating due to the end/beginning of the school year.
Main changes in tenant profile in 2013 – more international assignees and more families with children are relocating to Moscow.
Supply analysis of the high-budget segment of the residential rental market in Moscow in terms of rental budget, December 2013
28.2% $40006.8% $15000
14.4% $10000 - $15000
11.9% $8000 - $10000
17.3% $6000 - $800021.4% $4000 - $6000
9% $1500028% $4000 12% $10000 - $15000
11% $8000 - $10000
15% $6000 - $800025% $4000 - $6000
Analysis of supply – rental budget
2012 2013
- 3 -
Diagram 2.1
Diagram 1.5
Structure of demand – number of bedrooms
Demand analysis of the high-budget segment of the residential rental market in Moscow in terms of number of rooms, January-December 2013
The structure of demand in 2013 clearly correlates with the changes in the tenant profile and the growth in number of assignees relocating with families. Demand for smaller and less expensive properties have decreased, the demand for larger and consequently more expensive apartments has increased compared to last year.
By the end of 2013, the average budget of rental apartment requested by a prospective tenant amounted to $7000 , which is 19% higher than in 2012 ($5900).
studio
3 bedroom
4 bedroom
4+ bedroom
16%
10% 3%
28%
2 bedroom26%
1 bedroom17%
studio
2 bedroom32%
4+ bedroom4% 7%
4 bedroom 14%
3 bedroom 21%
1 bedroom22%
2012 2013
2012
2011
2013
60% 40%
70% 30%
58% 42%
Single/Coupleswithout children
Families with children
2012
2011
2013
80% 20%
89%
11%86%
14%
Furnished Unfurnished
- 4 -
Diagram 2.2
Diagram 2.4
Diagram 2.3
Supply-demand correlation (most popular areas)
Area Supply Demand
Arbat-Kropotkinskaya
Lubyanka-Kitay-Gorod
Zamoskvorechye
Tverskaya-Kremlin
Leningradsky Prospect
Leninsky Prospect
Kuntsevo
Krasnopresnenskaya
Patriarshie Prudy
Kutuzovsky Prospect
Frunzenskaya
20%
10%
9%
10%
9%
11%
5%
7%
5%
4%
2%
17%
7%
9%
13%
12%
6%
1%
7%
5%
3%
4%
Demand analysis of the high-budget segment of the residential rental market in Moscow in terms of number of rooms, December 2013
Potential tenants have not changed their preferences in 2013 – the most popular areas are still either downtown (Arbat-Kropotkinksaya and Tverskaya) or around international schools (Leningradsky prospect).
Structure of demand – areas
Supply-demand correlation- number of rooms
1% 7%
17% 22%
38% 32%
28% 21%
10% 14%
6% 4%
Number of Bedrooms Supply Demand
Studio
1 Bedroom
2 Bedroom
3 Bedroom
4 Bedroom
4+ Bedroom
0.0%
Arbat-Kropotkinskaya
Tverskaya-Kremlin
Zamoskvorechye
Other
Lubyanka-Kitay-Gorod
Krasnopresnenskaya
Leningradskiy boulevard
5.0% 10.0% 15.0% 20.0%
- 5 -
Chart 2.1
Chart 2.2
Diagram 2.5
2012 2013
Though smaller properties in the budget below $4000 still take the majority of demand volume - 38% - it is 10% less than last year. At the same time the demand for larger properties in the budget over $10000 has increased by 9% com-pared to 2013.
By the end of 2013, the average budget of renting an apartment, requested by a prospective tenant amounted to $7000 per unit per month, which is 19% higher than in 2012 (January-November 2012 - $5900).
Rental rates and budgets
Demand analysis of the high-budget segment of the residential rental market in Moscow in terms of rental budget, January-December 2013
Structure of demand – rental budget
Supply-demand correlation
28% 37%
25% 21%
15% 13%
11% 9%
12% 12%
9% 8%
Price USD Supply Demand
< 4000
4000–6000
6000–8000
8000–10000
10000–15000
> 15000
37.9% $4000
7.7% $15000
9.1% $10000 - $15000
11.8% $8000 - $10000
13% $6000 - $800020.5% $4000 - $6000
53.1% $4000
4.0% $15000
6.4% $10000 - $15000 7.5% $8000 - $10000
10.8% $6000 - $8000
18.2% $4000 - $6000
2012 2013
- 6 -
Diagram 2.6
Chart 2.3
Analysis of average asking prices/Number of bedroom/Class
Apartments in pre-revolutionary, Stalin-period or ministerial buildings. Clean secure entrance with concierge or quality intercom arrangement. Quality renovation with the use of standard renovation materials (not designer renovation), in many cases furnished in IKEA style/quality.
Apartments in pre-revolutionary renovated bulidings or new buildings. Presentable entrance with high quality renovation and concierge or security, in most cases the building has underground or enclosed parking. Apartments with high quality designer renovation, furniture and appliances.
Apartments in new premium class buildings - mostly "club buildings" - premium quality designer entrance renovation, underground parking, high multi-level security. The apartments have renovation of high quality, furniture and appliances of top brands, very often unique features like size of more than 300 sq.m., terraces.
$8000-$10000 $8000-$10000
Close to International schools (Leningrasky prospect, Kuntsevo)
Arbat/Kropotkinskaya, Patriarshy Ponds, Tverskaya, Lubyanka/Kitay-Gorod,
ZamoskvorechieArea
Description
$2500–$4000 $3500–$5000
$3500–$5000
$4500–$5500$6000–$8000
$4500–$8000
$2500–$3000 $3000–$4500
$9000–$12000$5000–$8000
$8000–$12000
$12000–$17000 $12000–$17000
$12000–$20000$15000–$23000
$17000–$30000 $17000–$30000
$6000–$11000
$6000–$10000$4000–$5500 $4000–$5500
$7000–$9000
3 bedroom
4 bedroom
2 bedroom
Studio
Business classElite class Elite classPremium class
(unique properties)
Premium class (unique
properties)
5+ bedroom
Business class
Business class
Elite class
Premium class (unique
properties)
- 7 -
Chart 2.4
International compounds
The prices of houses in main international compounds which remained stable in 2012, have grown by 5% on average by the end of 2013/beginning of 2014. Prices for most popular types of houses (which have the waiting list of poten-tial tenants) have increased by 8-10%.
The availability of houses in the compounds is still very seasonal – the largest supply of houses in compounds is in summer during the school break – when families with children leave Moscow and terminate their leases in com-pounds.
3 2.5 160 13 000
3 2.5 209 16 000
3 2.5 200 14 000
3 2.5 212 18 500
4 2.5 215 19 000
4 2.5 220 20 500
5 3.5 340 24 200
2 2 130 8 000
3 2.5 151 10 000
4 2.5 222 13 000
4 2.5 240 14 000
4 2.5 240 13 500
5 4.5 266 14 500
5 4.5 302 16 000
5 4.5 292 15 500
5 4.5 326 16 500
7 4.5 400 18 000
5 5 345 20 000
4 2.5 178
4 3.5 182
4-5 5 280
+8%
+10%
+4%+5%
+3%
+8%
+7%
0%
0%
0%
0%
0%
0%
+1%
-
+3%
-11%
-
13600
14200
17000
+5%
+9%
+1%
alone house 1901
Tver-1
Tver-3
Suzdal-1
Suzdal-2.3
Novgorod-1
Novgorod-2.3
Yaroslavl-2.3Rosinka
Business
Executive
Family
Family Deluxe
Family +
Country
Country Deluxe
Presidential
PresidentialPresidential Deluxe
Deluxe (Mitishi)
Ambassador Stand
Serebryany Bor
Pokrovsky Hills
Rent vs. 2011
Rent 2012 ($)
Size, sq. m# of Bath-room
# of Bed-room
House TypeCompound
- 8 -
Chart 2.5
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-House
Town-HouseTown-House
Town-House
House
House
House
House
The market will be greatly influenced by the current devaluation of Russian local currency (ruble).
- Landlords are likely to start calculating rent in euros or dollars. In theory this should lead to decrease of dollar
prices. In reality in most cases when re-calculating the ruble amount in dollars/euros landlords wlll base their
calculations on the most favourable exchange rate for them.
- If company allowances are set in rubles this may have to be significantly reviewed so they could correlate to
their value in 2013.
The change of tenant profile in 2013 – prevailing families vs. singles – has affected the availability of larger
properties. 2014 will witness price increase for this type of housing and shortage of availability. Typical example:
housing compounds that increased their prices and have waiting lists even before the school year start.
FORECAST FOR 2014 AND RECOMMENDATIONSFORECAST FOR 2014 AND RECOMMENDATIONS
2013 – MAIN TENDENCIES AND RESULTS2013 – MAIN TENDENCIES AND RESULTS
Demand for high-end rental properties has remained at the same level as in 2012.
After several years of decrease supply has demonstrated 27 % growth.
Average asking prices have increased by 8 %.
Important changes in tenant profile – more international assignees and more families.
Changes in tenant profile lead to more demand for larger properties.
Average housing budgets increased by 19 %.
Same Top 3 most popular areas:
Arbat (downtown)
Leningradsky prospect (area of international schools)
Tverskaya (downtown)
- 9 -
1.
2.
3.
The Kremlin
Airports
International Schools
Main Compaunds
Moscow has very clear distinction of which areas are considered to be “prestigious” – they are well developed in terms of infrastructure, supply of good quality housing compounds, they are also considered to be more ecologically clean. Thus, business centres (with a few exceptions of business parks outside of Moscow) and international schools / pres-tigious Russian schools would be located in these areas.
Naturally, international assignees and high-profile Russian customers only rent properties in these areas with practi-cally no exceptions.
Apart from the historical city centre (inside the Garden ring, Kransnopresneskaya, Frunzenskaya) such areas are located from the South to the North. South-East and North-East – practically half of Moscow in terms of territory – are not considered by international assignees and high-profile Russian customers, consequently in the current report we do not include properties in the East of Moscow into the analysis.
This is another reason why supply in the “prestigious” centre, South, West and North-West is quite low. Also this explains why the data in this report maybe significantly different from the reports of most Moscow real companies.
ATTACHMENT - MOSCOW HOUSING MARKETATTACHMENT - MOSCOW HOUSING MARKET
MKAD – Moscow CircularAutomobile Highway
Sadovoe Koltso(Garden Ring)
Leningradskoeshosse
Kutuzovskyprospect
Leninskyprospect
Rublevskoeshosse
- 10-
Rel
ocat
ion
Imm
igra
tion
OUR SERVICES
Marina SemenovaClient Services Director, Shareholder
Relocation & Immigration [email protected]
Irina YakimenkoDirector, ShareholderRelocation & Immigration Services
7/1 Kropotkinsky LaneMoscow, Russia, 119034
+7 495 502 95 53www.intermarkrelocation.ru
© Intermark Group, Inc. 2014
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