M O S C O W - Passport magazine

“It is quite likely that regulations over access to plots of land
are going to become more transparent and clear,” said Khalin.
“In that case companies from the country’s other regions,
primarily Moscow Oblast and bigger cities, like St. Petersburg,
would be able to enter Moscow’s market.”
According to Dzagurov, changes are going to be positive
for the market, attracting new developers not burdened with
financial problems. “In a situation where Baturina will no longer
be able to dictate to them the rules of the game, some
[developers] are likely to return to the capital,” he said. “The
[market shares are] likely to change. Those who were in an advantageous
position exclusively due to their connections—
which are being broken now—may not able to continue to
work in a situation of tough competition.
“Inteko’s role as a company, a conflict which meant pulling
out of all construction projects in the capital [for a developer],
is to change,” he went on to say. “Inteko’s positions are to
weaken, which will lead to the strengthening of all other players’
positions, and especially those not linked to Inteko.”
Meanwhile, observers are also concerned that the changing
of power in the city may lead to delays in the execution of
some previously announced development projects.
“I do think that there will be an impact on the real estate
market,” Michael Bartley, General Director of Four Squares,
told PASSPORT.
“Each real estate development requires a large number of
approvals and licenses. A change in the senior levels of the
city government creates uncertainty for both developers and
the bureaucrats. Why spend considerable money and time
(for developers) and planning reviews (bureaucrats) if the key
decision makers may no longer be in their posts in 6 months
time?”
“I am sure that some slowing down is set to take place due
to objective factors, but the new mayor’s task will be to avoid
serious delays,” said Dzagurov. “Luzhkov was concerned
about the city, and Sobyanin will make any effort to make sure
that effective work is not jeopardized and the best of what is
planed, the most important, is implemented with maximum
speed, regardless of who the author is. Sobyanin already has
an established reputation, and expecting populist steps from
him would be silly, I think.”
However, Dzagurov added that developers in the Moscow
market are still to face a difficult period of between six
months to a year, during which obtaining applicable permissions
is going to be difficult, while they’ll still have to
spend cash on projects already launched and pay interest
on loans taken.
One issue that the city’s new government will have to tackle
is the exorbitant prices for residential property. “The price/
quality ratio in our situation couldn’t be compared with not
only developed Western countries, where prices are generally
lower than in Moscow, but also with developing nations,
where one square meter of elite property costs $2,000 to
$3,000,” Dzagurov said. “In our situation, the main reason for
the high prices is the market, in which there is a shortage of
supply.”
“In Russia, Moscow is the political, business, cultural, financial,
judicial and educational centre, unlike the United States,
where, for instance, the intelligence is in Langley, the film
industry in Los Angeles, casinos in Las Vegas, the car industry
in Detroit, politics in Washington, business in New York,
the airspace industry in Seattle, mafia in Chicago and oil in
January 2011
Real Estate
Houston,” Dzagurov went on to say. “And, despite all that, our
supermegapolis has only between 25,000 and 30,000 apartments
of truly high class. But, some three years ago, Moscow
became the world’s leader in the number of billionaires living
in the city.”
But, the main problem, according to Dzagurov is not the
high prices for elite property but the fact that just about any
type of property is overpriced. “Frankly, I am not really frightened
or upset by the exorbitant prices for high-end residential
property, which are justified by the existing shortage,”
he said. “What causes unpleasant surprises and disappointment
are high prices for business-class and economy class
property.”
“With regard to the effect this will have on prices, the issue
is muddied by the continued drag on construction due
to the lack of financing in the market. Any restriction on supply
will inflate prices. My own opinion is that we can expect
a short-term property bubble in 2012-2013 due to lack of development
2009-2010, then stability as more stock comes to
market,” Bartley said. “The impact on the end user depends
upon which sub-segment they choose—some are more profitable
than others.”
Other experts believe that no major changes in property
prices in Moscow are likely. “In the near future, a balance between
demand and supply could be achieved,” Khalin concluded.
“In such a situation, property prices remain quasi-stable
and increase only adjusting to inflation.” P
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