Moscow Housing Market 2012-2013

Demand for high-end rental properties has increased by 16% compared to 2011. The level ofsupply decreased by 34%. There are a couple of reasons:

Historically in Moscow there is huge shortage of large apartments. It is connected with certainnorms of the Soviet period, when families lived in apartments of 70 square meters with twobedrooms. After the collapse of the Soviet Union larger apartments began to appear, but theimbalance of supply and demand still persists. However this mismatch does not induce owners to make considerable concessions in terms of price formation and the inclusion of additional services in the rental amount.

The second reason – there are few professional landlords on the Moscow rental market. Rental housing is not profitable because of the yield on the lease of about 3-5% per year, and inflation of about 10%.

Average asking prices have grown by 8% and practically reached pre-crisis levels with an average monthly rental rate of 7780 USD. Despite the increase in prices, most companies have not revised budgets for the rental of apartments to employees upwards, which leads to certain difficulties in the selection of new housing in Moscow.

Demand for high-end rental properties will demonstrate further growth, leading to a further decrease of supply and growth in prices at the same level as in 2012 – circa 10% on average.

Despite the global economic recession and to a certain extent due to it, the inflow of the expatriate population into Moscow is continuously increasing. In light of this we recommended the following:

1. Think twice before considering cutting expatriate housing budgets. This step will definitely affect the quality of rental housing for your employees and the number of available options.

2. Expatriates families with children: housing budget for this population will require careful revision, and most probably increase. Housing in expatriate compounds and around international schools has dropped in supply: which affects the pricing immediately.

3. The rental market requires flexibility from companies: demand far exceeds supply, and the market is landlord oriented, and extremely competitive for tenant. Flexibility in lease terms will help avoid losing properties.

4. Step up your decision making process: all properties with a good balance of value for money get leased overnight. Tenants capable of making fast decisions are more successful in securing the desired property. We understand and are mindful of the fact that this is not always possible for big corporations: do contact Intermark for creative solutions.

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