Experts: Rents Set to Stabilize

MTRents have been growing in recent months but are likely to stabilize by October.
Apartment rents in Moscow have been growing steadily for the last six months, and the traditional August seasonal increase this year has surpassed all expectations. Some realtors are even predicting a sharp increase in apartment rental prices in September, but most agree that in October the prices are going to stabilize.

"Since early August the number of requests for flats under $1,000 per month has exceeded our spring figures by several times," said Galina Kiselyova, the head of rent management at Inkom-Realty. "And this is happening at a time when the supply is dropping slightly."

Kiselyova said prices are likely to increase by another 10 percent to 15 percent in September and October. The growth should be over by late October, when prices are likely to stabilize as the seasonal demand slows down.

Yet the prices are not likely to drop by much. One of the particularities in Moscow real estate, proven time and again, is that after any increase in prices, no matter if it was slow or fast, they hardly ever return to their original level.

Specialists at the Moscow Investment Agency of Real Estate, or MIAN, have also noted a price increase, especially in the cheap segment of the rental market, designated as less than $500 per month. MIAN estimates that prices grew by 15 percent to 20 percent in August. If in June and July there were one-bedroom apartments available for $250 to $270 per month, by early September there was nothing cheaper than $300.

But Irina Bobko, the head of MIAN's rental department, disagreed with Inkom's conclusion. Prices are likely to remain stable at around $300, she said. "In contrast to the early autumn of 2001 and 2002, this year we are not seeing a growth in demand that would correspond to an increase in prices," Bobko added.

However, Inkom market specialists are expecting standard one-bedroom apartments to cost $370 to $380 or even $400 by the end of the month.

Expensive apartments are less susceptible to seasonal price changes. But there are other factors at work. According to real estate firm Blackwood, demand for elite apartments to rent has grown by some 50 percent since last summer.

"This is best explained by a huge inflow of foreigners to Moscow, mostly employees of corporations and embassies, who form the bulk of renters in the Russian realty market," said Marina Markarova, the head of the rental department at Blackwood.

"As foreign companies open their offices here and launch new corporate programs, a large number of foreign specialists are coming here to live with their families and they are provided with the most comfortable accommodations possible."

For example, a French school was opened on Milyutinsky Pereulok this year. French-speakers who have children would rather live close to the school and, consequently, the demand for rents in the Chistiye Prudy area grew sharply over the summer.

On the other hand, for the first time ever more Russians than foreigners are renting apartments in the expensive price range. Throughout the 1990s foreigners rented the bulk of high-quality apartments, but later on that proportion evened out and stayed that way for a long period of time.

Alexandra Kosaryova, the head of the rental department at Soho Realty, said 70 percent of people renting elite apartments in the range of $5,000 to $8,000 per month are Russians. She added that in 90 percent of cases foreigners' apartments are paid for by their employer, whereas Russians usually pay out of their own pockets.

Most Russian clients are businessmen who do not have an apartment of their own yet, Kosaryova said. Some renters are potential buyers who want to take a closer look at an apartment and the general area before making a purchase.

Another category of renters includes those whose own apartments are being renovated -- a process that can take up to 1 1/2 years.

Average Apartment Rental Price
1-room2-room3-room
City DistrictMayJune JulyMayJune JulyMayJune July
Central460450480580560560685700665
Northern325340335430425450525525555
Northwestern325320335425430440500480525
Western320325320410420435500495505
Southwestern310310325400405415490485505
Southern315315325410440420500520530
Southeastern335335350440465465520570535
Eastern370390405480485495670645645
Northeastern325315310410420450510510505
Source: Miel