Building Surges in Housing Shortage

A housing construction boom has returned to Moscow.

Realtors happily note the steadily rising prices for concrete-slab apartments in large-scale construction areas. Prices have increased between 25 percent to 30 percent this year. At the same time, elite homes are being offered on the market for prices that were not expected to reappear after the 1998 crisis.

"Since January, we have felt an undiminished demand for new construction compared with last December [traditionally, the most active month of the year]," said Natalya Tikhonovskaya, head of the branch for new construction at Miel Realty. "We were in shock when buyers started to submit orders to us as early as Jan. 4."

The majority of experts see the reason for the boom as the inadequate supply of housing. At the same time, there is an increasingly evident deficit of land for construction, Tikhonovskaya said.

A housing crunch arose last year and continued to this year. The city's construction orders were not completed last year, according to sources in the city administration. The sources could not name the exact volume of the shortfall, but say it approaches 70,000 square meters.

Nevertheless, the second quarter of this year could ease the housing shortage. The installation of public utilities and the preparation of apartment houses can take place only during warm weather. In May and June, if the builders do not again fall behind on their work schedule, then a large amount of new construction is expected in Mariinsky Park, Lyublino and North Butovo, said Sergei Yeliseyev, marketing director of Inkom MTSBN.

As a result, the rise of prices for apartments in those regions could pause temporarily or even fall slightly, said Yeliseyev. However, the medium-term forecast suggests prices will continue to increase, and by the end of the year, prices in regions of large-scale construction could go up by an average of between 10 percent and 15 percent.

Last spring, the price for 1 square meter of a typical concrete-slab apartment in Mariinsky Park was approximately $400 to $430, then by the end of the fall, it rose to $470 to $495, he said. Now prices average around $510 to $540.

The location plays an increasingly large role in the determination of prices. The division of large cities into prestigious and low-cost regions exists throughout the world, but in Moscow that process is still not particularly evident, said Alexei Preobrazhensky, general director of the Russian Real Estate House.

Nevertheless, such a division has become increasingly noticeable in Moscow. Miel, for example, sells homes on Zelenogradskaya Ulitsa, the region near Rechnoi Vokzal, for $620 to $650 per square meter, and in the words of Tikhonovskaya, people are standing "in line" for such apartments. While housing on Samarkandsky Bulvar in southeastern Moscow for $600 is not selling well.

In the foreseeable future, the rise in prices will not stop, say realtors. The market is returning to the pre-crisis price distribution, but those prices are not considered a ceiling. Sooner or later, the price of housing in Moscow will attain a level comparable to Western cities, the realtor said.

This tendency is now evident only in areas such as Arbat, Krasnaya Presnya, Patriarshiye Prudy and Kropotkinskaya. Projects are being carried out in these areas, for which buyers are willing to pay prices comparable to those in Paris and London, at $4,000 to $6,000 per square meter.

"In total, the average price for Moscow housing could reach a level approximately 30 percent cheaper than Paris," said Preobrazhensky.