Cheap Housing Supply Falls

Despite the rising demand for cheap apartments, few are being built in Moscow these days, realtors say.

"In Moscow the supply of cheap housing has fallen. There is still a certain amount in the Marinsky Park and the southern Butovo areas," said Sergei Vakhromeyev, deputy general director of marketing at the Moscow city real estate service.

He said prices for mid-range apartments have been rising as well since there is very little cheap housing in the $350 to $550 range. Even in the cheapest areas the average price is $420 per square meter. In northern Butovo, apartments are already going for $500 per square meter.

"Standard housing in the Zhulebino region can no longer be considered housing for the masses, unlike the Marino and Brateyevo regions," said Alexei Fedotenkov, marketing director for real estate agency Inkom Corporation. In certain areas prices have risen by $10 per square meter each week over the last two months, he said.

The nature of the construction market is being transformed in a process that began in September with the creation of the Moscow Construction Union.

Union members declared upon its creation that they would fight to slash the price of new buildings.

However, the union has major commitments to build municipal housing that will put a heavy burden on investors and consequently buyers.

"Much will depend on the MCU: Its members are rather big companies, which may set the tone on the market," said Irina Klimova, head of the sales department with the Moscow real estate investment agency.

The union is made up of seven leading construction companies: DSK-1, DSK-2, DSK-3, Mosstroimekhanizatsia-5, Mosfundamentstroi-6, SU-155, SU-83 and Russky Natsionalny Investitsionny Bank.

Mikhail Cherne, president of MCU and general director of Mosstroimekhanizatsia-5, said MCUТs policy over the coming year is still being developed. It is connected with the fact that the final volume and dates for sales of municipal housing have yet to be determined.

MCU has said it will build about 2 million square meters of the 3.5 million square meters erected in the city annually out of its own money. It is planned that the city will receive 40 percent of the total area built Ч about 700,000 square meters.

Areas under mass development reflect the state of the housing market as a whole. Construction on a broad scale in these regions is slowing considerably and has become as focused as in the center of the capital.

Construction in Novokosino, Zhulebino and Mitino is almost complete. Only a few incomplete objects remain, the prices of which are determined by sales on the market for existing homes that have developed in these regions. The increase in average prices for property sales in Mitino can be explained for the most part by the fact that virtually no cheap housing remains in the area.

"Now in Moscow there are very few blocks that are nearly completed and designated to go on sale in the fourth quarter of this year or the beginning of next," said Natalya Tikhanovskaya, head of the department for new construction with the Miel real estate agency.

Mass construction has moved to other regions within the Moscow Outer Ring Road, or MKAD: Noviye Cheryomushki, Zyuzino, Ramenki, Medvedkovo, Khoroshevskoye Shosse and others, said Mikhail Vasiltsov, head of the marketing department with the Moscow Central Real Estate Exchange.

Within the MKAD a more differentiated approach to determining the price can be observed. The quality, location and demand for particular types of apartments in specific types of blocks are taken into consideration. The price of one and three-room apartments may differ by $100 per square meter in the same building.

In the less costly regions of Moscow Ч Marino and Brateyevo Ч one- and two-room apartments are greatly in demand and, of course, their price is at a maximum. In the expensive regions in the west of the city, three-room apartments are popular. In regions with average prices, two-room apartments are most popular.