The deflation of the Real Estate market in Russia
April 13, 2015
In summer 2014, the first signs of a deflation of the real estate market could be observed. Expats who traditionally accounted for high demand in the segment of expensive rentals in Moscow started to leave the country due to the political situation.
Business activities of foreign companies operating in Russia started to slow down because of sanctions affecting mostly Western oil companies as well as other sectors. This caused a chain reaction which also led to the departure of expatriates who represent 50% of all tenants in Moscow (in better years they accounted for 80%). In consequence, the high number of proposals increased the price rents which now have fallen down.
As reported by Realtors, the demand for long-term rent in Moscow has decreased by 60%. In total, the number of current renting contracts has decreased by 50%.
Due to the urgent notifications to employees to leave the country, most of them can’t wait for the end of the lease term, even if does lead to high penalty because of early termination of the contract. The main traditional expats areas are vacant now, such as Patriarchy Ponds, Arbat, Krasnaya Presnya, Plyuschikha, although drop in demand affected not only urban housing but also countryside compounds as “Rosinka”, “Angelovo” nowadays, Moscow Country Club has no “waiting list”.
Owners of luxury housing have to change and adapt the lease conditions, even in detriment of themselves: from a quarterly to a monthly payment, declining rents and so on.
The owners even agree on 10-15% discounts. Now, the time required for owners renting out the property has increased at least twice.
This year 2015 the situation will not improve, although for those who want to spend less and get more – it’s the right time to look around and buy with the possibility of finding better apartments for reasonable prices.