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Knights of the Vine RUSSIA

Real Estate

Moscow Real Estate booming like Calgary
By David Green
Photo by Lisa Azarova

The real estate market reflects the state of the economy and politics. Based upon high mineral prices and the relatively political stability, currently Moscow is experiencing an upward trend in the real estate market.


The last big jump in rentals was in 2003 as a result of large oil companies (such as BP) and other service industries, flooding the market. For some properties, rents rose 40% within one year (especially for the large 3-4 bedroom apartments in the center and gated cottage developments close to international schools). Since then, prices are steadily going up by approximately 10% per year (the average inflation rate in Russia is 9%).

Small inexpensive apartments were and remain in big demand. Current average rents for apartments in the center:
1 room : $700 - $1500
2 room: $1200 - $3500
3 room: $2000 - $6000
4+ room: $3000-

Rents depend on location, type of building, size and condition of the apartment. The buildings most in demand are new developments with guarded entrances, and guarded parking or underground garages.

More leases are now paid opaquely (bank transfer in rubles).

The recent trend is for landlords to fix rent in euros or rubles due to the falling US Dollar-Russian Ruble rate.

Real estate commission is usually one months rent, and paid by the tenant, or can vary with both the landlord and the tenant paying a percentage of the commissions to the agency.


This is the most active and frustrating aspect of the market, especially if you are the buyer.

The sales prices have risen during the last year by almost 100%. The activity of the sales market reflects the growing wealth of some parts of the population in Russia. Real estate seem to be the best investment for many, taking into consideration several banking crises Russia experienced in the past. Real estate in Moscow promises the investors from the provinces guaranteed returns.

The minimum price per sq. meter in Moscow has reached $4000. There is no maximum limit. Apartments in Ostozhenka area (the Golden Mile) are being offered at $30,000 per sq. meter; residences in the City development in Krasnopresnenskaya Emb. at $50,000.

In the early 90's the most common way to buy an apartment was re-housing families from communal apartments. Now there is an opportunity to buy from a developer (the primary market) as well as on the secondary market. There is a difficulty at the moment for a buyer on the secondary market while re-housing the communal apartment: with the steadily growing prices it is impossible to keep the price of the apartment fixed; most sellers refuse to take a deposit which should protect the buyer from price change on sale.

Most payments between individuals in the secondary market are cash through the security deposit box. This way of payment protects both parties from fraud. With bank transfer payment, it is difficult to come to agreement on when money has to be transferred: before or after the registration of the sales-purchase agreement (registration of the title transfer). One of the parties to the deal has to take a risk.

When purchasing an apartment from the developer payments are mostly made by bank transfer in rubles; 100% prepayment is required .


(Information was provided by Hellevig , Klein & Usov):

Tax residents calculate their taxable base at sale, as sale proceeds less either a fixed deduction of 1 million rubles (or the deduction equal to the amount received at the sale of the apartment if the apartment was owned for three years or more), or the cost basis calculated as the amount of documented expenses incurred by the taxpayer in connection with the purchase, possession and alienation of the apartment. These expenses may include the costs of inseparable improvements.

The Tax Code states that non-residents cannot use tax deductions against their sale proceeds. For tax-optimisation purposes tax residents who owned the apartment for less than 3 years prefer to show in the salespurchase agreement a price of the apartment not more than 1 million rubles. Even mortgage lenders are aware of this situation and have adjusted their internal rules accordingly.

The procedure of getting a mortgage has simplified and about 50% of buyers in Moacow are using mortgage money. However, only about 30% of those on the market who get their mortgage approved actually buy an apartment . The rest cannot find anything on the market; with fast growing prices: their money devalued too fast. Also, most sellers prefer not to deal with mortgage buyers: it takes longer for approvals, plus more certificates and documents are required.

There are advantages and disadvantages of buying an apartment on the primary market. Advantages: modern utilities; building management; security; guarded parking; choice of lay-out; socially even neighbours. Disadvantages: time and costs of getting permissions and approvals for the construction works; higher operating expenses; risk of non-completion of the construction

Real estate commissions: 3-5% (for the apartment owners can be even less than 2%).

Costs: notarizing of the sales-purchase agreement: 1% notary charge; sales-purchase agreement without notarizing: 3000 rubles. Registration (5 days): 15 000 rubles (including all charges and fees).

Trends of development

Lease: we expect demand to rise, due to investment plans of most buyers. Rents should become more negotiable for some larger apartments. Smaller apartments will remain in big demand amongst young families as they are moving out of their parents homes.

Sale: apartment prices will continue to rise because of high land cost with noncompetitive bids from developers, monopolies in building materials, higher utility connection charges. Moscow government has suspended the investment ownership program. People are coming from mineral rich regions to invest in Moscow; people investing money in real estate other than traditional areas; increasing use of mortgages by the middle class; growing investor confidence; shortage of skilled labour. Two major factors could influence the market sharply: lower mineral prices and a worsening of the political situation.

In conclusion, the Moscow real estate market is somewhat close to Calgary. Last year, Calgary had 56% increase in price with zero vacancy rate. This has been driven mainly because of high oil and gas prices. Calgary market is not expected to slow down in the nearest future, and neither is Moscows.

David Green is a partner in Green&Green Realty (initially Moscow Realty) started in Moscow in 1991. As well as in Kiev since 1992 Key Realty (initially Kiev Realty). Both companies are active in leasing and selling of residential and commercial properties.

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