ELITE-CLASS HOUSING MARKET

The elite-class housing supply had been growing until late 2017, after which the trend reversed, but then recovered in late 2018. In 2020, the newly built housing supply decreased by 89% year-on-year. The total supply for 2020 and Q1 2021 shrank by 28%. In 2020, the total absorption increased by 11% compared to 2019. This does not include transactions under sale and purchase agreements which cannot be verified in the Rosreestr databases. The share of these transactions in the elite class market is about 40%.

Supply and demand in Moscow’s market of new elite-class housing, thousand sq m
Sources: newly built housing database, Rosreestr, Company’s proprietary databases

In 2020 and early 2021, demand for newly built elite-class properties exceeded supply, which boosted the price growth. In 2020, the offer price added 22%. Such price hike was attributable to a rush in demand in the real estate market and an increase in the cost of construction.

We expect the price growth to continue in the short term. At the same time, 2021 is projected to see new elite-class projects coming on sale, which will boost the supply and partially offset price gains.

Share of mortgage transactions in the sales of new elite-class housing, %

Sources: newly built housing database, Rosreestr, Company’s proprietary databases

The share of mortgage transactions in this segment is small and virtually flat. The elite-class housing market is not sensitive to mortgage rate fluctuations, so its cuts do not affect the demand.

Average selling price per sq m of new elite-class housing in Moscow, RUB thousand

Sources: newly built housing database, Rosreestr, Company’s proprietary databases

In terms of the demand structure by property size, large flats of 120 sq m and more prevail in the elite-class segment. In 2020, they accounted for about 59% of the demand, which is generally in line with the supply structure. The average area of elite-class housing purchased in 2016–2020 varied from 120 to 150 sq m, with flats dominating the demand side. Apartments prevailed in the size niches of less than 70 sq m and 100–120 sq m and were bought primarily as temporary housing. We expect these trends to continue in 2021.

Moscow’s new elite-class housing market is very strongly consolidated. In 2020 and early 2021, the top 7 players accounted for 83% of total sales (by area). The market leaders group may vary as elite-class projects are not mass in nature and pose no barriers for new players.