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BEYOND THE CITY LIMITS
Lower property prices are not the only reason why Muscovites are moving to the country
By BOJAN SOC
Economy, business and premium. In today’s Russia these are the three words (well, five, actually – don’t forget VIP and elite, which in most instances are synonymous with premium), that have become regular entries in both the business people’s and consumers’ vocabularies the moment market economy set foot in this country.
Whether you’re buying a mobile phone, a piece of furniture or an apartment, before choosing the actual product you’re highly likely to have your choice streamlined by a seller or an agent asking you what range/category/class of product your budget can afford. No problem with that. It’s just that – when put on a numerical scale – what stands for economy in Russia can be in a totally different ballpark somewhere else.
Take real estate, for instance. Last year’s residential property prices surge in Moscow sent ripples across the entire sector of residential real estate, eventually lifting the prices of countryside dwellings to new heights. Owing to the domino effect of the Moscow market, the purchase of homes outside the capital requires more cash than ever before. What is described as an economy class cottage in Podmoskovye can set you back by as much as half a million dollars. Countryside homes worth between $500,000 and $1 million qualify as ‘business’, with the ‘premium’ range starting beyond that figure and ending at heights that would make the cost of Beverly Hills villas look like a good bargain.
On the other hand, given the recent rampant growth of property prices in Moscow, settling outside the capital is an option considered by a fair share of Muscovites looking for cheaper, more affordable deals. Add to the mix the apparent disadvantages of living in the city, such as high pollution levels and congested traffic, and it is easy to understand why Muscovites are leaving. As June approaches, two other major drawbacks – summertime heat and stifling humidity – prompt a seasonal move to the countryside. Dating back to 19th century tsarist Russia, the tradition of spending summers in picturesque estates outside town was a must for every Moscow family of respectable social standing, while staying in the city was considered mauvais ton. Today, the tradition is coming back, analysts say.
“The old Moscow tradition of spending summer at the dacha was never broken,” says Anya Levitova, managing partner at EVANS real estate agency. “It was always especially popular among families with small children and older couples, who can afford to spend the entire summer outside the city with rare commutes back for work.”
According to Levitova, this category of tenants apparently doesn’t add to rental demand as the elderly usually own some property dating back to Soviet times.
“Younger families often have to rent. The demand is spread greatly across different price categories,” adds Levitova. “Some families are traditional and rent June through August, others figured it out that it is often easier to rent for the entire year and use the dacha not only for the summer, but for weekends throughout the year as well.” EVANS’ expatriate clients often team up to rent a house, which is shared by friends.
As a rule, the demand is characterized by two seasonal spikes, says Maria Zhukova, deputy director at MIEL Holding’s Rental Directorate.
“Traditionally, the so-called ‘dacha season’ begins in February-March, when those who wish to spend the summer in the countryside start looking for cottages to rent. Supply and demand during these months are higher compared to other periods,” says Zhukova.
She adds that a similar situation occurs in November-December when demand for cottages rises as Muscovites seek places to stay during New Year breaks. “In other months, the supply-demand ratio is more or less stable,” says Zhukova.
According to MIEL, this year demand for renting homes outside Moscow during the February-April span was only 1.11 percent higher than during the same period last year. At the same time, the supply was 10.3 percent higher year-on-year.
While the overall demand remains stable, it does change according to type, becoming more sophisticated with features such as overflow swimming pool, sauna, Russian banya, spa, skilled service staff and the like being requested more frequently by clients, Levitova adds.
Depending on the location, average rental prices range between $6,000 and $55,000 per month with the prestigious estates west of Moscow – primarily along Novorizhskoye and Rublyovskoye Chausses – driving the upper price range, statistics say.
“Over the last three to four years, the prices for renting countryside cottages have been higher [during summer months] than the average annual prices by 15 percent to 25 percent,” Vitaly Kurapov, senior consultant, Lettings, Residential, at Knight Frank told The Moscow News.
However, warns Kurapov, in addition to doubtless pros, living outside the city has a number of cons, too. As the chief drawbacks he cites traffic jams, lengthy trips to the country and the lack of infrastructure along some major routes.
“Not all roads have developed infrastructure and that is why going to a restaurant or going shopping can turn into a real adventure,” he adds. Expense-wise, living in the country is pricy as well. “For the same amount of money you can make several vacation trips abroad,” says Kurapov.
In the sales segment, demand in the first quarter of 2007 fell by 20 percent compared to the last quarter of 2006, a survey conducted by Blackwood says. The main reason behind the drop is the excessive supply and the saturation of the business-class segment of cottage villages.
“The major demand is for structures in the economy class, which are practically not being offered. In other words, there is a huge demand for non-existent homes. It’s a paradox,” Vladimir Yakhontov, deputy director at MIEL Holding’s Countryside Real Estate Directorate, says.
The demand is also characterized by the dropping interest for the property located within 15 kilometers of Moscow, while the homes situated at a 30- to 60-kilometer distance from the capital enjoy higher demand.
This is largely due to the lack of available plots in the areas located in Moscow’s immediate vicinity, as well as the high cost of land, which is hiking developers’ expenses and making such projects not as attractive as those pursued further away.
“An interesting tendency is taking place: clients have begun comparing the purchase of a villa at famous foreign holiday spots with the ‘Moscow region abroad’,” Kurapov says. “People are asking themselves what to choose: a three-hour flight and rest by the seaside in top-class hotels with the 24-hour service or to spend an hour-and-a-half in a traffic jam on any route out of Moscow and spend the whole summer in a classicist home behind a tall fence?”
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