Total supply in the new-build prime residential market in Moscow remained quite stable in May 2009 (1.5% increase). Total supply in the re-sale market has been continually increasing since the crisis began, but in May 2009 the trend of growth took a turn in the opposite direction for the first time. The total number of flats offered for sale reduced by 5.2%. Particularly noticeable is the reduced supply of high-quality objects. The same trend can be seen in the prime residential market in London, where total supply in April 2009 was cut by 28% in comparison to last year and continues to decrease.
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The activity of clients reduced by 30% in May. Nevertheless, the total number of deals in the re-sale market grew by 12% in May compared to April.
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In May 2009 the total supply in the prime residential lettings market climbed noticeably (+19.5% compared to the previous month). Thus, rental rates began to drop notably.
Key events
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Company MosCityGroup received approval from VTB for a receipt of credit in the amount of 4.5 bln. rubles in order to complete the Imperia Tower, located in the Moscow-City business center. As collateral for the loan, VTB will receive 80% of the premises of the skyscraper and a 75% stock share in ZAO Fleyner-City, who has the construction rights for the project.
Due to large amounts of debt, construction companies are being forced to look for sources of financing by selling assets or even parts of their businesses to bank creditors. Besides MosCityGroup, similar plans were announced by Capital Group, Glavstroy, Kopernik Group, PIK, Kvartstroy, Don-Stroj, and Snegiri. In the end of April it was announced that VTB would receive as collateral not just projects, but also a share in Don-Stroj Company as a result of a restructuring of the company’s debts. (Source: Kommersant)
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The Land Resources Department of Moscow is going to sell at auction 124 land plots, whose users are not fulfilling their commitment to pay for the rights to rent the land. In the end of March, Luzhkov, speaking at a government meeting, demanded a collection of land plots from the construction companies who had not started construction of announced objects in order to sell them at action. In the middle of April it became known that Moscow authorities had begun to break off contracts regarding the purchasing of land plot rental rights with companies who had not paid for such rights. (Source: RIA Novosti)
Main development projects in Moscow are being carried out on land plots, which construction companies are using on long-term rent deals; companies must buy land plot rental rights from municipal authorities. Thus, Moscow obtains its share in investment projects. This will increase the forecasted deficit in new construction.
