Small Apartments Dominate Housing Market
Published: December 5, 2012 (Issue # 1738)
PENNY LANE REALTY ST. PETERSBURG
The new Morskoi 33 complex on Krestovsky Island. Renting an 3-room apartment here costs 120,000 rubles a month.
This year is considered to have been a stable year on the residential real estate market, with no drastic increase in prices observed. Next year, analysts predict stable growth in this sector of 1 to 1.3 percent every month, totaling a 12 to 15 percent rise by the end of 2013.
Small and medium-sized apartments were most in demand during 2012, which led to a reduction of such properties on the market. The most in-demand properties are inexpensive one-room apartments and studios with an average size of 30 to 35 square meters.
“The high demand for this format [of one-room and studio apartments] together with the high level of value-added, as the price per square meter can be 20 percent higher for these than the price of a square meter in a three- or four-room apartment in the same building, leads to a situation in which the proportion of small apartments can reach 90 percent in some [construction]projects,” said Pavel Pikalev, head of Penny Lane Realty in St. Petersburg.
“Mass market” housing accounts for 91 percent of all residential real estate for sale on the St. Petersburg market, according to Petersburg Real Estate data. The average cost of a square meter in such apartments varies from 60,000 to 80,000 rubles ($2,000 to $2,600).
Another widespread trend on the residential real estate market is the demand for apartments in large-scale development projects.
“For example, the apartments in the Severnaya Dolina complex near Parnas metro station have been actively bought in 2012, not only because of the low price per square meter, but also because of the gradual occupation of the buildings — people have moved in to that area, new stores are emerging and so on,” said Pikalev.
DESIGN FOR LIFE
The second most appealing factor for people buying property in a newly built building is apartments that are already decorated, equipped with a bathroom and ready to move into, as opposed to the option of buying an empty shell and choosing one’s own bathroom and decor. According to Penny Lane Realty data, ready apartments account for more than 30 percent of all sales, while among sales of small apartments, this figure rises to 50 percent. The same trend is seen in the higher price segment.
“Interior decor, short deadlines in launching new apartment buildings, close location to a metro station and the technical facilities of the building are additional pluses in the search for a suitable apartment,” said Olga Trosheva, head of the Petersburg Real Estate consulting center.
TOP FIVE DISTRICTS
Most offers on the St. Petersburg residential real estate market are based in the Primorsky district in the north of the city, which accounts for a fifth of all the properties on sale, according to Penny Lane Realty.
In second place is another northern district, Vyborgsky, with 17 percent of all offers. The other areas in the top five are the Moskovsky, Nevsky and Krasnoselsky districts, which each account for 10 percent of offers. Together, these five districts contain 68 percent of all residential real estate on sale in St. Petersburg, with a total volume of 2.5 million square meters, according to Penny Lane Realty.
The Kirovsky and Frunsensky districts are less active; there is a lack of space under construction and low demand among customers in these locations, according to Petersburg Real Estate specialists.
The closest districts of the Leningrad Oblast to the city are gaining in popularity among buyers due to the lower cost of property there.
According to data compiled by Petersburg Real Estate, in June 2012 there were 16 complexes in the suburbs of St. Petersburg in which an apartment could be purchased for less than 2 million rubles, while in September, there were apartments available at that price in a total of 30 complexes.
MORE MORTGAGES
Another trend observed by analysts is the growing popularity of mortgage schemes.
“About half of all sales are made using payment in installment systems and mortgage schemes, while the year before, this figure was 10 to 15 percent,” said Trosheva.
The development of mortgage schemes along with changes in the average interest rates for private loans are factors that significantly influence demand and price setting.
“[Demand and price setting] will also be influenced by macro-economic factors such as the stability of the euro, local factors like town-planning regulations restricting construction in the Tsentralny district, and the development of residential construction in the nearest districts of the Leningrad Oblast,” said Pikalev.
Penny Lane Realty experts predict stable price growth on the residential real estate market of 1 to 1.3 percent every month, totaling a 12 to 15 percent rise by the end of 2013.
RENTAL BOOM
The demand for rented property increased greatly in the late summer and continued through the end of November.
“The demand for rented apartments in autumn 2012 was 34 percent higher than average year indicators,” said Pikalev. “This is connected, first of all, with the end of the holiday season, the start of the academic year in primary schools and high schools and with the general activation of business,” said Pikalev.
One-room apartments are also the most popular in the economy sector of the rental residential market. Seventy-one percent of all apartments for rent belong to this category, according to Penny Lane Realty research.
Most economy-class properties up for rent are in the Primorsky district, where the average monthly cost of renting a one-room apartment is 23,900 rubles ($771), 31,500 rubles ($1,000) for a two-room apartment and 43,200 rubles ($1,390) per month for a three-room apartment.
Elite apartments are far more expensive and cost from $1,500 per month. Most rental rates — 46 percent of all apartments on offer in the elite section of the residential market — fall in the $1,500 to $2,500 per month category, according to Penny Lane Realty data. About half of top-end properties up for rent are three-room apartments with a combined kitchen and living room, and two bedrooms. In second place are one-bedroom apartments and studios that together account for 27 percent of elite apartments for rent, according to Penny Lane Realty analysts.
The leader on the elite rental residential real estate market is the Tsentralny district, followed by the Petrogradsky district.
As the number of business and elite-class apartments up for rent is decreasing and new projects fail to satisfy existing demand, property owners can pick and choose their tenants. Favored tenants in this sector are, according to Penny Lane Realty, expats. The proportion of expats renting apartments for $2,000 or more per month is currently about 60 percent of all clients in this category. Owners explain their preference for expats as due to them being more reliable and attentive to the legal terms of the rental agreement. Other preferred tenants include married couples without children or pets. Embassy employees and corporate clients are also favored. Generally, landlords prefer tenants aged 35 and older.
ELITE SALES
The prevalence of small apartments in the economy sector is mirrored in sales on the elite residential market. According to Knight Frank data, as of September 2012, 880 newly constructed apartments and 1,650 apartments in existing buildings were on sale on the elite residential market.
The average cost of housing in a “comfort-class” apartment is 93,150 rubles ($3,000) per square meter, “business-class” costs 127,120 rubles ($4,100) and “premium class” costs 195,900 rubles ($6,300), according to Penny Lane Realty. Prices for apartments in existing buildings are higher.
Buyers looking for an apartment in an existing building pay more attention to the layout and decor of the apartment, and to the technical condition of the building. There are high requirements regarding the availability of parking and security systems in historical buildings, according to Knight Frank analysts.
Taking into account the difficulty of construction in the historic center of the city and ensuing lack of new projects in exclusive locations, any properties up for sale in buildings constructed during the last ten years are of high interest to potential buyers.
“There is a new trend on the elite residential market that came from Moscow and Europe,” said Yelena Gromova, head of elite residential real estate at Knight Frank St. Petersburg. “Interest has emerged in buildings that are under the management of hotel operators, offering high-class services, from room cleaning to the delivery of haute cuisine to the apartment,” she said.
“If such a project emerges on the market, there will be great interest in it and high demand, as this niche is currently free of competition,” she added.