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Russia’s “second capital” of St Petersburg (21%) – the two largest cities in Europe – with the regions accounting for less than 10% “The reported figures bring the highest level of completions since 2007, and see support from previously impressive residential demand and acceleration in construction permits. Moscow demonstrated the strongest demand trends in 2017-18 in Russia, growing the number of deals with a CAGR of 1%. Clients rushed for housing during regulatory uncertainty over the introduction of escrow accounts and historically low mortgage rates. Simultaneously, the number of construction permits has increased twofold since 2016, and now implies construction permits for some 36mn sqm of housing area, after the revision period of the new government. We consider the demand as upfront-loaded, without a comparable advance in household budgets. That is likely to result in a cooling in short-term residential sales and medium-term completions,” VTBC said.
House prices in Russia rose by 1.95% during the year to Q1 2019, a sharp improvement from last year’s 1.95% drop and the highest growth since Q4 2012, Global Property Guide reports. During the latest quarter, house prices in the country increased by 1.6%. Prices on the capital Moscow rose slightly by 0.39% y/y in Q1 2019 while they increased 10.45% in St. Petersburg. House prices across Russia plunged 47% (inflation-adjusted) in the past seven years. Before slowing once again in the beginning of this year, Russia’s economy grew by 2.3% in 2018, after y/y growth of 1.6% in 2017 and 0.3% in 2016 and a contractions of 2.5% in 2015, due to the fall in energy prices and the impact of US and EU sanctions triggered by Moscow’s annexation of Crimea. However, after stabilizing in recent years, inflation is rising again. In March 2019, consumer prices rose by 5.3% from a year earlier, up from the previous month’s 5.2% rise and above the central bank’s target of 4%, according to the Federal State Statistics Service. In fact, it was the highest reading since December 2016 after the government raised VAT from 18% to 20%. The Russian economy is projected to expand by 1.6% this year and by another 1.7% in 2020, according to the International Monetary Fund (IMF). The ruble has lost almost 61% of its value in just three years, from an exchange rate of RUB30.231= $1 in January 2013, to RUB77.175 in January 2016. Then in 2018, the ruble lost almost 16% of its value again, partially offsetting the 31.5% gain seen in 2016 and 2017. In April 2019, the average monthly exchange rate was RUB64.628 = $1. Rents, rental yields: yields are poor both in Moscow and St. Petersburg, at around 3% to 4%, while Moscow apartment costs are high, at around $13,300 per square meter.
9.1.5 Retail sector news
Leading Russia supermarket chain X5 Retail Group is toying with the idea of introducing postal services at its stores, while at the same time state-owned retail banking giant Sberbank is in talks to open up service points at McDonald’s restaurants. Sberbank may open several branches at McDonald’s by end-2019, according to press reports. The first branches will be opened in the central region of Russia, including Moscow. “Sberbank expects a reduction of clientele in its branches within 3-5 years by 30%, according to First Deputy Chairman of the Executive Board Alexander Vedyakhin,” as cited by BCS Global Markets. X5 Retail Group is thinking along the same lines and considering opening postal services at its convenience outlets, Vedomosti reported. The company is yet to make final decision or roll out a pilot. “The initiative could further increase X5’s use of its existing infrastructure and add to the currently developing parcel network programme, VTB Capital (VTBC) said
87 RUSSIA Country Report August 2019 www.intellinews.com