Page 88 - RUSRptOct18

boosted its presence in the Russian regions by launching domestic airline Rossiya and lowcoster Pobeda. The news of moves to boost its regional presence are in line with recent announcement that Aeroflot will order 100 medium-distance Russian Sukhoi Super Jets .
9.1.4 Construction & Real estate sector news
Number of premium-class housing projects commissioned in Moscow this summer reached an all-time high , according to Savills report cited by Vedomosti d aily on September 11. As of beginning of September 2018 2,725 new premium-class apartments were on the market. The developers completed 11 premium class projects with a total of 1,400 apartments. The demand peaked with 60% more deals in the premium segment of the capital year-on-year, according to Savills, with an average of 64 deals a month as compared to 41 in 2017. Overall 193 premium apartments have been sold. The demand increased despite 16% hike in the price year-on-year to RUB0.88mn ($12,700) per square meter on average. Eight out of 11 projects that were put on the market had a starting price of RUB0.5mn per square meters.
Elite housing sales in Moscow surged 2.4x y/y during the summer months to RUB19bn and 29,000sqm, according to Knight Frank. The average transaction value was up 35% y/y to RUB73mn. The spike in activity in the elite segment primarily reflects macroeconomic factors, we think, including FX volatility as well as capital returning to Russia. The upcoming regulatory changes have pushed developers to front load the approvals for construction permits and we do not anticipate the market offer drying out on any segment given the impressive housing sales of late.
For the year (from the second quarter of 2017 to the second quarter of 2018), housing prices in Russia grew by 1.5%, Knight Frank reported, which conducted a survey of world housing prices in 57 countries. On the growth of housing prices, Russia dropped from 27th to 46th place. The cumulative increase in house prices around the world for the year totalled 4.7% - the weakest annual rate of price growth since the third quarter of 2016.
9.1.5 Retail sector news
The share of promo sales in Russian retail reached a record high of 64% in volume terms in the first half of 2018 , according to the Nielsen study of twenty key sales categories at modern retail formats, cited by Vedomosti d aily on September 18. The share of promo sales increased from 58% a year ago. "The share of promos has been on rising in the last three years as companies try to mitigate the negative consequences of changing macroeconomic conditions and to support sales growth at chain," VTB Capital commented on September 18. Analysts do not see the situation with reliance on promotions easing in the short term, thus posing another structural challenge to Russian retail players . The share of the promos in the convenience format reached 25-35% of total ruble turnover a year ago and have since stabilised at that level. According to the study, household categories were the most prone to promo sales, with 82-83% for washing powders and conditioners. The average discount has also increased, from 20% to 23%. "Although promos are margin destructive for retailers, the question of how to reduce them without slowing down the growth in sales is an industry-wide challenge," VTB Capital notes,
88 RUSSIA Country Report October 2018 www.intellinews.com