Page 90 - RusRPTJul19

In Moscow, developers won some 1mn sqm of construction permits in 4mo19, a threefold decrease y/y. However, 21mn sqm of construction permits were received in Moscow in 2018 (a twofold increase y/y), which will still enable developers to bring sufficient commissioning volumes to the market over the next 5-6 years, in our view.
The government set the criteria for development projects to be exempt from switching to escrow accounts on 1 July: properties have to be more than 30% completed and more than 10% pre-sold. The exemptions are in line with the previous proposals by the Ministry of Construction. They assume a gradual transition process over 2-5 years and reduced operational risks for medium and small-sized developers.
In Moscow, blended real estate market prices increased 5% y/y both in May and in the 5mo19, driven by strong customer demand, continuing from the previous year.
Impressive trends were observed in most of Moscow’s administrative districts (up 2-9%, except for the central district, with unchanged prices), with the highest growth in the eastern, north-eastern and southern districts.
In St Petersburg, both the secondary and primary residential markets showed impressive results, with primary prices increasing 10% y/y in May and by 10% y/y in 5mo19. The secondary market premium to the primary was at a high level, 6% in 5mo19 and 8% in May, despite the impressive growth of the secondary market in the last three quarters.
In 2019, Sberbank estimate that primary prices will grow 5% y/y, in line with CPI. We anticipate developers will attempt to pass their higher cost bases (as a result of escrow accounts being introduced) to end prices.
90 RUSSIA Country Report July 2019 www.intellinews.com