Page 129 - RusRPTOct20

consultant JLL. The decline in cross-border real estate investment is not unique to Russia and seen globally in the current market environment, according to JLL. PwC analysts told ​Kommersant ​that foreign investors specifically in Russia could be deterred by weaker ruble, which has been falling heavily in the last month. However, those real estate investors that have stable presence in the market are unlikely to maintain low activity due to weak ruble as their investment horizon is long-term. Colliers International analysts believe that as ongoing monetary easing by the Central Bank of Russia lowers the yields of Russian assets to below 10%, investors could be switching to more mature and predictable markets. Overall, Moscow saw the most real estate investment in 9M20, with deals volume reaching $2.1bn, followed by St Petersburg with $300mn, and the rest of Russia with $100mn. About 44% of the total accounted for land acquisition for housing projects, with increased demand noted for warehouse facilities. As reported by ​bne IntelliNews,​ Russian​ ​e-commerce operators​ have been driving warehouse demand, with online businesses accounting for circa 25% of warehouse space leases in 2019. The market could see a decline of 25% in 2020, mostly driven by Moscow and the Moscow region, ​but is expected to rebound in 2021​.
Real estate 2020 completions could go down 5-6%. ​According to Deputy Prime Minister Marat Khusnullin, residential completions could go down 5-6% y/y in 2020. The rapid mortgage origination supported price growth in some regions but is unlikely to trigger a cross-country spike. He also mentioned the state infrastructure bond programme for RUB1 trillion with a real estate sector component of RUB300bn. In 8mo20, residential completions declined 7% y/y to 39mn sqm, mostly because work at construction sites was halted during the pandemic-related lockdowns. The second half of the year is seasonally stronger for completions, especially towards the year end, and operating conditions are to play a vital role. The subsidised mortgage programme, with a 6.5% rate, has been in place since 17 April and is a strong support factor for sales. In May-August, new originations surged 40% y/y to RUB1.2 trillion, while August volumes printed a record high. In the sales of publicly listed developers, the share of mortgage sales climbed on average 10pp, from 50% in 2019 to 60% in 1H20. PIK reported the greatest contribution of credit sales, at 76%, followed by LSR with 59% and Etalon with 40% (all as of 1H20). The pickup in mortgages was supportive for prices and Cian reports 8% y/y growth for 8mo20. Infrastructure bonds of RUB300bn for the real estate sector come as part of the larger RUB1 trillion programme and are to be organised by DOM.RF for the provision of land plots and utility infrastructure. The amount represents some 15% of the sector’s annual construction budget and our focus is on the timing of the programme, the conditions for participating and the involvement of commercial developers.
Russian warehouse market could see a decline of 25% in 2020, with the decline mostly driver by Moscow and the Moscow region, ​according Kommersant c​ iting the report by Knight Frank.
129 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com