As any Muscovite knows, apartments are only getting more expensive. And although there are a few indicators that prices may stabilize, the future is far from clear

The chances of finding cheap housing are disappearing fast in Moscow. Yes, there are still units such as a ground-floor apartment in a Khrushchev-era five-story block on the outskirts of town that you can get for about $30,000. But, mainly, you are talking $50,000-$80,000 to get a reasonably sized apartment anywhere near the city center.

Even though the supply of units is increasing, getting anything below $800 a sq. meter is becoming impossible, real-estate agents say.

Some residents are perplexed, saying developers are pushing rates up unfairly. But, many experts say, "welcome to the real world." Property in any capital city doesn’t come cheap.

The only two relatively cheap districts offering standardized panel housing in Moscow now are Lyublino, which developers say has the cheapest three-room apartments in its micro-district 39a, and Maryino. Standardized brick buildings are going up in the districts of Kurkino and Mitino, but they are not cheap. A sq. meter of space in Kurkino sells for an average of $815, while in Mitino, which offers mostly two- and three-bedroom apartments, a sq. meter costs $890. Kurkino offers not only apartments, but also three-, four-, five- or six-bedroom townhouses that sell for from $820 per sq. meter.

Building housing in areas with developed infrastructure networks is the dominant trend today. Construction is going ahead on plots of land still available or on the site of old demolished buildings. Most of the housing is panel or brick buildings. This kind of construction lacks the advantages of being part of an entirely new district in that it usually means ending up in an area without modern infrastructure.

There are clients who come looking for an apartment in Moscow and end up buying one in the oblast instead

The cheapest housing is concentrated on the outskirts of town, in districts such as Birulyovo-Zagorye or Ochakovo-Matveyeskoye. Next up in the price range are individual buildings here and there in outlying areas. There is a brisk trade in apartments in P44-T panel buildings around the Shchyolkovskaya metro station, for example.

There are also plans to build a large number of these panel buildings around the Rechnoi Vokzal metro station. Prices in this area are still moderate. Large apartments here sell for $670 per sq. meter, and one-room apartments start at $850 per sq. meter. Prices for panel and large brick buildings around the Prazhskaya and Yuzhnaya metro stations are similar.

Construction is underway on a 30 story brick building on Prospekt Vernadskovo with a two-level underground parking facility. Three- and four-room apartments without finishing work and with areas of 114-157 sq. meters are already on sale. The apartments have ceilings more than three meters high, triple-glazed windows, and German radiators with temperature regulation. These apartments, which are considered business-class housing, sell for $1,140 per sq. meter.

Business-class housing can be found not only in the brick buildings around town, but also in panel buildings in the more prestigious locations. There is business-class panel-building housing on Rubtsovskaya Nab., for example, and around the Profsoyuznaya metro station. This housing sells for $1,000-$1,500 per sq. meter. Many of the brick projects have a similar price range.

Apartments in brick buildings do not all get bought up immediately. Each of these buildings, built a couple of years ago, still has apartments to offer. This could have an impact on prices, given that supply will further increase this year.

"The fact that apartments in finished buildings remain unsold has an impact on new projects," said a representative of one real-estate agency who wished to remain unnamed. "If there are a lot of unsold apartments, it becomes hard to keep raising prices. After all, apartments in every new project cost a little more than apartments in already finished buildings – the price growth on the market is always fuelled by new projects. Now that there’s a supply of apartments in finished buildings, apartments in brick buildings are going for $1,100-$1,200 per sq. meter, which is on the same level as prices in panel buildings. This was the same price as 18 months ago. This store of unsold apartments is stopping prices from rising, but it isn’t likely to make prices fall."

RUSSIAN HOUSING CONSTRUCTION DYNAMICS  Total area, millions of sq. meters% compared to corresponding period of previous yearJanuary 1.3134.1February1.2132.8March2.3106.8First quarter 4.8119.3April1.5125.9May 1.5117.4June 3.4103.2Second quarter 6.4111.0July 1.7119.8August 1.9125.3September3.7103.1Third quarter7.3111.9October 2.3112.8November 2.9109.3December 10.194.7Fourth quarter 15.399.6January-December 200233.8106.7January 1.7136.3February 1.5121.5March 2.4104.4First quarter5.6117.3April1.7117.6May1.7109.3June3.7109.0Second quarter7.1111.1January-June 2003 12,.7113.7

In June 2003, construction companies built 44,400 new apartments.
In the first half of 2003, they built 138,100.

Source: Goskomstat

Alexander Baigushev, deputy general director of Kvartal, said that consumers have become more rational in their preferences. Previously, it was considered prestigious to own a palatial apartment, but now customers are more interested in how to make the best use of their living space.

"The clients have changed," said Yury Kochetkov, marketing director at the Pravovoi Tsentr Zhilya real-estate law center. "Most of the clients before were businessmen, while now there are more members of the intelligentsia. Also, people have become more familiar with all the different nuances. People know the rules of the game on the market, and they know how important it is to have developed infrastructure and an underground garage."

Kochetkov said the only niche that is still not filled is for good-quality apartments not far from the city center at a price of $2,000-$3,500 per sq. meter. There are few projects in this price range, and, when they appear on the market, the apartments sell very fast. The other trend that Kochetkov notes is demand for small apartments from people not looking specifically for upscale housing. No one needs a one-room apartment of 60 sq. meters or a two-room apartment of 90 sq. meters. The optimum size for apartments in brick buildings is 45-50 sq. meters for a one-room apartment, 60-70 sq. meters for a two-room and 80-90 sq. meters for a three-room.

Many buyers are now turning to the closer towns in Moscow Oblast in search of cheaper apartments. Realtors say that all the nearby towns, such as Lyubertsy, Mytischy, Balashikha, Krasnogorsk, Odintsovo, Vidnoye and Khimky, are popular – as is even Troitsk, which is farther away but, as a former scientific town, is still home to a large number of members of the intelligentsia and academics.

There are clients who come looking for an apartment in Moscow and end up buying one in the oblast instead, so long as it is not far from the city. Sometimes, it takes as long to get to the southwestern outskirts of the city as it does to reach some of the closer Moscow Oblast towns. For example, it takes 20 minutes to get from Yuzhnoye Butovo to the nearest metro station at Yasenevo, and it takes 25 minutes to get from the Moscow Oblast town of Solntsevo to the Yugo-Zapadnaya metro station. Most of these nearby towns can be reached by public transportation from the nearest metro station in 10-15 minutes.

The other factor fuelling demand for apartments in Moscow Oblast is that prices are 20-30 percent lower than in the city: Apartments sell for an average $500-$600 per sq. meter. "Apartments in standardized panel buildings are especially popular," said a representative of Miel. "They attract buyers because they are not too big and are relatively inexpensive."

But prices in satellite towns like Khimky, Mytischy, Krasnogorsk, Odinstovo, Reutov and Dolgoprudny are already almost on a par with those in Moscow itself. However, this is not true of brick housing, which is sometimes even cheaper than panel housing if it is not the right class and not built in the right location. Apartments in Moscow Oblast brick buildings sell for $650-$700 per sq. meter, a price range unseen in Moscow.

Realtors do not foresee any large price fluctuations this year, either on the new housing market (MIAN forecasts a monthly price growth of 1-1.5 percent) or on the secondary market.

On the secondary market, there is always strong demand for good apartments in the west and southwest, mostly for two- to four-room apartments at a price of $1,000-$1,400 per sq. meter.

"Prices on the secondary market have grown somewhat more slowly in the first half of this year than they did last year," said MIAN PR Director Andrei Zhingan. "The balance today between supply and demand lays the ground for stability on the real-estate market in [the rest of] 2003."