Sberbank: Russian real estate market afloat despite economic troubles

By Andrei Skvarsky.

Though battered by current national economic troubles, Russia’s real estate market remains very much afloat, according to studies by Sberbank, Russia’s biggest lender.

The market’s residential real estate segment has been faring better than its commercial property counterpart.

Sales of residential property have not dropped to dangerous lows after the dramatic plunge in oil prices and the outbreak of the Ukrainian crisis in 2014 with the consequent Western sanctions against Russia, Yuliya Gordeyeva, a senior equity analyst at Sberbank CIB, the bank’s investment arm, told a briefing in Moscow.

Mortgaging is largely what keeps the housing market going. About 25% of transactions are mortgage-based, and the rates in about one-third of these are subsidised under a state programme which has been extended until the end of 2016, Gordeyeva said.

In real terms, residential property is cheaper today than a decade ago. In nominal terms, since the start of the Ukrainian crisis housing prices have on average gone up by just 9% in Moscow and 2% nationwide, the analyst said.

A Sberbank CIB survey suggests 20% of urban residents with average incomes plan to buy new homes within the next couple of years.

In a separate emailed comment to EmergingMarkets.me, Gordeyeva has said investment is the purpose of between 15% and 20% of purchases of residential real estate.

As for developers, she said at the briefing, “we do not expect that the financial standing of the leading companies will worsen significantly, although their debt burden will undoubtedly increase”.

As the commercial property market goes, office space leasing has been its unluckiest segment because of rents that have fallen by between 30% and 50%, oversupply and the depreciation of the rouble, Gordeyeva said.

On the other hand, the leasing of warehouse space was a more successful business last year than in 2014 as lower rents stimulated retail chains to sign long-term contracts, she said.

Demand for retail space has gone down because of a decline in consumers’ purchasing power and the freezing of retail chain development programmes.

Nevertheless, last year 24 foreign companies got established in the Russian market and only six pulled out. Some foreign firms began to build out their business in Russia, Gordeyeva said.

Hotels in Moscow have generally been in the black, one reason being that the rouble’s weakening has encouraged more foreign tourists to visit Russia. However, demand for four-star accommodation has been relatively low as the average Russian cannot afford it while foreign tourists mostly prefer five-star hotels, Gordeyeva said.

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