Moscow Property Prices Down Despite Mayor's Denial

Source : The Business Times, January 15, 2009

(MOSCOW) Property prices in Russia's previously booming capital are steadily falling even as city authorities tick off local media for predicting a price collapse, newspapers reported yesterday.

In the doldrums: According to some estimates, 25 per cent of office space in Moscow is currently vacant

Newspapers said that city mayor Yury Luzhkov had given a news conference dismissing talk of a 50 per cent drop in residential property prices and advice by analysts that buyers should hold onto their money and wait for better deals.

Such views were misplaced given a housing shortage and continued migration to the capital from other parts of Russia, and could spell a 'collapse in the city's entire building system', he said.

Mr Luzhkov's wife, Yelena Baturina, is a leading property developer and has been ranked by Forbes as Russia's richest woman, with a net worth of US$4.2 billion.

But the daily Izvestia newspaper pointed to prestige projects such as the Federation Tower, due to become Europe's tallest building, and said that evidence of sharp falls in commercial property prices was incontrovertible.

Office space in the tower is now being offered at US$1,300 per square metre compared to US$2,000-2,500 in the third quarter of last year, reflecting falling prices across the city, Izvestia said.

'According to real estate experts, 25 per cent of office space in Moscow is currently vacant,' said Izvestia.

'This is due to the opening of a large amount of new office space built in recent years and an increase in space for rent as many companies are unable to pay their rents and are looking for cheaper options, even outside the city,' the paper added.

Vedomosti quoted the head of consultancy Finekspertiz Konsalting as predicting that residential prices in rubles would hold steady or even rise due to progressive devaluation of the ruble, while in dollars, prices could fall by 10-20 per cent by the middle of the year.

The business daily quoted state bank Sberbank as predicting that dollar prices on the primary market in Moscow would fall by 47-60 per cent by the end of next year and in rubles by 34-38 per cent. -- AFP