Buyers wait as property developers totter

The slump in Moscow real estate prices has potential buyers waiting on the sidelines for a developer to be pushed to the brink. Market watchers say this is a serious possibility.

The risk of major bankruptcies hand over the real estate sector, with a further downturn in prices likely should any major property develop be forced to unload developments on the cheap.

With big property developers such as Mirax, and DomStroy all facing possible bankruptcy, market watchers, such as Denis Sokolov, Head of the Research Department Cushman & Wakefield at say this is quite possible.

“The likelihood is pretty high and I think we'll see several bankruptcies. Bankruptcy is a correction for the market. Those players that had a wrong business policy will fail.”

With prices across all sectors already down sharply this year, the market is still seen to be quite sluggish. This is leading to speculation that potential buyers are sitting and waiting for a company to crack. Viktor Makshantsev, Head of Real Estate Funds at VTB Capital, says buyers are waiting.

“We're seeing a huge amount of delayed demand which is still existing in the market. Actually, across pretty much all of the commercial real estate segment.”

The extent to which prices are down is also subject of some debate with data showing that prices in most sectors are down sharply in dollar terms, but only slightly in rouble terms. For those waiting on the sidelines, a developer pushed to the brink, or a financier looking to get its cash back through a bankruptcy, could provide a lot more property for their Roubles.