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25 Sep, 2009 14:57

Market downturn opens gap for single dwelling housing

The Russian real estate market has seen a wave of bankruptcies amongst developers and construction companies, driven by falling demand and financing issues. But the market slump is providing an opening for some.

The housing market has almost come to a standstill as players wait for prices to bottom out and show some sign of a rebound.

After a year of economic downturn, developers are offloading land with infrastructure at a big discount. This is seeing increased interest from Muscovites in moving to the country where they can choose from a range of lifestyles.

That has meant a market opening for one company – NLK housebuilding. It has a production cycle running from timber processing to pre fabricated housing. The financial crisis has meant it needs to change its strategy, according to General Director,Semen Goglev, but in doing so, it has opened a new market.

“We have faced a significant demand change. Before, we worked mainly with developers and supplied houses into large housing estates. Now developers are selling land without construction, and we have started working with private customers. We have significantly changed the sales system but we have managed to keep sale at 80% of last years volumes. We have also diversified from premium end of the market to the low-cost end starting from $80 thousand.”

Some experts, such as Victor Makshantsev, are predicting a quick rebound in the traditional housing market will put pressure on the new model – with focus returning to apartments in the central city.

”That market is naturally very fragmented, ultimately the ability of people to create this sort of housing depend on their access to proper financing, and, as I said, I think gradually the situation will be improving down the road but we don't think there will be any boost in that sector.”

Olga Timofeicheva, Executive Director, at Step by Step agrees that some fundamental facors will see the focus return to apartments.

“The country houses are viewed by Russian citizens as second houses and not as alternative for their city flats yet. There are still a lot of problems in that sector – lack of infrastructure and high cost of living like the cost of getting to work and back.”

But with more than 70% of Russian living in apartment complexes in large cities, and Russia having plenty of available land for them to live in their own homes on their own land, there is plenty of scope for something different. And with regional Russia and areas outside Moscow looking to cultivate something other than the standard Russian apartment lifestyle more Russians could soon see this as a viable living choice.