Property slump puts Moscow Government in drivers seat

Russia's real estate market has seen prices dropping dramatically since mid-year, with further falls expected in 2009. This is forcing developers to sell off new property to the city.

After years of skyrocketing real estate prices in Moscow, the credit crunch and problems in the banking sector are turning around what was once a definitive sellers' market.

Sberbank research says the dollar price of newly-built property in the capital will fall between 47 and 60% by the end of 2009. It's new developments that are being hit the hardest. And that's led building firms to issue discounts of up to 50%.

The housing complexes – including some from internationally-listed developer Pik, have been put to tender for purchase by the Moscow City government – keen to get as good a deal as possible, according to Anastasia Kochetkova, Press Secretary, of the Moscow Tender Committee.

“We understand that today there is a crisis, today there is an extremely unstable situation. And the city's leadership is doing everything it can to make provisions to meet its obligations – so that Muscovites who are on waiting lists aren't left without housing.”

The City government has been monitoring the market situation, though it's not clear if the developer's deals will help set prices, according to Anna Levitova, Managing Partner, Evans Real Estate.

“Whatever developer will close the most deals with the government will be better off because today that's the only entity that actually has money.”

Agents and construction firms are now seeing a buyer's market is taking root.