Translated material
First Olympic records
In a week, residential real estate in Sochi has risen in price by 30%
In the week that has passed since Sochi was announced as the capital of the 2014 Winter Olympics , local prices for residential real estate have shown a dizzying rise. Experts and market players have different assessmentsof growth in specific figures , and the reason for this is clear: now the market is in a “wild” period, new price targets have yet to be determined.According to Arevik Demirchyan, a representative of the Sochi real estate agency Soned, over the past week, prices for luxury housing have increased by approximately 30-33%, while economy class prices have risen by 15-20%. The price increase, although not so large, is recorded by Evelina Ishmetova, vice president for consulting and partner of GVA Sawyer: “On average, the market growth was about 15-20%.” At the same time, the cost of housing in 2006, according to the Soned company, increased by 30-60% depending on the class, according to the GVA Sawyer company - by 12-18%.
Some developers have frozen the sale of their properties until the end of July in order to understand the new pricing system, Vesco Realty Sochi CEO Stanislav Gripas told Vremya Novostei. “True, the buyer can reserve the property,” he adds, “but the price will be announced to the potential owner at the end of July.”
Not all developers are in turmoil. For example, the MR Group company, which is implementing two residential projects in Sochi (the Royal Park residential complex, which is planned to be commissioned in 2008, and the Actor Galaxy residential complex, scheduled for completion in 2010), raised prices by 10 %. But this is a temporary phenomenon. Commercial Director of MR Group Irina Dzyuba told Vremya Novostey that prices in Sochi have indeed increased by 30% and “we will also raise prices to a new level in the very near future.” The cost of apartments in the residential complex “House by the Arboretum” of the M-Industry company has also increased. Before the decision was made to hold the Olympics in Sochi, apartments cost from $2,460 to $3,800 per sq. m. m, today - from 3300 to 4990 dollars per sq. m. m. In the Red Square residential complex of the Eldorado Trading Limited company, prices rose from $3,390 to $3,690 per sq. m. m.
General Director of the Sochi branch of Vincent Real Estate, Eduard Filippov, notes that the 30% increase in prices for residential real estate is “absolutely untrue.” “Of course, real estate prices have increased on average across the market, but not by 30%,” he says. -- I estimate an increase of 10%. It seems to me that such a sharp increase in prices is an inadequate market reaction, emotional and unfounded. Real estate will become more expensive once the infrastructure is built.”
And yet there are some reasons for the price increase. According to many analysts of the Sochi real estate market, the demand for residential properties has increased significantly over the past week, mainly among buyers from other regions. Soned estimates that 80 to 90% of deals done today are investment in nature. Moreover, they invest not only in luxury real estate, but also in business and even economy class.
The price of land is growing even more confidently - this is noted by absolutely all market participants. Stanislav Gripas believes that land intended for multi-storey construction and located within the city has especially risen in price. “If before the decision was made to hold the Olympic Games, one hundred square meters of land cost about $400 thousand, but today it is up to $500 thousand. In some areas, the price reaches $800 thousand per hundred square meters. It is interesting that today more than ten projects for the embankment of islands in eight bays in the Sochi area are being approved. So, the cost of filling one hundred square meters of land will be about 70 thousand dollars per hundred square meters,” said Mr. Gripas.
Many developers are forced to buy land now, and not before the “Olympic fever.” According to a representative of the consulting company, who wished not to give his name, the process of processing transactions for the purchase and long-term lease of land plots has been significantly complicated since the beginning of the year. “The Registrar's Office has significantly reduced the number of visiting hours. So, in February it was only two hours a week. In this regard, many transactions were stuck, and some could not be completed at all,” he noted. The fact is that most of the documentation is valid only for a certain period and the parties to the transaction had to collect all the documents again. By the way, this situation is quite beneficial to land owners, because the price of the asset is growing.
Despite some difficulties, developers and investors day after day announce their entry into the market of the Krasnodar region. According to many experts, the profitability of Sochi projects, especially commercial ones, may exceed Moscow indicators. According to Evelina Ishmetova, on the one hand, it will be easier for investors to work in Sochi, since the administration will certainly provide support for projects from a bureaucratic point of view. But, on the other hand, due to the excitement around the Olympics and the relative youth of the Sochi market, investors will face a certain amount of risk in terms of the return on investment of projects. From this point of view, the Moscow market is more stable and predictable.
Prices have also increased for land intended for low-rise private construction. Eduard Filippov estimates growth by 20-50% on average for the market, and in the Krasnaya Polyana area by 100%. In turn, Arevik Demirchyan notes that one hundred square meters of land in Krasnaya Polyana a week ago cost from 10 to 50 thousand dollars, but now they are offering it from 100 thousand dollars.
According to some analysts, prices will pause their rise for several months and then continue to increase moderately. According to Mr. Filippov, the growth rate will be about 5% per month. Evelina Ishmetova expects prices to rise within 20-30% per year, “everything will depend on the success of measures to develop transport and engineering infrastructure.” Market experts expect a second wave of sharp price increases immediately before the Olympics.