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New Moscow: Impact on the residential property market of the Russian capital


Gavriil Korolev, head of the RWM Capital real estate department, gives an interview to Novostroy.ru

Long before becoming ‘New Moscow’, areas belonging to the Moscow region but situated very close to Moscow itself were converted into a gigantic construction site for housing development. It was not at all surprising: apartments were cheap and provided with superb transport links – an ideal choice for commuters. However, the demand for residential property shot up when the Moscow Metro started its expansion beyond the boundaries of the city and into the Moscow region.

Is it a good move to buy property in New Moscow? How long will it take for a buy-to-let (BTL) property to pay off and become profitable? Gavriil Korolev (RWM Capital) answers our questions about investor opportunities in the area.

N.RU: With the rapid growth of new residential neighborhoods in New Moscow, can we say that the market now is over-supplied and apartment blocks just stand there empty and unwanted?

G.K.: The Moscow property market fortunately does not work like that. In many respects, this market seems to have no visible limit whatsoever. More and more people make up their mind to go and settle in Moscow, new businesses are established, the number of jobs increases. So that 2-3 million sq m of housing built every year are consumed easily by the growing city.

N.RU: Could you single out new residential areas with good potential for both further investment and private buy?

G.K. Not new perhaps, but I would like to mention areas near new-built metro stations on the Moscow Metro red line.

N.RU: In what district it is better to purchase property for BTL nowadays?

G.K.: While choosing a suitable apartment for BLT, you should consider not only its immediate location but additional issues as well. For instance, residential areas near the yellow line. At a glance, it is a nice choice for tenants working in the City or in central Moscow. But being a kind of a subsidiary line, the yellow does not take you to the centre of the city, but makes you switch trains instead. The switching takes place at Park Pobedy – quite a nightmare during morning rush hour. These circumstances make the area in question not that attractive for tenants from outside, and the actual demand comes only from locals – a poor consolation for residential property developers and owners of apartments bought already exclusively for BLT.

A healthier alternative is presented by the residential neighborhood at the end of the red line. The location provides residents with a direct excess to central Moscow. But a drawback of new residential districts here (and everywhere) is their poor infrastructure. That is why my advice is to purchase apartments for BLT on the red line - not at new stations but at old ones.

N.RU: As we have already decided what areas are the best for the purpose, would you tell what kind of apartment is the best one for BLT?

G.K.: The most commonly sought after apartment boasts of modern finishes and IKEA-style furniture, is 20-60 sq m big and the one in a new building, located in a nice neighborhood, well-connected with the city centre. But characteristics do differ from one market segment to the next. For instance, if it is your desire to deal with first-class residential property, you should look for a three-bedroom flat as there is a definitive shortage of them at the moment. In this case you may be sure to see it off your hands pretty quickly.

N.RU: How much time does it take for a BTL apartment to pay off?

G.K.: Usually it takes between 10 and 20 years. But now, with the legislation currently being changed and the VAT having been raised, a pay-off period is going to shrink to no more than 10 years.

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