Demand, prices and new players: main trends in the luxury new buildings market

Demand, prices and new players: main trends in the luxury new buildings market
Experts say one of the most noticeable trends is the increase in demand for luxury housing in Moscow, as evidenced by the sharp increase in the number of transactions in this market. According to analysts, a total of 991 transactions were concluded in the elite segment of capital housing in 2023, which is 1.5 times more than in 2022. The peak of demand occurred in September, the figures of which (139 transactions) became a record for the last two years.
Rising prices for the construction of luxury houses, rising inflation and the depreciation of the ruble stimulate people to buy more actively, thereby saving money in real estate. Many seek to fix the current price and continue to make payments in installments, experts say.
According to experts, a noticeable revival of the luxury market in the second quarter of 2023 translated into a strong increase in consumer activity in the second half of the year. “Pent-up demand made it possible to compensate for cooling periods. At the same time, there is a return of indicators to the level of 2021, we can talk about the recovery of the market after the stress that buyers experienced at the beginning of 2022,” experts add.
Another trend in the luxury real estate market is the consolidation of players through merger deals. According to experts, this becomes inevitable in the context of frequently changing rules of the game, when only the largest players survive in the real estate market.
“Developers are interested in diversifying their portfolio, just as in the hotel segment, operators have a separate luxury brand that enhances its prestige and overall brand value. So, last year Level Group, Pioneer Group of Companies, Absolut Real Estate and LSR Group entered the elite market, and this year COLDY, a developer specializing in commercial real estate and apartments of a more budget class, appeared in the segment,” - experts note.
If we talk directly about the consolidation of existing players, then the purchase by the developer Sminex of the Inteko company (the merged company is building and designing more than 700 thousand sq. m of luxury and premium real estate) is one of the most clear examples of this trend. According to experts, other major players who make a difference in the elite market include Capital Group, MR Group, Vos'hod, Donstroy and Level Group.
Price stabilization
Prices for luxury real estate in Moscow have been stable over the past year and a half, with minor quarterly fluctuations occurring, which are largely related to structural changes in the segment. According to analysts, the average price of 1 sq. m in elite new buildings in the capital in December last year amounted to 1.52 million rubles. This is 2.7% less than at the beginning of 2023. Preferential mortgages do not affect demand in the expensive segment, and therefore the rush demand for subsidized programs did not affect prices for luxury new buildings.
According to experts, sharp price fluctuations in the high-budget real estate market are not expected in the short and medium term.
According to analysts, the first place among the capital's locations - the leaders in the cost of luxury housing - is occupied by Patriarch's Ponds, where the average price is 1 sq. m. m in December last year was recorded at around 3.59 million rubles. In second position is the Ostozhenka and Prechistenka area, where a “square” in the elite segment costs 3.55 million rubles. Yakimanka closes the top three, where the average price of 1 sq. m is 2.4 million rubles.
The luxury real estate market is quite conservative; new super-expensive locations do not appear overnight. “Liquid lots are rising in price mainly because they are increasingly valued as safe investment assets. An interconnected process is observed: buyers invest in projects in order to save money, and consumer activity leads to higher prices for apartments in prestigious locations,” experts note.
“In 2024, much will be determined by the entry of new projects into the market, the balance of supply and demand, and will also depend on the increase in construction costs, inflation expectations, currency fluctuations, the tension of the geopolitical situation and other combination of factors,” experts summarize.
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