To Buy or Not to Buy?
Text by Alexander Ziminsky,
Director, Elite Real Estate Department,Penny Lane Realty
The summer of 2009 was marked by a noticeable upward trend of buyer activity. June and July became the most active months, which was never a characteristic for the summer season in previous years. I explain this partially by the fact that postponed demand played its role, demand which has built up since the beginning of the financial crisis. People were afraid to commit, waiting to see if prices would fall any further. These expectations were not fulfilled due to the fact that the majority of sellers of elite real estate, especially on the secondary market, did not experience particularly serious financial difficulties, and thus did not see any serious reasons for reducing prices more than a usual market reduction, which was normally reached in the course of negotiations.
The lowering of the cost of certain elite properties did not exceed 8-10% in US dollars from pre-crisis levels, however these kind of reductions were being made before the crisis. As a rule, this occurs when the owners of these properties need free cash because of financial difficulties, or if clients decide to take their profits and move into another segment of the market, and also for other reasons. Also, during the summer period many new attractive, elite apartments appeared on the market. Many of them have already found buyers, but demand is weak for those that are left, especially those which have just been repaired. Such apartments today mostly interest those who purchase property as an investment. But owners are not so keen to lower prices as they were a few months ago. Owners, who in February – March willingly offered to lower prices and apply different additional marketing steps to speed up the sale of their apartments, are today changing sale conditions and tactics. They do not experience the need for an urgent sale anymore.
the crisis on the elite real estate market, then it is possible to note that the elite end of the market has separated itself from the rest of the market, including “pseudo-elite” properties, to a greater degree. In essence this is manifested by the absence of additional discounts for the given properties. Therefore they will always be an attractive investment. As far as owners of less prestigious properties are concerned, not everybody got their money back. This is due to the fact that prices in buildings of various non-elite apartments have started to adjust to fit existing economic conditions. Because of the decline in demand and transformation of the market from seller to buyer domination, owners can no longer can sell their business-class apartments, for a price equal to that of say an apartment in a ‘club house’ in the center of Moscow. Subsequently, sharp upward price changes will not take place in the near future, and much will depend on the development of macroeconomic factors.
I recommend clients to look for their desired apartments now and not to wait. GREAT properties that are being offered now are also disappearing from the market with the same GREAT speed. Future hope for lower prices will be canceled out by a simple lack of offers, which will keep apartments of lower quality at the same price level as they are now, simply because there will be less options to choose from.