Prices leap in Moscow luxury market sector

PUBLISHED : Wednesday, 03 December, 2003, 12:00am
UPDATED : Wednesday, 03 December, 2003, 12:00am

Unprecedented growth noted in the residential area following the 1998 rouble collapse

Communism may be long gone but Stalin's 'Seven Sisters' remain dominant features along the Moscow skyline.

Once dubbed examples of 'Stalinist wedding cake' architecture because of their distinctive tiered construction, these seven monoliths house the Moscow State University, the Russian Ministry of Foreign Affairs and the Ukraina and Leningradskaya hotels.

Distinguished by the red stars atop their spires, the skyscrapers were built in the early 1950s as Stalin's answer to Manhattan.

Meanwhile, nearing completion is an eighth sister, close in design to Stalin's creations and bearing a Stalinist-sounding name. The Triumph Palace, which is to be completed this month, is a wholly free enterprise in spirit and construction.

Built at a cost of US$250 million by Russian developer Don-Stroy, the skyscraper is 61 storeys and home to 1,000 private apartments. Prices start at US$1,400 per square metre.

The private residential sector has boomed in Moscow over the past decade since the collapse of communism.

New apartment blocks have been sprouting up across central Moscow, including 15 additional projects by Don-Stroy.

Moscow estate agents report almost uncontrolled growth in Moscow's residential market following the collapse of the rouble in 1998.

Philip Bogdanoff, general manager of Kirsanova Realty, a Moscow associate of Sotheby's International Realty, said prices had risen 15 per cent to 20 per cent for luxury homes this year because strong demand in recent years had soaked up supply.

'Prices are going up and up, faster than in London, for instance. It is booming,' he said. 'There are very few high-class select apartments. Five developments going up simultaneously in the luxury sector are all sold. There are very few good sites left to develop.'

This strength of demand meant that Moscow's property market, which is open to overseas buyers, was ripe for investment, he believed.

President Vladimir Putin's arrest of oil magnate Mikhail Khodorkovsky in October should not dissuade buyers, he said.

'There is huge investment potential,' Mr Bogdanoff said. 'It is something to do if these investors can overcome the country thing. They should not be put off by Putin arresting that businessman, because I see how things are happening here, and I feel very confident about this country.

'Returns are much higher than in other places. I have got a 17 per cent return on a 120-square-metre mid-range apartment in central Moscow. Investment here can make you good money.'

Fittingly for a strong market, prices are comparable to other European capitals - expensive at the top end. Mr Bogdanoff said US$1 million would fetch the buyer a new 200-square-metre apartment.

New apartments are usually sold as shells with bare walls and undefined rooms.

Muscovites consider red-brick developments classier than monoliths, the agency reveals.

Some agents consider the market is becoming 'more mature', with buyers of high-end homes expecting to find properties decorated and furnished, with even the refrigerator stocked and a housekeeper in residence, services that some estate agencies such as American-run Penny Lane provide.

Some apartments are decorated by interior designers, including leading western names such as Philippe Starck.

Kirsanova Realty is offering a four-room apartment at the nine-storey Pyatnitsky Dvor apartment block in central Moscow for US$1.2 million.

The 198-square-metre, classically designed apartment overlooks St Christ the Saviour and St Basil's cathedrals. Car parking and 24-hour security are included.

Moscow's three most desirable residential areas - Arbatskaya, Patriarch's Ponds and Ostozhenka - are located centrally within the so-called Garden Ring Road.

The buying process takes about one month and involves the buyer and seller completing the sale through a notary, after the buyer has placed a deposit. The purchase must be registered with the Registration Chamber, Mr Bogdanoff said.