OREANDA-NEWS. November 12, 2008. The price bubble on the Moscow realty market will soon burst, and the prices of apartments will drop 'many times,' Aven declared yesterday at the conference 'Russian Financial Sector: Response to the Global Challenge.’ In Russia, the ratio of the price of an elite 100 sq.m apartment within the Sadovoye Ring to the GDP per capita is 155.7, in Ukraine – 99, in most of the European countries – below 30, and in Germany – 5.9, he argued. In Moscow, apartment prices are over-valued by 5 times with respect to the average European prices due to profiteers: 40-50% of apartments were purchased not for living, but for further re-sale, Aven believed. 'Since the times of the Soviet shortage, people have bought up apartments, because they considered realty the most reliable investment of money,’ he explained.

Developers don’t anticipate the crisis. Realty, unlike money and shares, doesn’t turn into paper, reminds Ekaterina Kukanova, a representative of Don-Stroy. She believes that it is in downtown Moscow where realty will not become cheaper: Prices may a bit fluctuate, but nobody will dump this gold mine at a loss.

The sellers of elite realty admit that the prices are going down, but they do not agree with Aven’s forecasts. In some case, reduction makes 30%, as noted by Alexey Sidorov, Deputy Director General of Kalinka Realty; according to him, the offer has grown by 15% since September.

The offer of elite realty has increased by 3 times as compared to the pre-crisis situation; at the same time the demand has decreased about twice, told Alexander Ziminsky, Director of Elite Realty Department, Penny Lane Realty. Ekaterina Tein, Managing Partner of Knight Frank states it differently: The customers are sitting on the fence.

It’s a good time now to get a discount, Tein believes. Ziminsky notes that on the average discounts for deals reach 10%, sometimes even 30%. Less successful offers must reduce in price, while high-quality elite realty will mature: As with any deluxe good, it doesn’t lose its value, he hopes. Now the market has a great number of speculative new buildings, which cost as much as elite housing, but fail in terms of quality, and they will fall in price, believes Oleg Repchenko, Head of IRN.ru. He reminds that back in 2007 while the prices for accommodation in Moscow reduced by 10-15%, elite housing cost the same or rose in price.