On the threshold of the Russian rent market fever, which was predicted by the specialists in the field, experts of EVANS Company carry out the comparative analysis of a condition of the market in two largest cities of the world – Moscow and New York. As analysts have found out, there are twice as many offers in a high price segment (from above $18 000) in Moscow, as in New York.
Demand
More than 70% of New York residents are tenants, so the demand for apartment rent here is very high. The main interest to real estate leasing is shown during the summer months. This year in New York there was a 15% growth on the amount of rent transactions from the beginning of June till the end of August. There are many reasons for active seasonal demand: in low segments it is supported by numerous students who come to work in New York during summer vacations. They are followed by the graduates who move to the city after finishing their studies and start working there. It is also convenient to resettle for families with children from June till August – during the summer vacations there is enough time and opportunities to adjust life on a new place.
Seasonal prevalence of the rent market is also supported by the standard conditions of lease agreements. Most of the contracts in New York signed for not less than a year, and it is almost impossible to break such an agreement earlier. Even if the tenant leaves an apartment, he must pay for it otherwise he runs the risk of spoiling his credit history.
The most popular low price segment (to $ 1200) options among the Americans are small studios (1-room apartments with no kitchen); in a medium price segment (from $2 500 to $6 000) these are 2 or 3-bedroom apartments (a living/dining room and 2-3 bedrooms); in a high price segment (from above $6 000) the large area apartments with four and more bedrooms are much in demand.
Absolutely different situation appears in the rent market of Moscow. In the capital of Russia, unlike New York, most of the residents are not tenants, but the landlords. And even those who rent the apartments can easily leave them, having warned the landlords beforehand.
The peak of rent activity here is autumn. At this time the students start their educational season as well as the search of apartments. Besides, the majority of potential tenants comes back from holidays by this period and tries to look for apartments. The only segment in Moscow, which is active in summer is elite segment (approximately from $18 000 a month). In most cases tenants here are high-ranking employees of the international corporations and diplomatic missions.
«Big foreign companies prefer to move their tops to Moscow in summer not to frighten them with cold and dirt, - says Anna Levitov, EVANS Managing Partner. - Many of them move to Russia with their families, and the children can change school only during vacations».
The most popular options in a low price segment (to $ 1000) in Moscow are rooms or small area 1-room apartments without special conveniences; in a medium price segment (from $ 3000 to $8000) spacious apartments with 3-4 bedrooms are much in demand; and in a high price segment (above $ 8000) these are multi-level penthouses with high quality finishing.
«According to our company, the most demanded options in Moscow during the summer were of a medium price segment – from $3000 to $8000, - Anna Levitov comments on the topic. – It is notable that during the three hot months quality apartments with an adequate price were in popular demand. I think, this tendency will show itself more clearly in autumn».
Supply
About 85% of offers in the New York rent market fall on the cooperative buildings, meaning that the residence belongs to corporation – non-profit organization which owns and manages it. Apartments in such buildings are sold as stocks in the company; the amount of stocks corresponds to the apartment area. Thus, all tenants in the residence are partners in cooperative society. About 15 % of buildings are condominiums. Unlike cooperatives it is possible to lease apartments in such buildings for long term, which is interesting to the majority of foreign investors.
In the Moscow rent market there are practically no cooperative buildings. Residences with management companies are very rare. For example, there is a management company in the apartment house which belongs to the Government of Moscow (10, B. Nikolovorobinsky lane). Other noteworthy residences are «Donskoy Posad» and "Park Place Moscow", which is managed by Hines.
Unlike Moscow many apartments in New York are offered with terraces and big balconies, in most buildings there is a terrace on a roof for all residents. Among offers for rent there are also townhouses - small houses with a garden located in the city.
The Moscow rent market offers to greater degree 1-room apartments (approximately 30% of total amount of rented apartments), 2-room (36%), 3-room (22%), 4-room and more (12%).
It is remarkable that the amount of offers in a high price segment in prestigious areas of Manhattan (which is comparable with the Moscow Centre) is insignificant. In the center of the capital of Russia there are more than 100 apartments from above $18 000 a month, but in the most popular areas of Manhattan there are about 50 such variants. At the same time the majority of apartments both in Moscow, and in New York cost less than $30 000 a month.
«This picture proves the opinion of wealthy New York residents, who prefer buying, instead of leasing apartments, - Anna Levitov says. - Numerous diplomats and even the high-ranking employees of the international corporations don't receive such big housing allowances as in Moscow, where a good packet of the expatriate often compensates all inconveniences».
Prices
In 2009 for the first time for many years rent rates in New York not only didn’t rise, but even dropped 20% and even 25% in some segments. However due to decrease of the amount of offers this summer and restoration of the financial situation in the country there was a 15-20% increase of the average rent rate.
As a rule, rent cost in New York is composed of the building location, presence of the doorman in it and total area of the apartment. On the assumption of this, the average apartment cost in the most prestigious quarters of Manhattan this August was from $2 900 to $5 000 a month. In less liquid New York districts, such as Queens, Brooklyn and Bronx (which can be compared to the Moscow districts of Vyhino and Butovo, because it’s impossible to reach any of them by the underground from the center in less than 40 minutes) rent cost is much lower - from $800 to $2000 a month.
There was also an increase of rent rates in the Moscow market this summer, which averaged 7% for three months. Thus in the center of Moscow the average monthly rent was $4 000 - $7 000 and $850 - $1800 in the remote areas of the city.
«Due to gradual stabilization of the financial market both in Moscow, and New York, we expect growth of rent rates in the near future. In Moscow it will happen in autumn and, according to our forecasts, till the end of November it will have made about 8-10 %. In New York the growth peak was in summer, however in autumn the upward tendency will continue due to considerable decrease of offers. Within the next 3 months the growth of rent rates will make approximately 5-7%, - summarizes Anna Levitov».
Evans Property Services is one of the leading full-service real estate companies with offices in Moscow, Russia and New York City, United States. The company was founded in 1991 by experienced brokers Anna Levitov, graduate of Wharton Business School, and Karina Kheifetz-Sagieva, University of Pennsylvania graduate.
Evans work in residential real estate, providing assistance with lease, purchase and sale in both central and suburban Moscow and Saint Petersburg. The company also performs various operations with foreign real estate.
