Residential Real Estate Market Overview Residential Real Estate Market Overview Q1 2013 Residential Real Estate 2013

RESIDENTIAL REAL ESTATE 2013 MARKET OVERVIEW

RESIDENTIAL REAL ESTATE MARKET OVERVIEW RESIDENTIAL REAL ESTATE MARKET OVERVIEW Q1 2013 RESIDENTIAL REAL ESTATE 2013

Content

Residential real estate. Russia. Moscow region. Residential construction……………...………….. 3 Residential real estate. Old Moscow……………………………………………………………………. 4 Residential real estate. New Moscow.……………………………..……………………………….…… 6 Apartments…………………………………………………………………………………………………. 9 Residential real estate. Elite segment. Moscow. Sale………………………….…………………….. 10 Residential real estate. Elite segment. Moscow. Rent………………………………………………… 13 Residential real estate. Moscow region………………………………………………………………..... 16 Countryside. Land market………………………………………………………………………………. 18 Forecast……………………………………………………………………………………………………. 20

All rights reserved. This report has been prepared for information purposes only. The data and information contained herein are the exclusive property of Blackwood Real Estate company. Reproduction of the report in total or in part is allowed only with a prior written permission of the Blackwood real estate company. Quoting is allowed with refer- ence to the source.

RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

Russia. Moscow Region. Residential construction According to Rosstat, 69.4 mln. sq.m of residential space Dynamics of residential construction volumes in Russia were commissioned in Russia in 2013, which was 5.5% more than in 2012. The initial plans on the commissioning of 71 mln. 80 200% 180% sq.m were not carried out. 70 160% 60 The Moscow Region was still the leader by the construction 140% 50 volumes among the regions of Russia. 6.9 mln. sq.m were com- 120% missioned in the Moscow Region for January-December 2013. 40 100% 80% The Krasnodar Kray followed (3.39 mln.sq.m). Moscow ranked 30 60% third among the leading regions by the construction volumes. 3.1 20 40% mln.sq.m were commissioned in Moscow for the specified pe- 10 20% riod, more than 1 mln.sq.m of which were delivered on the terri- 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 tory of New Moscow. (forecast) new supply, mln. sq.m It should be noted that the represented data for the Moscow growth rate, % to the corresponding period of the previous year Region are specified exclusive of apartments, which legally refer Source: Rosstat to non-residential fund. The main volume of apartment- Monthly residential commissioning volumes in Russia complexes is under construction, the commissioned properties mln sq. m % are scarce now. However, taking into account an impetuous 20 160 development of this format as an alternative to traditional resi- 18 140 16 dential space, it will be reasonable to account this segment in 120 14 the total residential commissioning volume as a number of large 12 100 properties are completed. 10 80

8 60 6 40 Monthly residential commissioning volumes in Moscow, thous. 4 sq.m ** 2 20

December 0 0 November October September August new supply, mln. sq.m July 2013 % to the corresponding period of the previous year June Source: Rosstat May 2012 April March * - the latest accessible data at the moment the overview issue February January ** - data on the city of federal significance Moscow and the Moscow Region is presented taking into account the change of their borders since 1 July 2012 according to 0 200 400 600 800 1 000 1 200 the resolution of the Council of Federation of the Federal Assembly of the Russian thou sq. m Source: Rosstat Federation as of 27 December 2011 No.560-СФ.

Leaders among the constituent entities of the RF by the construction of residential houses in 2013, thous. sq.m**

8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0

Source: Rosstat

3 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

Old Moscow. Supply During Q4 2013 the primary market of old Moscow con- Supply structure of new buildings by AD of Moscow, sq.m, tinues to increase by new properties, as well as by new vol- December 2013 South-East South-West umes in the projects on sale. The sales in the segment of North-East 6,5%Zel-AD 1,3% 10,9% North-West 1,7% new comfort class buildings started in the following proper- 9,0% East 4,0% ties: new buildings in Zeleny Bor microdistrict, Fili-grad RC, South 17,3% MFC in Melnikova street, the sales resumed in O7 RC. The summary volume of new supply in the comfort class segment was estimated at the level of 25 thous.sq.m. Central 20,3% West 13,4% The business class segment supply was represented by new buildings in Michurinsky RC, as well as new supply North 15,7% volumes in RC Gazoil City and RC Losiny Ostrov. The new Supply structure in the primary residential market of Mos- supply volume in this segment was estimated at the level of cow by classes, sq.m, December 2013 82 thous.sq.m. Economy 15,3% The economy class new supply was represented by a new Elite 15,3% building in RC Vershinino from Vedis Group, a new house at 1, 17th passage of Maryino Roscha from GC PIK, as well as new buildings in mcr. Nekrasovka Park. The summary volume of new Comfort 23,1% supply in the economy class segment accounted for about 64 thous.sq.m. Business 46,3% A more detailed information on some new projects is presented in the Table below. Source: Blackwood Company data The supply volume in the primary market of old Moscow changes by the results of Q4 2013 as compared to the previous amounted to 1.7mln.sq.m with account of apartments and elite period and looked as follows: new buildings at the end of Q4 2013. The growth at the level of A little bit more than 46% of the total supply volume was a little bit more than 10% was noted as compared to the previ- accrued to the business class; ous period. The supply was represented by more than 280 properties. The share of apartments in the primary market exceeded Approximately 23% of the total supply volume—comfort 31% by the results of Q4 2013. The supply volume amounted to class new buildings; 1.66 mln. sq.m. The supply structure in the primary residential About15% accrued to elite new buildings; market of old Moscow by classes did not undergo any significant Approximately 15% - new economy class buildings. Some economy, comfort and business class properties, which entered the market of the old Moscow in Q4 2013 .*

Address Name Developer Class AD/Region Wall material

Nametkina str. (Khersonskaya str.) Gazoil City Tashir Business SWAD/Cheremushki Monolith

57, Michurinsky pr., quarter 5-6, bld. 9 Michurinsky PIK Business WAD/Ramenki Monolith

mcr. 23, 11 Radio str., bld. 5, 11 Zeleny Bor Promstroyinvest Comfort ZelAD Monolith 17-й проезд Марьиной Рощи, владе- - PIK Economy NEAD/Maryina Roscha Panel ние 1 16 Elektrolitny pr., bld. 2 Vershinino Vedis Group Economy SAD/Nagorny Panel Luberetskie aeration fields, quarter 7, Nekrasovka Leksion Development Economy SEAD/Nekrasovka Panel bld. 3, 4, 5 park Luberetskie aeration fields, quarter 11, Nekrasovka Leksion Development Economy SEAD/Nekrasovka Panel bld. 5, 6, 7 park Luberetskie aeration fields, quarter 10, Nekrasovka Leksion Development Economy SEAD/Nekrasovka Panel bld. 4 park Luberetskie aeration fields, quarter 4, Nekrasovka Leksion Development Economy SEAD/Nekrasovka Panel bld. 1 park Source: Blackwood Company

* - information on elite properties and apartment-complexes is presented in the respective sections

4 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

Old Moscow. Prices Price dynamics. Old Moscow The average-weighted supply price in the primary market of RUR per sq. m old Moscow constituted 192, 150 rub.per sq.m at the end of 250 000 primary market 2013 (exclusive of the elite segment, apartments and town- secondary market 200 000 houses), the dollar equivalent—$5, 880 per sq.m. The growth at the level of 7.5% (+4.9% in dollars) was noted as compared to 150 000 Q3 2013, which was connected both to the total increase in 100 000 11 11 12 12 13 13 11 11 11 11 12 12 12 12 13 13 13 13 11 11 12 12 13 13 11 12 13 11 12 13 11 11 12 12 13 13 ------prices, among other things due to the passing of construction - - - Jul Jul Jul Apr Oct Apr Oct Apr Oct

stages, and to the change of the supply structure: for instance, Jan Jun Jan Jun Jan Jun Feb Mar Feb Mar Feb Mar Aug Sep Dec Aug Sep Dec Aug Sep Dec Nov Nov Nov May May May to the commissioning of large supply volume in the business class RC Gazoil City at high prices. The annual growth of rouble $ per sq. m primary market prices equaled 3% (and the decline in dollars—4%). 8 000 secondary market 7 000 The average-weighted supply price in the secondary 6 000 residential market remained at the level of the previous pe- 5 000 riod and amounted to 199, 800 rub. per sq.m, the dollar 4 000 11 12 13 11 11 12 12 13 13 11 12 13 11 12 13 11 12 13 11 12 13 11 11 12 12 13 13 11 12 13 equivalent—$6, 110 per sq.m. 11 11 12 12 13 13 ------Jul Jul Jul Apr Oct Apr Oct Apr Oct Jan Jun Jan Jun Jan Jun The average supply prices in the primary market depending Feb Mar Feb Mar Feb Mar Aug Sep Nov Dec Aug Sep Nov Dec Aug Sep Nov Dec May May May on class established at the following level at the end of 2013: Economy class— 127, 700 rub. per sq.m ($3, 905 per Source: Blackwood Company data sq.m); Average prices in the primary market by districts of old Mos- cow, December 2013. Comfort class - 145, 800 rub. per sq.m ($4, 460 per sq.m); Business class - 224, 020 rub. per sq.m ($6, 851 per sq.m). The change of the supply structure due to the commissioning of new projects still had the significant impact on the price dynamics both in the market on the whole and in separate segments. The average –weighted supply price in the economy class primary segment declined by almost 1% by the results of Q4 2013 due to the commissioning of a considerable number of supply volume in Nekrasovka Park mcr. The sales started in 8 new buildings at one time during the quarter, and the average supply price for new volume did not exceed 100, 000 rub. per sq.m. Along with rather cheap offers in the mcr. Nekrasovka Park the sales started in the second building of RC Vershinino from Vedis Group, where the average supply price amounted to about 187, 000 rub. per sq.m. The change of price in the business class segment was more significant: +3.7% by the results of Q4 2013. During the period under consideration the supply in this segment increased due to the new supply offered for sale in RC Gazoil City at rather high prices—for more than 310, 000 rub. per sq.m. Moreover, the sales started in new buildings of Michurinsky mcr.: the supply Source: Blackwood Company data encompassed about 15 thous. sq.m, the average price was The projects expected for commissioning in the market of old about 210, 000 rub. per sq.m. Moscow in the short-term included RC Donskoy Olymp (SAD, Ser- Comfort class new buildings gained 2.7% in price by the re- pukhovsky val), Red Side (CAD, Sergeya Makeeva str.), RC Zolo- sults of the quarter. The new supply was represented by new taya Zvezda (EAD, Prospekt Budennogo), RC Varshavskie Holmi buildings in mcr. Zeleny Bor in Zelenograd, where the minimal (SAD near Annino and Akademika Yangelya metro stations), RC average supply price in the comfort class reached 97, 000 rub. Nasledie (WAD, Preobrazhenskaya square), RC in Grayvoronovo per sq.m. (SEAD, Ryazansky prospekt).

5 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

New Moscow. Supply Dynamics of the supply volume in the primary market of new The supply volume on the whole remained stable in the pri- Moscow mary residential market of new Moscow during 2013—flats in 200-230 residential complexes were presented for sale. A number of properties, which offered flats for sale, corresponded to 227 new buildings at the end of December 2013 (-1% as compared to September 2013).

Offers appeared in 130 properties in the primary market of annexed territories for the past year, for the most part these were new buildings in large residential complexes, the sales in which had started earlier. New residential projects of new Mos- cow replenished the supply in 2013 mainly by projects of low Source: Blackwood Company data and mid rise. Supply structure of new buildings in new Moscow by classes, December 2013 The supply volume of the south-west territories increased by 43 addresses in Q4 2013 (19% of the total number of new buildings in the supply), economy class properties occupy a considerable share—67% of the total number of new offers.

The main volume of new supply consisted of buildings in earlier commissioned residential projects, mainly sold on the territories of the first distance belt from MKAD. These were the

offers in such residential complexes as Bunuinsky near Stolbovo Source: Blackwood Company data village, Moskva A101 in Kommunarka settlement, Pervy Mosk- Supply structure of new buildings in new Moscow by distance ovsky in Moskovsky, Peredelkino Blizhnee near Rasskazovka from MKAD, December 2013 village and Tatyanin park in Govorovo village.

New projects also included high-rise residential house Novoe Krekshino in Krekshino village (22 km between the Minskoe highway and the Kievskoe highways) and low-rise apartment houses in a multiformat residential complex Troitskaya Riviera in Troitsk.

Source: Blackwood Company data

Some residential projects commissioned in the new Moscow market in Q4 2013

Total residential Name of RC Address Developer Class area, sq.m New Krkshino Krekshino village , RC Novoe Krekshino HaraStroy-M LTC comfort 23, 820

Troitskaya riviera Troitsk, RC Troitskaya riviera, Zarechnaya str., bld. 1, 2, 3 Interior-Design-Project LLC comfort 4, 815

Borisogebsky Zverevo, RC Borisoglebskoe, bld.. 140-151 Aprelevka C2 LLC economy 11, 510

Buninsky Stolbovo village, RC Buninsky, bld. 7, 9, 10 GC PIK / Status Land LLC economy 33, 290

Moskva A101 Bachurino village, RC Moskva А101, bld. 7 Avgur Estate JSC comfort 3, 642

Pervy Moskovsky Moskovsky, RC Pervy Moskovsky, phase 4, bld. 24, 33-36, IC Absolute / Sovkhoz Mosk- economy 70, 440 phase 6, bld. 5 ovsky + LLC Peredelkino Blizhnee Rasskazovka , RC Peredelkino Blizhnee, bld. 8 (1 stage), IC Absolute / Oleta LLC economy 47, 270 bld. 2 (3 stage), bld. 7 (4 stage) Tatyanin Park Govorovo village, RC Tatyanin Park, bld. 21, 22 GC Moscow Mortgage Center / comfort 47, 900 Govorovo LLC Source: Blackwood Company data

6 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

New Moscow. Prices The past year did not bring considerable changes in the price Dynamics of average-weighted supply prices of new buildings dynamics of new buildings in New Moscow. Flats in the primary in New Moscow residential market gained 6% in rouble equivalent per year. The correction (-1% per year) was observed in dollar currency due to the weakness of national currency.

The level of prices in new buildings of the south-west territories corresponded to 90, 500 rub. per sq.m at the end of Decem- ber 2013 (+4% versus September 2013). The prices in dollars gained 3% per quarter, the average supply price amounted to $2, 753 per sq.m.

Economy class flats gained 5% in price for the year, the average supply price amounted to 86, 300 rub. per sq.m at the end of December 2013. The prices grew more actively in comfort Source: Blackwood Company data class new buildings (+8% per year) and reached the index of 91, Average-weighted supply prices of new buildings within the 300 rub per sq.m. The business class experienced the correc- territory of New Moscow, thous. rub. per sq.m., December 2013 tion at the level of –1% versus December 2012 and the average supply price corresponded to 124, 000 rub. per sq.m.

Average-weighted supply prices of new buildings in New Moscow by classes, December 2013

Source: Blackwood Company data

7 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

Old and New Moscow. Demand Dynamics of a number of registered transactions**, Moscow According to Rosreestr (Federal Service for State Registra- 5 000 volume of transactions under the equity participation agreement 4 500 tion, Cadastre and Cartography) Administration in Moscow a volume of transactions using mortgage loan programs 4 000 number of registrations of equity participation agreements in 3 500 construction amounted to 6, 332 units for October—December 3 000 2 500 2013, which was 11,2% more than for the analogous period of 2 000 1 500 the past year. A number of registered mortgage deals according 1 000 500 to the data of the same administration increased by 11.4% and 0 11 12 13 11 11 12 12 13 13 11 11 12 12 13 13 11 12 13 11 12 13 11 11 12 12 13 13 11 12 13 11 11 12 12 13 13 ------reached 11, 066 deals for October—December. ------Jul Jul Jul Apr Oct Apr Oct Apr Oct Jan Jun Jan Jun Jan Jun Feb Mar Feb Mar Feb Mar Aug Sep Nov Dec Aug Sep Nov Dec Aug Sep Nov Dec The increase of demand was connected first of all to the sea- May May May sonal factor: a number of transactions traditionally grew by the Source: Rosreestr Administration data end of the year. ** - according to the federal law No.302−FZ as of 30.12.12 the registration of a residential space sale and purchase agreement has been cancelled since 1 March 2013 . According to the Central Bank of the Russian Federation, a The state registration is only applicable for the transfer of the alienated property, that number of provided mortgage loans in Moscow grew by 25.4% is why the overview will cover only data on mortgage transactions and transactions based on equity participation agreements as the most informative ones. in January-November 2013* as compared to the analogous period of the past year and constituted 35, 864 units. The analo- Volume of indebtedness by credits provided to individual per- gous index in the monetary terms advanced by 31.3% and con- sons, Moscow stituted 126, 890 mln. Rub. Despite a positive growth, its pace in 350 35 the current year declined almost 1.5 times. In 2012 the growth of 300 30 the index for the analogous period constituted 52.7% in qualita- 250 25 tive terms and 42.3% in the monetary terms. 200 20

The average-weighted mortgage rate in Moscow declined % 150 15 from 12.7% in January to 12.5% in November 2013*. Despite 100 10 the decrease, the level of mortgage transactions turned out to be bln.rub. higher than the year before. 50 5

- 0 * - the latest accessible data at the moment of the overview issue 12 13 12 13 12 13 12 13 12 12 13 13 11 12 12 13 12 12 13 13 12 12 13 13 ------Jul Jul Apr Apr Oct Oct Jan Jun Jan Jun Feb Mar Feb Mar Aug Sep Aug Sep Dec Nov Dec Nov May May

volume of housing loans Including mortgage loans housing loans, % to the total households loans

Source: Bank of Russia data

8 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 APARTMENTS

Old Moscow. Sale. Supply, prices The past year showed a very high activity in the market of Complexes with apartments presented in the primary market of apartments—25 new properties entered the market for the year old Moscow in December 2013 (among other things due to the appearance of new buildings/ stages in the earlier sold volumes). Only in Q4 the market of apartments in old Moscow increased by 9 new properties: St. Nickolas, Mon Cher, Park Mira (the 2nd stage), Riverdale, Litsa, Marshal (a new building), Apart-hotel YES, Apart Ville Fit- ness&Spa, Serdce Stolitsi. By the results of 2013 the supply volume of apartments amounted to 507.1 thous.sq.m (4, 206 apartments) in 55 complexes. The supply volume increased by 262.2 thous. sq.m in the past year, i.e. more than twice (+107%). Despite the fact that this increase was comparable to the indices of the previous year, the growth of the supply volume in absolute terms turned out to be record-breaking in 2013. The share of apartments in the supply structure constituted 31% in the primary market of old Moscow. By the results of 2013 the main share of the supply structure by classes was occupied by business-class properties (58%). The distribution of the supply volume by classes during the year underwent considerable alterations, first of all, due to the commissioning of large-scale comfort-class properties. As far as the geography of the distribution of apartments was Source: Blackwood Company data concerned, they were presented in all the districts of old Moscow (exclusive of Zelenograd). And the main volumes were concen- Supply structure in the primary market of apartments by dis- trated in the North administrative district due to a number of tricts of old Moscow, December 2013 САD large properties - VTB Arena Park, Litsa, Flotilia, Vodny, Loft 33% SEAD Park. 0,1% SAD 6% The average supply price in the primary market of apart- SWAD ments amounted to 281.1 thous.sq.m per sq.m by the results of 0,6% Q3 2013. The decline constituted 4% by the results of the quar- NAD NEAD 49% EAD 0,9% ter, 9% by the results of the year and was conditioned by the WAD NWAD 1% 5% changes in the supply structure (commissioning of comfort class 4% properties). Source: Blackwood Company data The average prices for apartments by classes looked as fol- Dynamics of the average prices in the primary market of apartments and the supply structure by classes (sq.m), December lows by the results of 2013: elite class - 555.6 thous. rub. per 2013 sq.m (+13.4% per year), business class - 204.6 thous. rub. per comfort 17% business sq.m (+21%), comfort class - 123.8 thous. rub. per sq.m 58% elite (+0.3%). thous. rub. 25% per sq. m The announced for commissioning in the short-term projects 600 550 business elite comfort include: Bruce Boutique Apartments (2/14 Brusov per.), Komso- 500 555,6 450 molsky de luxe (1, Komsomolsky pr.), Povarskaya, 8, MFC Sa- 400 350 dovnicheskaya, 31, ReForm (3, Khromova str.), Borisovsky dom 300 250 204,6 (63, Kashirskoe highway, bld 3.), MFC Lainer (Khodinskoe pole). 200 150 129,2 100 * - detailed analysis of the market of apartments has been carried out by Black- 50 11 11 10 wood Company’s experts in «Research of the market of apartments» 11 - - - - Jul.11 Jul.12 Jul.13 Apr.11 Apr.12 Apr.13 Oct.11 Oct.12 Oct.13 Jun.11 Jan.12 Jun.12 Jan.13 Jun.13 Jan Feb.12 Mar.12 Feb.13 Mar.13 Feb Mar Aug.11 Sep.11 Aug.12 Sep.12 Aug.13 Sep.13 Nov.11 Dec.11 Nov.12 Dec.12 Nov.13 Dec.13 Dec May.11 May.12 May.13 Source: Blackwood Company data

9 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 ELITE RESIDENTIAL REAL ESTATE

Moscow. Sale. Supply The supply volume in the elite primary market (including pre- Elite residential new buildings on sale in the primary market in mium class) constituted 959 flats in 40 complexes (168.5 thous. December 2013 sq.m, 128 thous. sq.m of which in the Central administrative district) in Moscow at the end of 2013. The index increased by 3.5% as compared to the end of 2012.

All in all, 7 elite residential new buildings entered the market in 2013:

“Grand deluxe in Pluschikha” (4, Pogodinskaya str.),

1, Plotnikov per.,

“Bulgakov” (25, B. Kozikhinsky per.),

“Wine House” (57, Sadovnicheskaya str.),

“Klenovy DOM” (5-7, Prechistenskaya emb.),

“Barkli Residence” (1, Ordzhonikidze),

“Snegiri Eco” (1-26 Minskaya str.).

It was remarkable that the latter two complexes, referring to premium class, were located in South Administrative District (SAD) and West Administrative District (WAD) respectively. Therefore, the geography of elite construction expanded beyond the center in 2013. Source: Blackwood Company data The main volumes of elite residential space were still con- Supply structure of elite new buildings by districts, sq.m, Q4 centrated in Central Administrative District (CAD). Hamovniki 2013, % district remained the leader by the supply volumes in 2013, other districts housed considerably less residential space among other Zamoskvorech'e 5,4% Tagansky reasons due to the redistribution of supply towards apartment 4,9% Meschanski complexes. 3,4% Hamovniki Tverskoy 55,2% 2,6% The average area of flats offered for sale in the primary mar- Presnensky 2,1% ket reached 180 sq.m at the end of 2013, the range of offered Yakimanka 1,2% areas: from 44 to 850 sq.m. More than 30% of the whole supply Donskoi (South) volume was concentrated in the range of 100-150 sq.m. Ramenki (West) 7,5% 16,6% The average supply budget in the primary elite residential segment amounted to $3.4 mln. per flat at the end of 2013. The Source: Blackwood Company data maximum number of flats were exhibited in this budget (from $3 Supply structure of flats in elite new buildings by budgets, to $5 mln.). The supply budget varied from $0.5 to $21.3 mln. Q4 2013, % per flat.

The supply volume in the secondary elite residential market > $5 mln. $0,5-$1 mln. reached 235 thous. sq.m at the end of 2013. The average area 18,9% 4,4% of flats on offer in the secondary market constituted 215 sq.m, the average, the average supply budget - $4.9 mln. per flat. $1-$2 mln. $3-$5 mln. 27,7% 29,1%

* - exclusive of apartments considered in the Apartments section $2-$3 mln. 19,9% Source: Blackwood Company data

10 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 ELITE RESIDENTIAL REAL ESTATE

Moscow. Sale. Demand If at the beginning of 2013 minor decline of demand, unchar- Dynamics of demand* in the high-budget residential market, % acteristic for a spring period, was noted - a number of requests received by Blackwood Company decreased, then already in 300% 2011 2012 2013 H2, with the beginning of the autumn, the demand increased 250% traditionally: peak of clients’ activity was recorded in October 200% 2013. 150% The central district dominated in the geography of elite resi- 100% dential space - more than 60% of all the requests were concentrated in the center. At the same time the overwhelming number 50% of clients did not have any preferences concerning a specific 0% July May

district of a future flat location inside the CAD. Those who de- April June March August

cided on the location, were most interested in Presnensky, Tver- January October February November December skoy, Hamovniki and Arbat districts. The share of other districts September in the demand structure was minor. * -requests for buying residential space received by Blackwood Company, January of the corresponding year - 100% The average area of a requested flat constituted 185 sq.m by Demand structure by districts, Q4 2013 the results of 2014, and the main demand volumes were con- Presnensky Tverskoy centrated in the range of 100-150 sq.m, the second by popularity 12,4% 9,2% Hamovniki range was 150-200 sq. m. 9,2% Arbat 7,8% The most popular budget among Blackwood Company’s Yakimanka clients was $1-$2 mln per flat, however lower budgets of $0.5 to 1,5% $1 mln. were in-demand as well. Zamoskvorech'e Central (no matter 1,3% what district) Basmanny 1,1% The average requested budget for a flat was at the level of 56,2% $2.8 mln. per flat Tagansky 0,7% Meschanski 0,5%

Source: requests received by Blackwood Company

Demand structure by budgets, Q4 2013 Demand structure by area of flats, Q4 2013 > 301 sq.m < 50 sq.m < $0,5 mln. 51-100 sq.m > $5 mln. 251-300 sq.m 15% 2% 11% 14% 19% 5% $0,5-$1 mln. $3-$5 mln. 21% 201-250 sq.m 10% 9%

$2-$3 mln. 10% 151-200 sq.m 21% 101-150 sq.m 34% $1-$2 mln. 29% Source: requests received by Blackwood Company Source: requests received by Blackwood Company

11 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 ELITE RESIDENTIAL REAL ESTATE

Moscow. Sale. Prices By the results of 2013 the average price for elite residential Dynamics of average prices in the elite residential market new buildings (including a premium-class segment) amounted to $ per sq m $18, 800 or 614.2 thous. rub. per sq.m. 30 000 28 000 Primary market Secondary market The increase of dollar prices equaled 2.7% by the results of 26 000 23 730 the year, therefore differently directed fluctuations first of all 24 000 22 000 caused by the appearance of new properties were noted during 20 000 the course of the year. No considerable increase or decline of 18 000 16 000 supply prices were noted in developers’ offers. Mainly minor 14 000 18 800 increase in prices war related to passing through construction 12 000 stages. 10 000 10 11 12 13 11 12 13 11 12 13 11 12 13 ------The rouble prices posted 10% growth. - - - Jun Jun Jun Mar Mar Mar Dec Sep Dec Sep Dec Sep Dec

The leader by the average prices among central districts in thous. rub. the primary elite residential market was Presnensky district, per sq m 1 000 where several most expensive houses of Moscow were concen- 900 Primary market Secondary market 775,3 trated (“Granatny Palace”, “Bulgakov”, 12a, Bogoslovsky per., 6, 800 Granatny), besides, high average prices were traditionally re- 700 600 corded in the “Golden Mile” area (Ostozhenka-Prechistenka) 500 614,2 inside the Garden Ring within Hamovniki district. 400 300 It was remarkable that rather high prices were recorded be- 200 yond CAD - the average supply prices for flats in Snegiri Eco 100 10 11 12 13 11 12 13 11 12 13 11 12 13 ------exceeded $20, 000 per sq.m. - - - Jun Jun Jun Mar Mar Mar Dec Sep Dec Sep Dec Sep Dec The supply prices in the most expensive new buildings of Source: Blackwood Company data Moscow reached $41, 100 per sq.m by the results of the year. Average prices for elite residential new buildings, The average price in the secondary elite residential market December 2013 amounted to $23, 730 per sq.m by the results of the year, declining versus the indices of the end of 2012 by 2.6%. The prices in rouble equivalent gained 4.3%.

The most expensive residential new buildings in Moscow, December 2013 Price, Address District $ per sq.m

6, Granatny per. CAD/Presnensky up to 41, 100

5-7 Prechistenskaya emb. CAD/Hamovniki up to 41, 000 Klenovy DOM (Ostozhenka) 8, Granatny per. CAD/Presnensky up to 40, 000 RC “Granatny Palace” 16, Kooperativnaya str. CAD/Hamovniki up to 40, 000 RC “Knightsbridge Private Park” 12А Bogoslovsky per. CAD/Presnensky up to 40, 000

CAD/Hamovniki 13, Prechistenka str. up to 40, 000 (Ostozhenka) Source: Blackwood Company data

Source: Blackwood Company data

12 RESDIENTIAL REAL ESTATE MARKET OVERVIEW 2013 ELITE RESIDENTIAL REAL ESTATE

Moscow. Rent. Supply The high-budget rental market was characterized by high Dynamics of new supply*, % to the base period stability level in 2013. The supply volumes were regularly re- 350% 2012 plenished by new properties, furthermore, the market tradition- 300% 2013 ally experienced both declines (summer and winter periods) and 250% peaks (spring, autumn) of activity related to seasonality. 200% One of the supply sources in the market was players of sale 150% and purchase segment, who considered buying a flat with its 100% consecutive lease as the least risky and more clear way to pre- 50% serve means. 0% July May April

Tverskoy, Arbat and Hamovniki districts, followed by Pres- June March August January October

nensky district (including apartments in Moscow-City) turned out February November December September to be traditional leaders at the end of 2014. *- flats, which entered the base of Blackwood Company; январь соответствующего года - 100% As far as the supply structure by number of rooms was con- Supply structure by districts of CAD, Q4 2013 cerned, 3-room flats occupied the main share of the market. Yakimanka Krasnosel'skii Meschanskii Taganskii 5% 4% 3% The average area of offered for rent elite flat amounted to Basmannyi 6% Tverskoi 6% 25% 146 sq.m by the end of the year. Zamoskvorech'e 7% The budget of $6, 000-$8, 000 per flat per month occupied the maximum share in the supply structure.

Presnenski 12% Hamovniki Arbat 17% 15% Source: Blackwood Company data Supply structure by budgets, $ per month Supply structure by number of rooms, Q4 2013

≥5 rooms 1 room 16% 1% 2 rooms 4 rooms 15% 30% Average level room of area kv.m 1 room 65 2 room 78 3 127 3 rooms room 39% 4 room 161 5 room 224

Source: Blackwood Company data Source: Blackwood Company data Moscow. Rent. Demand Demand dynamics*, % to the base period

200% Demand in the elite rental market was also affected by sea- 180% 2012 sonality in 2013, which was quite characteristic of the market on 160% 2013 the whole. Furthermore, it is important to note that the demand 140% 120% volumes were preserved at a rather high level, establishing sup- 100% ply & demand balance in the segment. 80% 60% Evidently, high-quality properties with optimal price-quality 40% ratio were of the highest demand and they left the market rather 20% 0% quickly. Hamovniki district was the most popular one in the de- July May April June

mand structure based on Blackwood Company clients’ requests March August January October February

(“Golden Mile” of Ostozhenka and Prechistenka). November December September *- requests received by Blackwood Company; January of the corresponding year- 100%

13 RESDIENTIAL REAL ESTATE MARKET OVERVIEW 2013 ELITE RESIDENTIAL REAL ESTATE

Moscow. Rent. Demand In the demand structure by number of rooms, 2 and 3-room Demand structure by budgets, $ per month, % of the total num- flats occupied almost the same shares. ber of requests 40% The average requested budget amounted to $5, 700 per flat 35% 2012 2013 per month and the main requests were concentrated in the 30% 25% budget of up to $3, 000, the budget of $3, 000—$4, 500 per flat 20% per month turned out to be the second by popularity. 15% It was remarkable that despite the ossification of the elite 10% rental segment on the whole, clients were interested in new for- 5% 0% mats—apartments in Moscow-City, lofts as well.

Renal by number of rooms, December 2013, $ per month Source: requests received by Blackwood Company Demand structure by number of rooms*, % of the total number Average level of rental rate, room of requests, Q4 2013 $ per month. ≥5 rooms 1 room 3 500 4 rooms 5% 11% 2 room 4 490 1 room 3 room 8 530 11% 4 room 9 980 3 rooms 35% 5 room 14 640

Source: Blackwood Company data 2 rooms 38%

Moscow. Rent. Rates * - required minimal number of rooms Source: requests received by Blackwood Company By the end of 2013 the average level of rental rate amounted to $9, 120 per flat per month in the elite rental market. By the Rental rate by districts of CAD, December 2013, $ per month results of the year the prices gained 8% despite minor seasonal decline in Q3, which leveled out by the growth of the rental level by the results of Q4, high-quality properties with optimal consumer performance provided the main price increase. The highest average prices were recorded in Hamovniki district—$12, 830 per month, the lowest ones—in Tagansky—$5, 740 per month. The most expensive properties were offered in new buildings in Ostozhenka (Hamovniki) and Tverskoy district: the maximum supply price of an elite flat for rent reached $75, 000 per month by the results of the year.

Dynamics of the average rental level, $ per month

10 000 9 500 9 000 8 500 $ 9 210 8 000 per month 7 500 7 000 6 500 6 000 11 12 13 11 12 13 11 11 12 12 13 13 11 11 12 12 13 13 10 11 11 11 11 12 12 12 12 13 13 13 13 11 11 12 12 13 13 ------Jul Jul Jul Apr Apr Apr Oct Oct Oct Jan Jun Jan Jun Jan Jun Feb Mar Feb Mar Feb Mar Aug Sep Aug Sep Aug Sep Dec Nov Dec Nov Dec Nov Dec May May May Source: Blackwood Company data Source: Blackwood Company data

14 RESDIENTIAL REAL ESTATE MARKET OVERVIEW 2013 ELITE RESIDENTIAL REAL ESTATE

Moscow Region. Cottages to rent The elite countryside rental market was weak in 2013. The Dynamics of cottages supply volumes* demand stayed at a low level and the trend of demand shift 400% within the bounds of the city was noticeable. 2012 2013 Families with children interested in the large area of a rented 300% house within a certain budget were still the main target audi- ence. 200%

The average area of offered for rent cottage hade reached 100% 497 sq.m by the end of 2013. 0% The range of $5, 000—$10, 000 per month occupied the July May April June March

maximum share in the supply structure by budgets. The highest August January October February November December supply prices reached the index of $150, 000 per month, how- September ever, the number of such offers was extremely low. *- properties in the base of Blackwood Company kwood; Rublevo-Uspenskoe direction remained the leader by supply Supply structure of cottages by directions of the Moscow volumes (it was also of the highest demand), the Novorizhskoe Region, Q4 2013

highway ranked second by volumes. Skolkovskoe Pyatnitskoe 2% Others 9% 7% The general slackening of the market together with seasonal Minskoe, Mozhaiskoe fluctuations caused 7% decline of the average rental level by the 9% Rublevo- results of the year, consequently reaching the index of $15 360 Kaluzhskoe, Uspenskoe Kievskoe 38% per house per month. 17% Novorizhskoe 22%

Source: Blackwood Company data Supply structure of cottages by budgets, $ per month, Q4 Rental rate for elite cottages by directions of the Moscow Re- 2013 gion, December 2013, $ per month

Source: Blackwood Company data

Dynamics of the average rental level for elite cottages, $ per month

18 000

16 000

$15 360 14 000 per month

12 000

10 000 11 12 13 10 11 11 12 12 13 13 11 11 12 12 13 13 11 12 13 11 12 13 11 11 12 12 13 13 11 12 13 11 11 12 12 13 13 ------Jul Jul Jul Apr Oct Apr Oct Apr Oct Jan Jun Jan Jun Jan Jun Feb Mar Feb Mar Feb Mar Dec Aug Sep Nov Dec Aug Sep Nov Dec Aug Sep Nov Dec May May May

Source: Blackwood Company data

15 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

Moscow Region. Supply A number of new buildings presented in the Moscow Region Dynamics of the supply volume in the primary market of the supply is gradually declining. During the past year much less Moscow Region new properties entered the market as compared to the previous 1400 year. The policy of new government regarding implementation of 1200 new residential projects on the territory of the region, starting 1000 their revision, contributed to this situation. All in all, the market 800 increased by 434 new offers of new buildings, about one third of 600 them (145 new buildings—13% of the total number of new build- 400 200

ings in the supply) in Q4 2013. houses ofnumber

0 … … … The supply volume declined by 10% by the number of march2 march2 march2 ian2011 oct2011 ian2012 oct2012 ian2013 oct2013 feb2011 feb2012 feb2013 apr2011 apr2012 apr2013 july2011 july2012 july2013 dec2010 nov2011 dec2011 nov2012 dec2012 nov2013 dec2013 aug2011 aug2012 aug2013 may2011 may2012 may2013 houses in the past year, flats at 1, 107 addresses were pre- june2011 sept2011 june2012 sept2012 june2013 sept2013 sented for sale at the end of December 2013. Source: Blackwood Company data

The majority of new offers, which entered the market in The segments of low– and mid-rise construction were under 2013, referred to comfort class new buildings (55% of the total more active development. About 40 such projects entered the pri- number of new buildings) located in the immediate vicinity of mary market of the Moscow Region in 2013, which included the Moscow within 15 km from MKAD (62% respectively). sales in RC Arkhangelskoe, RC Bulanikovo, RC Malaya Istra, RC Pavlovsky Kvartal and others in Q4 2013.

Some residential projects commissioned in Q4 2013 Total resi- Name Address Developer Class dential area, sq.m

Aviator Naro-Fominsk, Voykova str./Kurzenkova LLC BC OSTOV comfort 13, 170 str., bld 1, RC Aviator / LLC Investment Company KASKAD

Arkhangeskoe Krasnogorsky r-n, Arkhangelskoe settle- OJSC Elite Estate comfort 3, 520 ment, RC Arkhangelskoe Belie rosi Kotelniki, RC Belie rosi, Novoryazanskoe LLC StroyComfort comfort 86, 620 highway, site 1, bld.1, 2, 6, 7 Breeze Orekhovo-Zuevo, RC Breeze, Yakova Fliera CJSC Domostroitel/ LLC Planeta-2 comfort 14, 380 str./Tsentralny boulevard, bld. 4, 5-5А Bulatnikovo Leninsky region, Zhabkino village, RC Bulat- LLC Kvartstroy-MO economy 9, 685 nikovo, site 3, bld. 1-4, 6 Vostochnoe Butovo Leninsky region, Bobrovo village, RC GC Morton / LLC Lotan economy 82, 600 Vostochnoe Butovo, bld. 10, 12, 28, 31 Malaya Istra Istrinsky region, Visokovo village, RC Ma- LLC PROMSERVICE COMPANY economy 10, 440 laya Istra, bld. 2 Nakhabino Tsentralnoe Krasnogorsky region, Nakhabino village, LLC Kars-Invest comfort 11, 380 Institutskaya str., bld. 86 Nikolsky Naro-Fominsk, Efremova str., RC Nikolsky LLC BC OSTOV comfort 13, 035 / LLC Investment Company KASKAD Novoe Tushino Putilkovo, RC Novoe Tushino, bld. 6 FCC Leader / LLC SouzAGRO comfort 15, 000

Edinburgh Odintsovo, RC Edinburgh, mcr. Otradnoe, 1 AFI Development / LLC RAPO comfort 150, 770

Pavlovsky quarter Istrinsky region, Lobanovo village, RC Pav- OPIN / LLC “Pavlovsky Quarter” comfort 11, 920 lovsky quarter, Novaya str., bld. 9, 10, 16, 17 Ratsional Reutov, RC Ratsional, Golovashkina str., 3 LLC “Nord Way” comfort 41, 630

Solnechnaya sistema Khimki, RC Solnechnaya sistema, in the Urban Group / CSJC Continent project economy 18, 510 area of Vashutinskoe highway and Oktyabr- saya railway station, 3, bld. 1, 2 Shikhovo Zvenigorod, RC Shikhovo, Kirova str., 78, CJSC Financial-Industrial Alliance economy 20, 700 bld. 2-5 Source: Blackwood Company data

16 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 RESIDENTIAL REAL ESTATE

Moscow Region. Demand According to Rosrestr Administration data, 603, 754 rights to Number of registered rights to residential premises and trans- residential premises and transactions therewith were registered actions therewith in the Moscow Region, thous. units in the Moscow Region in January-December 2013, which was The number of regestered deals 13% higher than the analogous index in 2012. The number of The number of mortgage deals The number of regesteredtransactions according records about mortgage in 2013 also surpassed the indices of 200 to equity participation agreements 30 the previous year - 178, 776 records in January-December 2013 25 150 (+16% to January-November of 2012). 20 100 15 Thanks to the growth of buyers’ activity in the primary resi- 10 dential market a number of concluded deals under equity partici- 50 5 pation agreements grew as well. 30% more such transactions 0 0 were concluded in 2013 (89, 139 equity participation agree- Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 ments) than in 2012. Source: data of Rosreestr Administration in the Moscow Region Moscow Region. Prices Dynamics of the average-weighted supply prices in new buildings of the Moscow Region

The price situation in the primary market of the Moscow Re- 80 3000 70 gion remained stable in 2013. By results of the past year the 2500 60

2000 m $/sq. growth of prices in rouble equivalent corresponded to the infla- 50 tion level, flats in new buildings increased in price by 6% on av- 40 1500 30 erage. The level of dollar prices changed insignificantly (-1% 1000

20 thous. rub./sq. m $/sq. m thous.m rub//sq. 500 per year). The average price in the primary market of the Mos- 10

cow Region amounted to 74, 830 per sq.m at the end of Decem- 0 … … … 0 ber 2013 (+2% as compared to Q3 2013), the level of prices in march2 march2 march2 feb2011 feb2012 feb2013 jan2011 oct2011 ian2012 oct2012 ian2013 oct2013 apr2011 apr2012 apr2013 july2011 july2012 july2013 dec2010 dec2011 dec2012 dec2013 aug2011 aug2012 aug2013 nov2011 nov2012 nov2013 may2011 may2012 may2013 dollars corresponded to $2, 276 per sq.m (+1% respectively). june2011 sept2011 june2012 sept2012 june2013 sept2013 Source: Blackwood Company data Average-weighted supply prices in new buildings of the Mos- Average-weighted supply prices in new buildings of the cow Region towns, thous. rub. per sq.m., December 2013 Moscow Region by classes, December 2013

buisness 176,3

comfort 75,3

thous. rub./sq. m economy 67,4

Source: Blackwood Company data The flats in new buildings located in the towns and settlements near MKAD (within 5 km from MKAD) went up in price most of all in the past year due to high level of demand for residential space in this location. The average supply price on the territories close to the capital reached 94, 360 rub. per sq.m (+12% per year) at the end of December 2013. The price changes in other territorial belts of the Moscow Region corresponded/were lower than the regional level

Source: Blackwood Company data

17 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 COUNTRYSIDE RESIDENTIAL REAL ESTATE

Organized countryside settlements. Supply A distinctive peculiarity of the countryside residential prop- Structure of new settlements in the market, by directions and erty market in the Moscow Region in 2013 was developers’ high distance from MKAD, 2013, % activity: a record growth of supply versus the pre-crisis times Novorizhskoe 20% was noted. Since the beginning of the year approx. 90 cottage Kashirskoe 10% Simferopolskoe settlements have entered the market since the beginning of the 9% 4% 10% Kievskoe 9% 22% 13% year. And the bulk of new supply consisted of economy class Yaroslavskoe 9% projects (approx. 72% of new supply). Consequently, 28% of Novoryazanskoe 7% 27% 22% supply was accounted for business class projects. No cottage Kaluzhskoe 7% Dmitrovskoe 6% 81-100 km less than 15 km settlement appeared in the elite class during 2013. One of fully Piatnizkoe 6% 31-50 km 16-30 km Il'ynskoe formed trends in the market was the development of absolutely 2% 51-80 km more than 100 km Nosovihinskoe 2% non-elite product—land plots without building contracts in the Volokolamskoe 2% high-budget segment, which to a large extent was conditioned Other directions 5% by the deficit of high-quality supply. Settlements with such an 0% 10% 20% 30% 40% 50% offer appeared and were successfully sold in Rublevo- Source: Blackwood Company data Uspenskoe, Novorizhskoe, Skolkovskoe and other directions. Dynamics of new settlements entry into the market, Land plots without building contracts were still the main sale January 2012 - 100% items in the newly appeared settlements (about 61%). The segment of blocked residential space was also rather popular in 1400% new cottage villages 2013, one in three settlements presented duplexes and town- 1300% 1200% villages offering land plots without building contracts houses. 1100% 1000% 900% The Novorizhskoe highway was still a traditional leader by 800% 700% the delivery of new supply (20% of all new projects), the Kashir- 600% 500% skoe (10%) and the Simpheropolsoe (9%) highways followed; 400% 300% the latter fell within the top three predominantly due to the settle- 200% 100% ments of economy class “distant dachas” type located far from 0% MKAD. Jul.12 Jul.13 Apr.12 Oct.12 Apr.13 Oct.13 Jan.12 Jun.12 Jan.13 Jun.13 Feb.12 Mar.12 Feb.13 Mar.13 Aug.12 Nov.12 Dec.12 Aug.13 Nov.13 Dec.13 May.12 May.13 The near belt of the Moscow Region, up to 30 km from Sept.12 Sept.13 MKAD, was under the most active development (about 40% of Source: Blackwood Company data new supply), furthermore, the considerable share of new settlements was located far away from MKAD.

Organized countryside settlements. Prices The countryside residential property market of the Moscow Price dynamics of a sq.m of a cottage Region in 2013 still experienced stagnation: the average supply (with account of land value) by class, $/sq.m prices kept up, fluctuating a little bit depending on seasonal factors, changes of the supply structure, as well as a readiness 8 000 7 000 stage of the project. Elite Business Economy 6 000 At the end of 2013 the price of 1 sq.m. of a cottage (with 5 000 4 000 account of land value) amounted to $4, 800 in elite settlements, 3 000 to $3, 400 in business class settlements and to $1, 650 in econ- 2 000 omy class settlements. 1 000 0 I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV 2007 2008 2009 2010 2011 2012 2013

Source: Blackwood Company data

18 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 COUNTRYSIDE RESIDENTIAL REAL ESTATE

Organized countryside settlements. Demand 2013 was marked by a rather moderate buyers’ activity in the high budget countryside segment: a number of requests Clients’ preferences by distance of a property from MKAD, % received by Blackwood Company declined a little bit as com- of the total number of requests, 2013 pared to the analogous period of the previous year. Deteriora- tion in demand for the countryside residential property was observed in all the classes in 2013 on the whole. 9% 27% 28% less than 10 km Ranking of the main directions by the level of demand for 11-20 km countryside high-budget residential space, % of the total 21-30 km number of requests, 2013 more than 30 km 36%

Novorizhskoe 36% Rublevo-Uspenskoe 21% Demand structure by area of land plots, % of the total number Kievskoe 15% of requests, 2013 Kaluzhskoe 11% Minskoe 7% 6% 2% Mozaiskoe 2% 15% less than 15 Dmitrovskoe 2% 56% sotkas Other directions 6% 21% 16-20 sotkas

0% 10% 20% 30% 40% 21-30 sotkas

Source: Blackwood Company data The top three directions among the buyers of high-budget countryside real estate have been preserved the same over a Demand structure by area of cottages, % of the total number period of several years: Novorizhskoe (36%), Rublevo- of requests, 2013 Uspenskoe (21%) and Kievskoe directions (approx. 15% of requests received by Blackwood Company) remained the most 7% popular ones. It is particularly remarkable that the main share of 3% 12%8% less than 300 sq. m demand was concentrated within the belt of 11-20 km from 35% 301-400 sq. m MKAD (36% of the aggregate volume of requests). 401-500 sq. m

We would like to highlight that the post-crisis trend of reduc- 501-600 sq. m tion of the average requested area of a cottage, land plot and, 34% consequently, the purchase budget continued in 2013. Thus, land plots of less than 15 sotkas accounted for more than a half Clients’ budgets in the segment of high-budget countryside real of requests received by the company, while in 2012 this index estate, % of the total number of requests, 2013 was only 18%. As far as cottages were concerned, about 69% of potential buyers would rather prefer a household of up to 400 sq.m in 2013, while in 2012 the rate was 54%. Furthermore, the 3% 3% 7% less than $1 000 000 largest demand by the purchase budget was concentrated in the 12% $1 000 001-$1 500 000 segments of up to $1 mln. (41% of requests against 29% in 41% $1 500 001-$2 000 000 2012). As for demand in the segment of land plots without build- $2 000 001-$3 000 000 ing contracts, the lots, measuring 30-35 sotkas, located in No- $3 000 001-$5 000 000 12% $5 000 001-$8 000 000 vorizhskoe and Rublevo-Uspenskoe directions at the price of $1- 22% more than $8 000 000 $1.5 mln. were the most popular ones in 2013.

Source: requests received by Blackwood Company in Q3 2013

19 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 FORECAST

Demand

The past year demonstrated deterioration of the macroeco- Sobyanin' s policy of investment contracts reconsideration. nomic situation in Russia. The GDP constituted 1.3% in 2013. Commissioned in 2013 residential houses were laid down in 2010 This level was lower than the most pessimistic forecast of the -2011 when the practice was introduced. ministry for the past year. According to the representatives of Moscow construction com- Despite negative trends in economics, the consumer demand plex, neither decline of residential construction volumes nor in the residential market of Moscow area in 2013 was a little bit growth are planned in "old" borders. Due to this fact the supply higher than in 2012. According to Rosreestr of the Moscow Re- volume and the competition level would not increase in "old" Mos- gion the number of registered sale and purchase transactions cow. increased by 16.8% as compared to 2012, and the number of The launch of active construction in industrial zones is ex- construction equity participation agreements (FZ (federal law)- pected in 2014. If the previous years featured the approval of 214) gained 23.2%. technical and economical values of construction by the Moscow In Moscow (including newly-annexed in 2012 territories) the Government and the subsequent designing, then in 2014 a transi- number of registered for September-December agreements tion to active development was expected. Economy, comfort and according to FL-214 amounted to 8, 152, which was 5% more high-budget residential space will enter the supply. than for the analogous period of 2012. Considering the fact that Apartments the residential property market in Moscow and in the Moscow Region was liable to the influence of macroeconomic factors, it The adoption of norms for the provision of apartment com- could be assumed, that the growth of the demand level was plexes with necessary social and utility infrastructure is expected noticed in Moscow as well. According to our estimate the at the end of 2014. This measure can cause the decline of apart- growth accounted for at least 10%. ments construction volumes in Moscow (particularly comfort class). Mortgage lending contributed to buyers' demand in 2013. According to the Central Bank of the RF the volume of mort- Elite real estate gage residential loans in Russia increased by 17.6% in quanti- Under the conditions of stable demand and supply volumes the tative terms and by 30.0% in monetary terms. In Moscow this growth of prices for high-budget residential space will constitute index grew by 25.4% and 31.3%, in the Moscow Region by 7%. 30.9% and 34.7%. However, the growth rates slowed down 1.5- 2 times in the past year. Nevertheless, 2013 would be noted by record high volumes of mortgage lending. The primary residential market of "new" Moscow

Taking into account vague global and internal economic A stable situation was characteristic of the primary market of trends, a further deterioration of macroeconomic parameters New Moscow in 2013 - the supply volume stayed at the level of could be expected. However, it could hardly cause demand 200-230 properties during the year, and the price dynamics did not decline in 2014, it would most probably remain stable. undergo any tangible changes. Nevertheless, buyers' activity in The primary residential market of "old" Moscow regard to new buildings in south-west territories was estimated as moderately high on the whole, the sale paces in some projects In accordance with the program "Housing" approved even reached very high indices. before the expansion of Moscow, the commissioning volume of residential space on the territory of "old" Moscow in 2012-2016 New offers, mainly in new buildings of earlier commissioned was forecasted at the level of 2.54 mln. sq.m, including 0.76 projects, appeared in the primary market of the annexed territories mln. sq.m using budget funds. on a regular basis. 130 new buildings entered the supply in 2013.

However, the results of 2013 showed the decline of the com- Taking into account established trends in the primary market of missioning volumes in old Moscow, which constituted only 1.93 New Moscow in 2013, the preservation of a stable situation is ex- mln. sq.m. Such a low index had not been observed since pected in the short term. The supply volumes and prices dynamics 1990s. The reduction of commissioning volumes was caused by will hardly undergo any considerable changes.

* Data for the whole 2013 in Moscow is incompatible with 2012, as starting from August 2012 the transactions on the newly annexed territories started to be accounted in the statistics.

20 RESIDENTIAL REAL ESTATE MARKET OVERVIEW 2013 FORECAST

The primary residential market of the Moscow Region As far as the elite property segment is concerned, the market anticipates new high-quality supply in the turn-key condition The primary market of the Moscow Region did not face any seri- meeting the requirements of pretentious buyers. Slight in- ous changes in 2013. The choice of new buildings remained wide and crease of prices is expected in 2014 - not more than 5-7% per diversified in the Moscow Region despite minor decline of the supply year. volumes. The market presented properties in low-, mid- and high-rise construction projects, from economy to business classes in different On the whole, rather unstable situation of macro-economic territorial belts. indices in the country , as well as volatility of currencies, will Buyers were still highly interested in the primary residential market make the countryside property market participants act carefully offers. However, a stable price situation was preserved in the market and take wait-and-see attitude, minimizing their risks. under highly competitive conditions. Elite rent

The trends developed in the market in 2013 will most probably As far as the high-budget rental market is concerned, no continue in times to come. According to our expectations, the scenario significant alterations will be observed in the supply volume on of a stable situation in the market will occur again in 2014 provided no the whole, but the growth of the deficit of high-budget areas is serious changes take place in the economic sphere. possible, for which reason the average growth of prices will be Countryside real estate noticeable, but not considerable - not more than 5-7% per year. Furthermore, a more significant growth (10-15%) for high- The situation in the countryside residential property market will be quality properties due to their deficit and the growth of demand characterized as stable in 2014, the development of the main trends for this type of areas. Moreover, the price dynamics will be ex- outlined already in 2013 are anticipated before the Olympic Games.: posed to seasonal alterations and fluctuations during the year new cottage settlements will continue to open the market, land plots (the growth in the spring and autumn periods and decline in the without building contracts will still be the leaders by the supply vol- summer and winter periods). ume. The demand for countryside real estate will be flexible in terms of price, affordable lots will still be the most in-demand ones. No considerable growth of prices is expected.

* Data for the whole 2013 in Moscow is incompatible with 2012, as starting from August 2012 the transactions on the newly annexed territories started to be accounted in the statistics.