2016 EXPAT HOUSING REVIEW 2016: Review and Conclusions 2017 2017: Tendencies and Forecast

M 2016 - MAIN TENDENCIES AND RESULTS

Marina Semenova Managing Director & Shareholder

"The past year confirmed stability on the prime residential rental market in Moscow, despite the uncertain economic conditions. The volume of vacant properties dropped significantly, and requests from new tenants increased by nearly one-quarter.

Demand was a market reality, even for the most expensive listings valued at USD 11,000 pcm (per calendar month). The most striking trend was the strong activity of Russian nationals in this segment, compared to the previous periods." Key numbers of 2016

+ 21% +7% –15% requests from potential of average rental rate prime rental stock tenants compared to requested per property, available compared to 2015 compared to the last year the start of the year

≈ 20% of all requests by potential tenants from France

Average requested rental rate by Average offered budget by district, district, USD/listing pcm USD/listing pcm Leningradsky prospect Leningradsky prospect $3 870 +3% $3 970 Arbat-Kropotkinskaya Arbat-Kropotkinskaya $5 480 +21% $6 650 Tverskaya-Kremlin Tverskaya-Kremlin $4 630 +23% $5 700

Average demand in December Average supply in December for Moscow for Moscow +16% 4 350 $ / per month. 5 070 $ / per month.

1 www.intermarkrelocation.ru TENANT PROFILE

During the whole year, the share of requests from potential foreign tenants increased, making up about 74% of the total requests. Prime rental apartments in the capital were particularly popular with French citizens, whose requests accounted for 20% of the total interest, followed by Russian nationals (about 16%).

74% 2016 26%

63% 2015 37%

66% International 2014 Russian/ 34% Assignee CIS

The average age of potential tenants ranged from 35 to 49 years old, making up over half (51%) of all clients interested in the high-budget segment. The largest demand came from families with children (72%), looking for 2- and 3-bedroom apartments.

28% 2016 72%

38% 2015 62%

53% Single/Couples 2014 Families 47% without children with children

Furnished VS. Unfurnished

Furnished apartments are the most popular among tenants, accounting for nearly 90% of requests. A distinct feature of today’s tenants is the prerequisite demand for premises that are protected by security guards.

87% 2016 13%

87% 2015 13%

18% 82% Furnished 2014 Unfurnished

2 www.intermarkrelocation.ru SUPPLY

The overall feature of 2016 on the high-budget rental market was the stable supply volume. The number of available listings fluctuated from -3% to +5% every month. Nevertheless, by the close of the year, there were 15% less vacant properties, testifying to growing liquidity of rental real estate. Furthermore, potential tenants are being offered better options, with high-quality decoration and furnishings.

Chart 1.1 Dynamics of the supply of Moscow prime rental market (January 2015 – 100%)

High-budget supply volume fell 15% between Jan. and Dec. 2016

140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII 2015 2016

Source: Intermark Relocation

Top 5 districts for High-budget property listings for rent are concentrated in five supply in 2016 main districts: Arbat-Kropotkinskaya, Tverskaya–Kremlin, Arbat-Kropotkinskaya, Zamoskvorechye, Krasnopresnenskaya and Leningradsky Pros- Tverskaya–Kremlin, pect. Together, these areas account for about 61% of the total Zamoskvorechye, supply volume in this segment. Krasnopresnenskaya, Leningradsky Prospect

3 www.intermarkrelocation.ru Chart 1.2 Analysis of the most popular areas for living in Moscow in terms of supply

Arbat-Kropotkinskaya 19%9% 2015 2016

Tverskaya-Kremlin 18%

Zamoskvorechye 10%

Krasnopresnenskaya 7%

Leningradsky Prospect 7%

Lubyanka-Kitay-Gorod 7%

Leninsky Prospect 7%

Tsvetnoy Boulevard 5%

Patriarshie Prudy 5%

Frunzenskaya 4%

Kuntsevo 3%

Kutuzovsky Prospect 2%

Prospekt Mira 2%

Other 2%

Taganskaya 1%

Source: Intermark Relocation

The high-budget rental supply structure is organized in the following manner: 2- and 3-bedroom apart- ments are most common (32% and 24% respectively), followed by 1-bedroom (20%), 4+ bedrooms (16%) and studio apartments (8%).

Chart 1.3 Supply analysis of expat housing in Moscow in terms of number of rooms

Number of 2015 (%) Bedrooms 2014 (%) 2016 (%)

Studio 1% 4% 8%

14% 14% 20%

38% 36% 32%

28% 27% 24%

+ 19% 20% 16%

Source: Intermark Relocation

4 www.intermarkrelocation.ru DEMAND

Between January and December 2016, demand from potential tenants was 21% higher than during the same period in 2015.

Chart 2.1 Dynamics of the demand of Moscow prime rental market (January 2015 – 100%)

Demand grew by nearly one-quarter in 2016 year-on-year

180% 160%

140%

120%

100%

80%

60%

40% I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII 2015 2016

Source: Intermark Relocation

Leningradsky Prospect was the most popular district for prime Top 5 districts for rentals in the Russian capital. Property in this area attracted 12% demand in 2016 of all client requests, followed by Arbat-Kropotkinskaya (11.5%). Leningradsky Prospect Tverskaya-Kremlin and Lubyanka-Kitai-Gorod tied for third Arbat-Kropotkinskaya place. Lubyanka-Kitai Gorod Tverskaya-Kremlin Zamoskvorechye

In 2015, Leningradsky Prospect was also the most popular but held a larger margin over other districts, attracting nearly one-fifth of all client interest (18%). Tverskaya Street and Arbat Kropotkinskaya ranked second and third (17% and 12% respectively).

5 www.intermarkrelocation.ru Chart 2.2 Analysis of the most popular areas for living in Moscow in terms of demand

Leningradsky Prospect attracted most tenant requests

Leningradsky Prospect 12%2% 2015 2016

Arbat-Kropotkinskaya 12%

Lubyanka-Kitay-Gorod 11%

Tverskaya-Kremlin 11%

Zamoskvorechye 9%

Krasnopresnenskaya 7%

Leninsky Prospect 7%

Tsvetnoy Boulevard 5%

Patriarshie Prudy 5%

Kutuzovsky Prospect 4%

Other 4%

Taganskaya 4%

Frunzenskaya 4%

Kuntsevo 3%

Prospekt Mira 3%

Source: Intermark Relocation

1- and 2-bedroom prime rentals were in greatest demand last year, attracting nearly two-thirds of all requests. 3-bedroom properties (18%) and studios (10%) were less popular, as were more spacious options: 4+ bedroom flats (7%).

Chart 2.3 Demand analysis of Moscow housing market in terms of number of rooms

Number of 2014 (%) 2015 (%) 2016 (%) Bedrooms

Studio 8% 14% 10%

24% 33% 30%

30% 30% 34%

24% 16% 18%

+ 14% 7% 7%

Source: Intermark Relocation

The prime rentals segment in Moscow was most popular with French and Russian citizens (approx. 20% and 16% of all requests respectively).

6 www.intermarkrelocation.ru RENTAL RATES AND BUDGETS

In 2016, the average rental rate requested per property was USD 5,000 pcm, which is 7% higher than in 2015. Rental rates remained stable during the last quarter of 2016.

Tenant budgets declined by 22% compared to the previous year, to USD 3,700 pcm on average per prop- erty. In December 2016, rental budgets reached their highest monthly average at USD 4,300 pcm, com- pared to just USD 3,000 pcm at their lowest in January.

In holding with tradition, Arbat-Kropotkinskaya was the most expensive district with landlords requesting USD 6,500 pcm on average per property, followed by Krasnopresnenskaya (USD 5,740 pcm) and Tvers- kaya Street (USD 5,690 pcm).

The most affordable district of the high-end rental property segment was Taganskaya, where average rental rates were just USD 1,940 pcm per property.

Chart 3.1 Dynamics of the average budgets of supply and demand

Supply Demand

$7.000 $6.170 $6.500 $6.000 $5.500 $5.850 $5.000 $5.000 $4.500 $4.300 $4.600 $4.000 $4.160 $3.500 $3.000 $3.150 $2.500 $2.000

I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI XII 2015 2016

Source: Intermark Relocation

Chart 3.2 Top 5 most expensive districts for prime rentals in 2016

1 Arbat-Kropotkinskaya 2 Krasnopresnenskaya $6.100 250 $10.000 200 $7.000 $9.000 $8.700 $6.000 200 $8.000 150 $7.000 $4.400 176 $5.000 $4.900 150 $6.000 ea, sq.m ea, sq.m $3.300 $4.000 199 $5.000 100 $2.900 100 $4.000 110 $3.000 118 $3.000 50 $1.200 81 $2.000 50 $1.600 $2.000 76 $1.000 38 $1.000 40 average a r average a r 0 $0 0 $0 1 Bedroom 2 Bedroom 3 Bedroom +4 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom +4 Bedroom

7 www.intermarkrelocation.ru 3 Tverskaya-Kremlin 4 Lubyanka-Kitay-Gorod $6.100 200 $7.000 250 $7.300 $8.000 $6.000 $7.000 150 200 $6.000 $4.400 176 $5.000 150 $5.000 ea, sq.m ea, sq.m $3.300 $4.000 $3.500 208 100 $2.700 $4.000 $3.000 110 100 111 $3.000 50 $1.200 81 $2.000 $1.200 $2.000 50 73 $1.000 $1.000 41

40 average a r average a r 0 $0 0 $0 1 Bedroom 2 Bedroom 3 Bedroom +4 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom +4 Bedroom

5 Tsvetnoy Boulevard and Patriarshie Prudy

$7.000 $6.600 $7.000 200 $6.000 180 180 $6.000 160 $6.000 160 140 $4.600 176 $5.000 $3.700 159 $5.000 140 120 120

ea, sq.m $2.600 ea, sq.m $2.800 $4.000 100 $4.000 100 80 80 $3.000 101 $3.000 121 60 60 $1.200 88 $2.000 $1.200 $2.000 40 40 74 $1.000 $1.000 20 20 45 37 average a r average a r 0 $0 0 $0 1 Bedroom 2 Bedroom 3 Bedroom +4 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom +4 Bedroom

Chart 3.3 Analysis of average asking prices/Number of bedroom/Class

Arbat/Kropotkinskaya, Patriarshy Ponds, Close to International schools Area Tverskaya, Lubyanka/Kitay-Gorod, Zamoskvorechie (Leningrasky prospect, Kuntsevo)

Elite class+ Elite class+ Premium class Business class Premium class Business class Description (unique (unique properties) properties)

1 bedroom $1300–$2000 $1500–$2500 n\a n\a

2 bedroom $1600–$2500 $3000–$8000 $1000–$2000 $1000–$4000

3 bedroom $2500–$3500 $4000–$7000 $1500–$2500 $4000–$10000

4 bedroom $3000–$4500 $7000–$8000 $2500–$3500 $7000–$13000

5+ bedroom $5000-$10000 $10000–$15000 n\a $10000-$17000

Source: Intermark Relocation

Apartments in pre-revolutionary, Stalin-period or ministerial buildings. Clean secure entrance with Business class concierge or quality intercom arrangement. Quality renovation with the use of standard renova- tion materials (not designer renovation), in many cases furnished in IKEA style/quality.

Apartments in pre-revolutionary renovated bulidings or new buildings. Presentable entrance with Elite class high quality renovation and concierge or security, in most cases the building has underground or enclosed parking. Apartments with high quality designer renovation, furniture and appliances.

Apartments in new premium class buildings - mostly "club buildings" - premium quality designer Premium class entrance renovation, underground parking, high multi-level security. The apartments have renova- (unique properties) tion of high quality, furniture and appliances of top brands, very often unique features like size of more than 300 sq.m., terraces.

8 www.intermarkrelocation.ru International compounds In 2016, almost every international compound revised its rental rents, with the exception of Serebryany Bor, which offers RUB rates.

Pokrovsky Hills reduced their rates by 2.8–33% depending on the property type, compared to December 2015. The rate is inclusive of water, electricity, TV, except telephone and Internet.

Rosinka maintained its rates in USD, but also provides a RUB option. This particular compound is flexible on price for potential tenants.

Please note that Serebryany Bor has significantly changed its policy and rates no longer include water or electricity. Tenants are now liable for these services. The approximate cost of these amenities in a 300 sqm house may reach RUB 30,000 per month during the winter. The property management board of Serebryany Bor has added new listings to the compound – these are large houses ranging from 280 to 430 sqm.

# of Bed- Compound House Type # of Bath- Size, sq. m Rent 2016 room room Pokrovsky Hills Tver-1 Town-House 3 2.5 160 $6.000 Tver-3 Town-House 3 2.5 209 $10.500 Suzdal-1 Town-House 3 2.5 200 $8.000 Suzdal-2.3 Town-House 3 2.5 212 $12.000 Novgorod-1 Town-House 4 2.5 215 $12.500 Novgorod-2.3 Town-House 4 2.5 220 $13.500 Yaroslavl-2.3 Town-House 5 3.5 340 $17.500 Rosinka Business Town-House 2 2 130 - Executive Town-House 3 2.5 151 $7.500 Family Town-House 4 2.5 222 $9.400 Family Deluxe Town-House 4 2.5 259 $9.900 Country Town-House 5 4.5 266 $10.200 Country Deluxe Town-House 5 4.5 302 $11.000 Presidential Town-House 5 4.5 292 $11.000 Presidential Deluxe Town-House 5 4.5 326 $12.500 Serebryany Bor House 3 2.5 165 420.000 rub. ($7.000) House 2 2.5 150 350.000 rub. ($5.000) House 3 2.5 171 420.000 rub. ($7.000) Town-House 5 4.5 248 530.000 rub. ($8.800) Town-House 5 5 280 800.000 rub. ($21.700)

Source: Intermark Relocation

9 www.intermarkrelocation.ru FORECAST AND RECOMMENDATIONS

New large - scale projects will enter the market and should significantly improve prime rental apartment quality in business class segment.

Number of elite rental properties remains at the 2016 level.

+5-10% growth is expected in ruble rates for 2017.

90% of rental contracts fixes in rubles; this trend is expected to continue.

ANTI-CRISIS SERVICES

Rent Negotiations

Intermark constantly monitors real estate market and predicts changes in rental cost. If rental rates begin to decline or if only appear prerequisites to this, we are ready to negotiate with landlords and fix a rental rate in accordance with the current market. During the periods of rent decrease (1998, 2008, the end of 2014) employees of Intermark conducted several hundreds of successful negotiations, which in result led to significant reductions in the clients’ cost savings.

Sublease

Project «Sublease» linked Intermark with our corporate clients and landlords. We offer our clients to conclude an agreement of sublease straight with Intermark. After that our company will conclude an agreement with landlords. Consequently we assume obligations both of the Tenant and of the Landlord and responsible for every client.

Such scheme of collaboration has some advantages: • no need for direct collaboration with the landlord. • all sublease agreements signed on a single draft. • easy and unified procedure of prolongation and termination of the contracts on the approved before- hand procedure. • unified damage assessment procedure.

10 www.intermarkrelocation.ru NEW MATERIALS Moscow Relocation Guide Relocation Guides

Inside this edition of the Intermark Moscow Intermark helps expats relocate to many coun- Relocation Guide you will find all the facts of the tries and we are proud to present our brand new local housing market and different areas of the Relocation Guides for Azerbaijan, Belarus and city including the most popular residential areas, Kazakhstan! These guides with useful informa- international schools, medical care and, of tion about migration procedures, housing mar- course, tips for adapting to Moscow life. kets, international schools, traditions and culture, sightseeing and tips making expat life in Baku, Minsk, Astana and Almaty interesting and Guide to Rentals in eventful. Russian Regions Regional Guides

Despite various types of locations there are many similarities in how the relocation process is In recent years international companies have organized and what challenges and solutions to been actively expanding and relocating their them one finds along the way. This Guide to assignees not only to Moscow, but also to other Rentals in Russian Regions will give you an regions of Russia. Intermark Relocation creates opportunity to feel yourself comfortable in every guides about other Russian cities to make expat city of Russia. life easier and more interesting across the coun- try. Country Pages

Intermark Relocation is glad to present our new country pages for Armenia, Uzbekistan, Kyr- gyzstan and Moldova. Our team created these pages for people relocat- ing to different countries and inside you can find important information about immigration proce- dures, culture and traditions, business communi- cation styles and other useful tips. We also have country pages for Russia, Kazakh- stan, Azerbaijan, Georgia, Ukraine and Belarus. You are welcome!

11 www.intermarkrelocation.ru Contact our Management Team

Marina Semenova Irina Yakimenko Managing Partner Managing Partner [email protected] [email protected]

Evgenia Schramm Stanislav Labunsky Alexey Stepanenko Operations Director Senior Business Development Manager Corporate Clients Services Director [email protected] [email protected] [email protected]

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