Hot Spots
City 2008 Ranking 2007 Ranking
Moscow 1 18
Istanbul 2 11
Hamburg 3 9
Munich 4 4
Paris 5 1
Lyon 6 5
Frankfurt 7 27
Stokholm 8 3
Berlin 9 25
Helsinki 10 6

Source: Urban Land Institute / PricewaterhouseCoopers Emerging Trends survey.


The ULI/PWC Emerging Trends survey has placed the Moscow real estate market at the top of its real estate hotspots for 2008. The survey is conducted with 500 Europe-wide investors and developers. The report stated that Moscow’s meteoric rise, up from 18th last year, is due in large to investors turning away from Europe’s traditional markets to tap into new opportunities. Investors in Moscow are placing more emphasis on the return rather than the risk. They are betting on hopes that Russia’s rocketing economic growth will continue on the back of oil prices of $100 per barrel and push through into higher rental rates and greater property demand.

This is based on comments on both commercial and residential sectors however it is the retail and commercial markets in Russia that gets the most recommendations.
Buy recommendations for the retail sector from those surveyed topped 80%, followed by office space and hotels at about 75% and the industrial sector at almost 65%.

In terms of investment optimism, the residential sector lags slightly behind the pack, with only 54% of those surveyed giving it a buy rating, while 16% advised owners of Moscow apartments to sell. I would have expected a lower buy rating from the survey myself.

Last year's top city, Paris, dropped to 5th and London, 2nd last year, slumped to 15th out of the 27 cities on the list. It is also the first year that London has dropped out of the top 10.

Moscow, and the residential sector, seems to be overheating. The majority of the investment money seems to be going directly to Moscow but what of the regional cities which should be able to take in the additional capital going into Russia. There is the issue of a lack of transparency, corruption etc.

Despite my doubts on the residential market, it keeps on growing, The city’s average residential retail prices this week broke through the $5,000 per sqm barrier for the 1st time according to a Russian real estate website. Resi prices increased 15% since the start of 2008, according to the same website.

I think that this year prices need to stabilize and most likely will but what of the growth we have already seen in 2008? The rental market is also one of the most expensive in the world indicating a lot of the local market must not be able to afford to buy?

The Moscow market appears to be independent of global markets and driven entirely by wealthy cash-rich Russians. I was thus surprised to see it ranked as number one hotspot by so many European investors and developers.

Perhaps the smart money is in the retail and commercial sectors in Moscow and I am also very interested in the regional milioniki cities which I believe represent great potential.

But I keep coming back to the residential sector in Moscow? Does anyone recommend buying in the market currently or like me you think we have reached the top of the resi market in Moscow?

Thanks
Noreen
PS - the format of the table above is a little difficult to read - its the way it came out on the forum - 1st set of numbers are ranking for 2008 and 2nd set to the right are 2007 data

interesting, noreen. i see moscow as an oil price play. if that price starts heading down moscow will certainly be affected negatively (most other cities would be affected positively). also interesting to note that 40% of the list is german cities. is PS considering launching a german deal?

regards,
dan

Noreen, not that I'm obsessed by Slovakia but was Bratislava on the list?

I think you have to consider other factors such as political risk. For this reason alone I wouldn't touch Russia with a bargepoll. Actually I would also shy away from Istanbul for the same reason.
Huw

I read this article in the Moscow Times - sorry Huw, it only listed the top ten as shown above.

I have to agree on the political risk. Moscow and Istanbul might be growing fast, but that doesn't mean you should put your money there!

Agree with Ben - huge political risk in Moscow and Istanbul

Huw - I'd never have thought you were obsessed with Slovakia!

I am going to order a copy so will see what it has to say about Slovakia and alert you of any interesting commentary.

Noreen