Real Estate Quarterly, сентябрь 2006 // Top Cottage Settlements

Two issues shape the demand — and, of course, the price — for cottage settlements: the environment and access. Environmental issues are not new to Moscow where the whole city is planned according to the wind-rose, and areas to the west have been more prestigious and valued for centuries. As long ago as 1664, Peter the Great's father Tsar Alexei Mikhailovich banned all smoke-producing facilities to the west of the Kremlin. Cars built to Soviet designs still travel the streets of the Russian capital, although their exhaust falls far short of European standards. With 3.5 million registered cars in Moscow alone, and thousands upon thousands more arriving every day from beyond the city limits, air-pollution is very much a real and present danger.

Moscow's notorious traffic jams that clog up the approaches to the city are a reminder of how much more pleasant and healthy it is to live in natural surroundings, but they certainly do impose restrictions on your social life. Therefore, prestige these days is measured in terms of how quickly one can get into the city center. And so here the Rublyovo-Uspenskoye Shosse — or Rublyovka, as it's popularly known — is the leader. Thanks to its status as a 'government' road (top officials have lived along it since Soviet times and President Vladimir Putin travels it twice daily) it is excellently maintained and relatively free from traffic jams. Kutuzovsky Prospekt, its continuation leading into the city center, is classed as a 'non-stop' road. Thanks to the fact that cottages in this area are either located in mega-settlements, with a complete infrastructure and services like a supermarket, fitness, beauty saloon, daycare center and so on, or else are within easy reach of built-up areas, in terms of the provision of facilities there is little difference with life in an urban area.

Moving clockwise, the Novorizh-skoye Shosse to the north of the Rublyovka is gaining popularity thanks to the prospect of major improvements to traffic flow expected to be brought about in the near future. Within several months the Novorizhskoye Shosse, which currently narrows from a good dual carriageway to a small, winding suburban road after it bisects the Moscow Ring Road, or MKAD, will be extended and taken through a tunnel and over a bridge to join on to Krasnopresnensky Prospekt and the Third Transport Ring. It is precisely the underdeveloped transport infrastructure, including public transportation, that at present is seriously hindering the development of areas along main roads such as the Novorizhskoye Shosse as fully-fledged suburbs in the European and American sense of the word.

The long-established tradition of having an apartment in the city and a dacha in the countryside for spending summer weekends is losing ground fast. Chief city architect Alexander Kuzmin said in an interview on Voice of Russia' that what he described as "an achievement of the Soviet system" is becoming too expensive and inconvenient. Sharply rising prices for residential realty in Moscow are prompting many to look at buying cottages in the Moscow region instead. But supply is often limited to the business class and de-luxe sectors.

Zhanna Shcherbakova, vice president of Miel-Realty summed up the situation at a press lunch dealing with current issues on the suburban real estate market in May: "House-hunters are ready to pay $ 150,000 for a cottage in the economy sector. But properties available for this price are quite simply non-existent. When we compare the price of a square meter in a cottage settlement with the price of a square meter in an apartment — a square meter in the former house will cost $1,300. And this price includes fresh air, natural surroundings, and your own land." But as Shcherbakova noted, although square meter for square meter a city center apartment is more expensive and not as good value for money, in absolute terms they are still cheaper, meaning that only suburban townhous-es will be able to provide effective competition for them.

Andrey Fedaka, vice general director of the Vesco Group agrees: "The market has a deficit of supply of economy-class cottages below $300,000. Developers usually look at the profitability and if the project is within 20 to 25 kilometers from the MKAD, then they go for de-luxe or business class because otherwise the land is too expensive."

However, the problem is not merely that the land itself is expensive; it is the underdeveloped transportation infrastructure that makes living beyond 40 kilometers from Moscow inconvenient. According to analyses conducted by Miel-Realty in the second quarter of 2006, 34 percent of properties were offered within 16 to 30 kilometers from the MKAD, 27 percent of properties were in the 31 to 60 kilometer range, while just 25 percent were within 15 kilometers of the MKAD. 64 percent of townhouses on sale through Miel-Realty were within 15 kilometers of the MKAD.

But thanks to a shortfall in supply, an economy awash with petro-dollars which investors want to see working harder, and the migration to Moscow of the regional elites, developers are sure enough to launch large-scale projects. "Among the most important growing trends on the out-of-town cottage market are large-scale projects," said Fedaka. "Investors and developers prefer to build settlements of 1 50 houses or more based on a single architectural concept."

"The so called 'mega-settlements' are positioned in the economy sector of the market. Developers use sites of 100 hectares and more, and build modestly-sized cottages of a single type. Until now this sector has not been fully exploited, but it shows future promise," commented Vladimir Yakhontov, vice director of the Suburban Realty Department at Miel-Realty. "A cottage settlement is in reality an entire habitat," he explained. "Not only is it a living space, it is a social environment. This is especially important in the de-luxe sector. The number of houses should not exceed 100. This emphasizes the high social status of the owners."

"From the investor's point of view buying a property in a cottage settlement is best," added Yakhontov. "About 20 percent of cottages are purchased for investment. It is a very lucrative business because the cycle is shorter than for apartment building construction, and the value of a cottage grows on average by 30 percent between the start of construction and delivery of the finished product, and that without taking into account the general growth in market prices — 20 percent over the first six months of 2006." But houses in a cottage settlement are preferable to a one-off project standing on its own. "It carries with it a certain individuality and it might be not that easy to sell," added Yakhontov.

We asked our experts to name the most popular cottage settlements.

Zhanna Shcherbakova, managing director of Miel-Realty:
• Fominskoye Village (Kaluzhskoye Shosse, 16 kilometers from the MKAD]: consists of 300 houses, large settlement with well developed infrastructure — shops and security; town of Troitsk is in the vicinity.
• Glagolevo settlement (Kievskoye Shosse, 35 kilometers from the MKAD): one of the longest established cottage settlements; located in a forest; more than 500 houses; developed infrastructure, security could be improved.
• Novospasskoe Village (Kaluzhskoye Shosse, 20 kilometers from the MKAD): the best of all from the point of view of infrastructure. There is a recreational zone, forest, water front. There are already 200 houses and new ones are still being built.

Dinara Lizunova, PR specialist at MlAN Real Estate:
• Istra Country Club (Novorizhskoye Shosse, 38 kilometers from the MKAD]: one of the so-called eco-set-tlements. Houses built of quality wooden materials - Russian pine. Choice of different architectural designs for houses instead of 'one size fits all' uniform style, Moscow region registration possible. Developed infrastructure — tennis courts, shops, recreation centers.
• Family Club (Leningradskoye Shosse, 12 kilometers from the MKAD): one of the largest projects to the north of Moscow; developed urban infrastructure; affordable prices; 2 1 8 cottages and 1 32 town-houses.

Sergey Ganusov, head of the suburban department at BEST Real Estate:
• Novoye Lapino (Rublevo-Uspenskoye Shosse, 18 kilometers from the MKAD): status settlement with a historic flavor; located in prestigious area, all cottages are ready for inhabitants to move in; different architectural styles to choose from.
• Aurora (Dmitrovskoye Shosse, 18 kilometers from the MKAD): located on a well lit highway with a good quality road surface, there are many recreation opportunities close to the settlement — Extreme, Park-Yakhroma, Sarochany, the Admiral marine club, the Spartak yachting club.

Maria Litinetskaya, head of the suburban realty department at Blackwood: "Basically cottage settlements on the Rublyovskoye Shosse lead over any others. Nobody can compete with what the Rublyovskoye Shosse has to offer because of its landscape features, such as pine forests. The next best would be Novorizhskoye Shosse," comments Litinetskaya. Among the most popular are:
• Barvikha Club (Rublyovskoye Shosse, 9 kilometers)
• Zhukovka hills (Rublyovskoye Shosse, 9 kilometers)
• Gorky-2 (Rublyovskoye Shosse, 8 kilometers).

Ivan Lyasnikov, PR director of Vesco Group (cottage settlements ranked in order of precedence):
• Greenfield: high class cottage settlement (Vesco Category B)
• Pavlovo: top class cottage settlement (Vesco Category A)
• Knyazhye Ozero: business class cottage settlement (Vesco Category C)
• Pestovo: business class cottage settlement (Vesco Category C)
• Riverside: high class cottage settlement (Vesco Category B)

In early 2005 Vesco Group introduced guidelines for rating cottage settlements, which laid down three categories with one extra covering individual cottages, defined as individually built projects in remote areas more than 50 kilometers from the MKAD. The order of the ranking is defined by the following criteria: the direction from Moscow (i.e. the shosse in whose vicinity the settlement is located), distance from MKAD, number of cottages in the settlement, the setting (water front, pine or mixed forest) and infrastructure, including security and availability of shops, fitness and beauty saloons within a set distance.

Interestingly, a year later the criteria have changed. "Now the number of cottages in the settlement is no longer a deciding factor because of the improvement in the quality of large-scale projects," explained Lyasnikov. "Nowadays we include settlements with up to 300 cottages in the top category and up to 400 cottages in the high category (Category B). We also have altered the distance from the MKAD expected of Category B settlements — it is 30 to 35 kilometers now."

However, the top category has remained limited to settlements located up to 15 kilometers on the Rublyovo-Uspenskoye or Novorizhskoye shosses from the MKAD, or up to 10 kilometers on Kaluzhskoye Shosse, or all along the Shchyolkovskoye Shosse. Another important condition is the presence of relict (i.e. natural and not artificially planted) pine forest in the surroundings. Mixed forest immediately shifts settlements down to Class-B. It is evident, however, as the demand for suburban iving grows and the resources are limited, certain rigid restrictions will be lifted in the foreseeable future.

As can be seen from the results above, opinions about cottage settlements differ so widely as to make it impossible to compile any sort of grand rating. According to Andrei Fedaka, vice CEO of the Vesco Group, "Such disparate results can be explained by the variety of real estate agencies and differing lengths of time for which these settlements have been on the market. For example, Aurora has now been on the market for two years while others have been on the market for only three to four months." But Oleg Repchenko, head of the IRN.ru agency viewed the issue slightly differently: "Popularity is a very subjective parameter and I find it very difficult to talk about any sort of leadership or rating," he said. "The only quantifiable variable here, which could have been rationally made into a rating, would be price. However, each cottage settlement is unique and prices for two different houses in the same cottage settlement can differ by a factor of two or three. Concerning the ratings available, each agency is interested in promotion of the properties on their books, putting first those which are more difficult to sell. That is the reality of any business, not only real estate."