Moscow's new high-rise housing plan casts shadow over local developers

Moscow’s local government project to build hundreds of thousands of new homes threatens to cause a supply glut, forcing private sector developers to cut back on their own projects and depressing apartment prices, real estate analysts and experts say.

The authorities in Moscow intend to re-house over 1 million citizens living in decrepit Soviet-era apartments, which they plan to demolish, in new high-rise blocks of flats as part of a 15-year programme.

But officials have said some of the new housing could be built for sale, in a market where developers including PIK Group , Etalon and LSR compete.

PIK and Etalon declined to comment while a spokeswoman for developer LSR said that while it was not planning to cut the size of its own projects some homebuilders might choose to reduce prices.

These homebuilders are not expected to have a stake in the municipal project as the authorities have said they only plan to engage them as sub-contractors for the supply of components.

The authorities have also said that the first flats under the programme are likely to be ready in about three years’ time with apartments for sale likely to follow in around 2024.

Julia Gordeyeva, a real estate analyst at Sberbank CIB, estimates that an additional 1.3-1.4 million square metres of housing could be supplied to the market each year once the resettlement project gets going.