What to look for when choosing a new building for investment: 5 tips from professionals
Investing in a new building is not at all the same as investing in an apartment on the secondary market. The disadvantages and advantages of secondary real estate are immediately visible: it is enough to inspect the apartment, walk around the area and conduct a minimal study of the location. The primary market is more complicated.
Those who want to buy housing as an asset see two options: receive rental income or it is profitable to resell an apartment with a noticeable price increase. A combination of these options is also possible: an investor can rent out his apartment for several years, and then sell it at a profit. In any of the scenarios described, it is important to choose a residential complex that will be in demand in five to ten years. Especially for those who are thinking about investing money in a new building, RBC Real Estate has prepared a list of five criteria that must be learned and checked before entering into a deal. This is a checklist that will help budding real estate investors recognize the best investment options.
If in an established area without building plots one can speak of infrastructure and microclimate at the local level, then in new buildings the situation is different. Here the picture is changing all the time: new houses, schools, stadiums and clinics appear on vacant lots. In such conditions, inalienable advantages come to the fore.
This is the name of the positive characteristics that will definitely not go anywhere. For example, the proximity to the metro. The Moscow metro will remain important under any conditions: even if a station is temporarily closed for connection to a new line, such pauses remain short-lived – and as a result, each station built continues to operate. And bring benefits to everyone who lives within walking distance.
A case in point: LCD “NOW. Quarter on the embankment “, which is being built on the peninsula near the backwater of Novinki. From the point of view of a buyer of secondary real estate who needs infrastructure here and now, the location is not the most successful: construction is underway on the peninsula, and rare inhabited houses have not yet formed an integral and indivisible area with their own face.
A forward-thinking investor will look at the situation differently. Such a person will appreciate not how things are now, but what the situation will be in three to five years. On such a planning horizon, the peninsula at the Novinsky Sleeve will turn from a global construction site into a well-equipped area with all the amenities and exclusively new houses – that is, a place that is attractive for life. Several more residential properties are under construction nearby, which will create an attractive neighborhood and a homogeneous business class urban environment.
But the main thing is that NOW will have its location within a seven-minute walk from the Technopark metro station. The same inalienable advantage that an investor should look at.
Another characteristic of this kind is natural objects nearby. The same NOW is built 30 meters from the Moskva River: even for the Moscow market, where there is a good selection of residential complexes on the embankments, such proximity to the water turns out to be exceptional.
In the 21st century, rivers do not unfold and do not fall asleep: in modern urban science, reservoirs are becoming an important place of attraction for townspeople. All over the world – from the USA to Korea – the coasts are being developed, the channels are being cleaned, and the “lost” and buried rivers are returned to the townspeople. With this trend, you can be sure that the backwater of Novinka will remain in place and continue to attract people. This means that a view of the water and a quick exit to the embankment will remain integral advantages of the residential complex under construction.
Another example is the Eniteo residential complex, which is being built near the Cheryomushki-Znamenskaya estate. This is a green area, the preservation of which will be important for any city administration. Both Eniteo buildings are directly adjacent to the estate, which protects future residents from unwanted neighborhoods. Or from the fact that new skyscrapers will suddenly grow under their windows: the special status of Cheryomushki-Znamensky insures investors against the risk of losing the species characteristics of apartments in Eniteo.
In general, investors should study whether there are free areas between the residential complex under construction and the object to which it has windows. If there is a land plot with a separate owner between the new building and the park, or just an undeveloped area, there is no doubt that sooner or later something will appear there. And this is a risk for those who rely on a beautiful view from the window.
This can be avoided with a detailed study of the environment. For example, from the windows of the Spiers residential complex a view of the Setun River Valley nature reserve opens. Is this neighborhood reliable? Since 1998, the Setun River Valley has had the status of a specially protected natural zone of regional significance. This status protects the reserve from development, deforestation or reduction. This means that Spiers LCD gets its own inalienable advantage: proximity to a huge forest and clean air 365 days a year.
Opportunity to invest at the start of sales
The most favorable prices for new buildings are always at the start of sales: this is the tradition of the primary market in Moscow. “From the start of sales to the moment of project implementation, you can get a profitability of 20-40%. If we take into account that the average implementation period is two years, the profitability for 12 months will reach 10-20% per annum, ”said Andrey Solovyov, director of the city real estate department at Knight Frank, at the request of RBC Real Estate.
“The profitability can be estimated at the level of the annual growth in prices for apartments in the business class residential complex, which by the end of 2020 is 24%,” Maria Litinetskaya, managing partner of Metrium, confirmed the arguments of her colleague.
Practice has shown that many people see this trend. If in February 2019 the total supply in new buildings of all categories of the Moscow region was 6.4 thousand square meters. m, then by February 2020 this figure decreased to 5.5 thousand square meters. m, and by February 2021 – up to 4 thousand sq. m. The annual decline in supply reached 28%, according to data compiled by Tekta Group (.pdf) .
At the same time, they did not build and buy less. Developers now and then announce new projects, and the number of registered preschool institutions grows from 6% to 100% YoY. For example, in January 2021 in Moscow, taking into account New Moscow, Rosreestr recorded 5257 purchases of apartments in new buildings against 4950 purchases in January 2020. This is one of the weakest monthly gains: only 6%.
At the other extreme, the indicators of September 2020 compared to September 2019: here the increase exceeded 100%. If in the first autumn month of 2019, 5594 apartments in new buildings were purchased in Moscow, then in September 2020 – 11,856.
What does all this mean? That buyers understand the liquidity of housing in Moscow and strive to invest in new buildings in the capital as soon as possible. And increased demand accelerates prices. “2020 has become a special year for the residential real estate market,” admitted at Knight Frank. – Such a rapid rise in prices in projects is not typical for new buildings in the business segment. Usually we plan for growth in the range of 20-30% for the construction period. “
An investor can use this situation to his advantage if he invests in a new building at the very start of sales. From the nearest options: LCD Ever near the Kaluzhskaya metro station. Sales of apartments in this residential complex started on March 29, 2021.
3. Variety of options
Imagine a situation: a large residential complex with hundreds of apartments sold. If there are many investors in such a residential complex, then in five to seven years they will all begin to compete with each other. How to stand out in such a situation and not be one of the 190 sellers of a typical one-room apartment with a standard layout?
The obvious answer is to find a residential complex with a variety of layouts in order to “stake out” a unique option. For example, in the NOW residential complex, there are more than 100 layout options. This variety immediately segments the market and does not lead to a situation where several sellers are fighting for one buyer: here buyers will study all the possibilities in advance and choose the optimal layout for themselves.
“On the housing market in new buildings now there are practically no residential complexes, where two or three layout options are presented. There are dozens of them even in the projects of the mass segment, as this ensures the variability of the offer and allows you to adapt to different categories of buyers, “Metrium confirmed.
“When choosing an apartment, it is important to focus on an investment strategy: maximum earnings due to an increase in the price of an apartment in the next three to five years, or receiving rental income on the horizon of five, ten or more years. Depending on the strategy, a good investment option can be, for example, a two-room business-class apartment closer to the center or a comfort-class one-room apartment in a residential area closer to the Moscow Ring Road, but within walking distance from the metro, “Maria Litinetskaya recommended.
4. Reputation of the developer
It is worth investing only in those projects that are being built by developers who do not allow marriage, incomplete work and failure to meet construction deadlines. In order to find out, you can study one of the ratings that brokers or independent consultants often maintain.
Metrium also advises to collect all available information from open sources: how long the developer has been on the market, how many projects he has implemented and in which segments, whether the objects were put into operation on time, how significant and for what reasons did he allow delays, whether there were any claims from the outside regulatory authorities.
“A reliable developer always has an appropriate reputation in the market thanks to the implemented projects. He does not violate the deadlines for the delivery of objects and, if necessary, has sufficient credit lines to implement them on time, “said Andrey Solovyov from Knight Frank.
Let’s show how an investor can form a developer’s profile using the Tekta Group as an example. This developer has been on the real estate market since 1999 – information is easy to find on the company’s official website and in independent sources. Such experience is already a competitive advantage: a problem developer would not have lasted 22 years on the market.
In recent years, Tekta Group has built 12 business and premium class residential complexes in the Moscow region. Such a portfolio shows both the experience of the developer and the willingness of people to trust the company: if the buyers were unhappy, sales would not go, and the developer would not be able to launch new projects.
Meanwhile, the current portfolio of Tekta Group includes four capital objects at the stage of implementation at once. The last completed project is the Big Time residential complex, in which 100% of the apartments were sold even before the complex was put into operation, and a significant part of the residents received the keys.
Such analysis helps to identify possible problem points and highlight the advantages – especially if we compare several developers from the same region according to the same criteria.
The uniqueness of the purchased apartment
Experienced consultants and developers recommend paying attention to apartments with unique advantages so that they “hook” the future buyer. For example, a two-level apartment in Spiers Residential Complex is an interesting solution that can impress, and therefore quickly find a buyer.
Or, unusual for Russia, a Euro-couple with a huge terrace, where it is convenient to have parties and thereby “conquer” guests. Discerning buyers will turn their attention to Spiers’ master bedroom apartments. This is the name of a special layout, in which the master bedroom has its own bathroom and dressing room; sometimes complete with this a loggia is attached to the master bedroom.
Spiers also has apartments with a separate entrance – an attractive option for the post-quarantine world, where privacy is included in the price right up to your own street door, so that you don’t even cross with neighbors at the entrance.
“During the pandemic, the interest of potential buyers in purchasing apartments with an office, terraces, balconies in order to expand the living space has increased,” said Andrey Solovyov from Knight Frank. – This is the secret of a successful investor. He sees trends, analyzes and understands better than others what may be in demand and popular in the future, and what will become a thing of the past. It operates according to its own strategic plan. “
The approach with the search for uniqueness is not entirely applicable to standard- or comfort-class apartments: in them, banal transport accessibility and a basic acceptable layout are more important. But if you study the business segment, it becomes clear: it is really possible to detach from competing investors from all over Moscow only through personalized apartments.
For example, with a window in the bathroom and dressing room, as in the NOW residential complex. Or with a winter garden – this is from the “menu” of the Ever residential complex. In Spiers, you can find options with a second light, in NOW – with your own sauna right in the apartment.
“Unique characteristics can both attract potential buyers or tenants and alienate them,” warns Maria Litinetskaya. “Therefore, if in the considered location the offer is exclusive, then it will not be difficult to sell or rent such an apartment.”
A separate category is lovers of high ceilings and penthouses. This is a special segment in which the LCDs Eniteo, Spiers, Ever and other new buildings are playing. In Moscow in the 2020s, the presence of penthouses is no longer a unique characteristic – which does not negate the stable and predictable demand for such apartments. This means that it turns into another interesting tool for making money on investing in real estate.