We expect the recession in Russia to trough in Q209-Q309, with base effects moderating the pace of contraction beginning in the fourth quarter. That said, we hold to the view for a weak recovery, with private consumption likely to remain weak until the latter half of 2010. While we forecast real GDP to fall by 8.1% in 2009 and then grow by only 3.4% in 2010, we note that a sustained rally in oil prices above US$70.00/bbl in H209 would pose upside risks to our core scenario. Russia's business environment is hampered by poor infrastructure, rising state protectionism in the energy industry and weak institutional development, which has contributed to an endemic corruption problem and limited impartial judicial oversight. There are signals that the government is taking some of these issues seriously, but we do not expect any major changes to occur within the short term. The size of the country and the limited capacity of government institutions mean that any policy initiatives will take years to have any meaningful effect. The Central Bank of Russia (CBR) cut its benchmark refinancing rate to 9.50% on October 29, bringing cumulative monetary easing since April to 350bps. The rate cuts have coincided with a steep drop in inflationary pressures, with headline consumer price growth falling to 9.7% y-o-y in October, down from a recent peak of 14.0% in March. We maintain, though, that the CBR's decision-making is as much influenced by contracting domestic demand and bank lending as it is by adjusting to lower inflation. By cutting the policy rate, the authorities are likely trying to bring down lending rates, which remain well into the double digits in nominal terms. Going forward, we believe there remains scope for further interest rate cuts in the near term, with our end-2009 refinancing rate forecast set at 8.50%. Office, retail and industrial premises continue to be beset by high vacancy rates and low rents. We judge that current rent rates are not sustainable, and therefore developments will not be commenced until demand rises and vacancy rates fall. House prices, office rents and retail rents will probably continue to fall, albeit at a slower level than in H109. The industrial property segment is expected to stabilise in early 2010. The investment market is expected to continue a mild upswing in investments in office, retail and warehouse projects. Distressed deals will increasingly be renegotiated.
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Report Table of Contents:
Executive Summary
- Key Features Of This Report
- SWOT Analysis
- Russia Real Estate/Construction SWOT
- Russia Economic SWOT
- Russia Business SWOT
- Real Estate Market Overview
- Key Projects
- Construction Overview
- New And Ongoing Projects
- Residential Construction
- Commercial Construction
- Industrial Construction
- Tourism Construction
Table: Major Projects - Construction
- Real Estate Investment Trusts
Table: FTSE EPRA/NAREIT Global Real Estate Indices Total Returns (%, US dollar terms)
Table: US REITs - Total Returns (%, US dollar terms)
- Industry Finance Outlook
- Global Outlook
- Exchange Rate Policy
Table: Russia - Current Account
- Industry Forecast Scenario
- Russia Real Estate Forecasts
Table: Central And Eastern Europe Housing Prices At A Glance (% change y-o-y)
Table: Office Rents In Central And Eastern Europe - CBRE
Table: Office Rents In Central And Eastern Europe - Other Research
Table: Russia - Construction Industry Forecast
- Economic Outlook
Table: Russia - Economic Activity
- Business Environment
- Real Estate/Construction Business Environment Rating
Table: Europe Real Estate/Construction Business Environment Rating
- Russia’
- Central And Eastern Europe Project Finance Ratings
Table: Design And Construction Rating
Table: Commissioning And Operating Rating
Table: Overall Project Finance Rating
- Russia’
- Latest Developments
Table: BMI Business And Operational Risk Ratings
- Institutions
Table: BMI Legal Framework Ratings
- Infrastructure
- Market Outlook
Table: Emerging Europe, Annual FDI Inflows
Table: BMI Trade Ratings
Table: Top Export Destinations
- Tax Regime
- Operational Risk
- Company Monitor
- Mirax Group
- SU-155 Group
- LSR Group
- RODEX GROUP
- Jensen Group
- Peresvet-Group
- BMI Forecast Modelling
- How We Generate Our Industry Forecasts
- Construction Industry
- Bank Lending
- Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
- Project Finance Ratings Indicators
Table: Design And Construction Phase
Table: Commissioning And Operating Phase - Commercial Construction
Table: Commissioning And Operating Phase - Energy And Utilities
Table: Commissioning And Operating Phase - Transport
- Sources
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