Latest developments from Russia: New home purchases are increasing rapidly

Despite the health crisis and its economic consequences, the residential construction market in Russia is growing rapidly.

For more than a year, the residential construction market has been growing rapidly in Russia[1]. This can be explained by slower access to credit and lower rates offered to buyers, as is often the case in Europe. But of course, the development of a market where demand pressure is very strong, far beyond the responsive capacities of the production system, is sometimes accompanied by a sharp rise in prices.

A good summer for construction in Russia

According to Goskomstat (Federal Russian State Statistics Service), despite the health crisis and its economic consequences, the level of housing construction in Russia is better than expected. As in 2020, new home purchases benefited from a significant increase in mortgage lending to households: “mortgage” transactions currently represent about 2/3 of all transactions in the real estate market. Loans made at the level of 8% of GDP (as a reminder, total loans to individuals in France – excluding renegotiations, loan repurchases and bridge loans – represent 7.5% of GDP).

So during 3pearl According to Goskomstat, for a population estimated at 146 million people at the beginning of 2021, more than 209,000 new homes were purchased in Russia, usually in the best quarter of the year. France, with a population of 67 million, has built around 91,000 homes each quarter since the start of the year (on average, to account for a quite different seasonal profile): therefore, relative construction levels are comparable between the two countries. If we take into account the size of the population that needs to be accommodated.

With more than 28% of total construction, Moscow and its region are the heavyweights in the industry, with the strongest economic attractiveness among major Russian cities (15% of construction alone). Next comes the Krasnodar region (North Caucasus) with about 10% of construction. Even in Saint-Petersburg, where more than 8% of residences are built. And far behind is the Sverdlovsk (Western Siberia) region, whose administrative capital is Yekaterinburg with about 4%. The other 81 regions of the Russian Federation represent only 2 to 3% of the total, at most.

However, rising real estate prices

The response to this “healthy” situation in the housing sector is, of course, the rapid increase in housing prices, as is the case in almost all parts of the world. The RIA Novosti news agency pointed to double-digit increases in prices for homes marketed on Russia’s Black Sea coast last year: an average of 35% increases in new ones and 20% in old ones.

The rise in prices for new homes, including the British company Knight Frank, its subsidiary Knight Frank Russia, has only accelerated since the beginning of 2020. This applies, for example, to luxury real estate: this market segment represents about 9. Percentage of construction compared to 64% for “communal housing” (social housing in France) and 27% for intermediate housing. Thus, according to data from the “Knight Frank Prime Global Cities Index”, Moscow and Saint-Petersburg recently found themselves in the top 10 of the world’s most important luxury real estate markets by price: St. Petersburg in 6th place.pearl location and 8th place in Moscow with a price increase of 13.4% in one year.pearl Eats with +12.4%. A year ago, Moscow was in 11th place.pearl square at 43 and St. St. Petersburgpearl !

[1] Erwan Pensec: “Which are the most popular regions in Russia for buying new real estate? », Beyond Russia (November 15, 2021). And also: “Rising real estate prices on the Russian Riviera” (September 9, 2021), which MySweetimmo’s columns previously reported. Not forgetting an article by the editorial team of Russian Beyond, “Two Russian cities in the Top 10 in the ranking of rising prices for luxury real estate” (May 5, 2021), or Nikolai Shevchenko’s old article: “The most prestigious in Moscow and what are the expensive neighborhoods” (15 June 2020).

Michel Mouillart, Professor of Economics, FRICS: