Residential real estate trends in Russia and their potential impact on markets
In recent years, property prices in Russia have climbed faster than overall inflation, signaling strong demand across primary and secondary markets. Yet, a marked rise in mortgage rates during 2022 and 2023 began to cool demand and may slow the continued appreciation of apartments in the near term. This pattern has drawn attention from analysts and industry observers who track price dynamics and credit conditions closely.
Market participants note a shift in buyer preferences. Before the summer of 2023, the balance favored secondary homes by a wide margin, with roughly nine times as much interest in resale properties as in newly built units. By year’s end, the distribution shifted toward new developments, roughly 60% of activity in the primary market and 40% in the secondary sector. The change reflects a growing interest in new construction, driven partly by the appeal of modern layouts, better energy efficiency, and incentives that sometimes accompany launch programs from developers.
Analysts point out that the momentum in average prices persisted across both segments. This rise is linked to sustained demand in recent months, which tends to filter out older or less affordable options and, consequently, lifts the overall average price per square meter. “The trend shows price growth in both the primary and secondary markets,” explained a leading analyst from a major real estate research center. The explanation hinges on the mix effect: when cheaper stock is sold first, the remaining inventory becomes comparatively more expensive, nudging the average higher even if individual transactions occur at lower levels on occasion.
Looking ahead, the medium-term outlook suggests a potential correction as demand adjusts to higher borrowing costs. While price increases may moderate, the market may not immediately enter a state of oversupply in construction. Caution remains warranted, as developers often diversify offerings to respond to shifting buying power and to maintain activity across cycles.
On the funding side, banks reported a downturn in mortgage lending volume, marking the first decline in a year during November. This tightening of credit conditions is expected to influence housing affordability and could weigh on future price dynamics. A prominent consulting firm emphasized that the cost of purchasing an apartment could rise if credit becomes more expensive or harder to obtain, highlighting the interconnectedness between lending standards and market prices.
Industry observers estimate that developers may respond with price adjustments and targeted incentives. A noted expert from a forecasting group suggested that some transactions could see a modest 2-4% reduction in the headline bill as promotions and discounts are offered to sustain demand. The strategy aims to keep transaction activity robust while the mortgage environment stabilizes, with larger apartments sometimes receiving special offers to attract buyers wary of higher monthly payments.
Meanwhile, forecasts for new housing supply remained elevated for the near future. A record level of construction activity was expected, with the annual completion of significant square meters of new dwelling space. This influx, coupled with higher mortgage costs, has the potential to exert downward pressure on housing prices, as the market absorbs more supply while demand grows more selective due to financing considerations. The interplay between supply expansion and financing constraints remains a central theme for market observers.
Policy discussions have touched on mortgage policy adjustments. There have been mentions of proposals to increase down payment requirements on concessional mortgage programs, a move that could influence affordability and demand. The implications of altering support mechanisms for privileged or subsidized loans have been debated among officials and industry participants, with attention to how such changes would affect home buyers, credit institutions, and the broader housing market. These considerations add another layer to the evolving landscape of real estate in the country.
Overall, the housing market is navigating a period of transition shaped by higher borrowing costs, shifting buyer preferences, and a surge in new supply. While short-term price momentum may temper, the medium term will reveal how demand adapts to tighter credit and the enduring appeal of well-located, attractive properties. Analysts continue to monitor developments closely, weighing the impact of policy changes, lending dynamics, and market sentiment on the trajectory of prices and activity across both primary and secondary sectors.