The Russian housing market is showing signs of overheating, a situation analysts link to widespread use of subsidized mortgage programs. Industry observers point to how government-supported lending has accelerated price growth, especially in the primary market where new flats are being sold rapidly while cheap financing remains available.
Vitaly Kostyukevich, who heads the retail products division at Absolut Bank, notes that one clear indicator of overheating is the faster rise in prices for newly built homes compared with the secondary market. This gap widens as preferential mortgage schemes encourage buyers to opt for new construction, driving demand and pushing up prices in the primary segment.
Tatyana Polidi, Vice President of the Foundation of the Institute of Urban Economics, explains that for an extended period the cost of apartments in new buildings has lagged behind the price of older stock. This was partly because new developments are often located in more distant areas, while established districts benefited from more mature infrastructure and easier access to urban amenities. As the country expands its urban footprint, the gap in pricing dynamics has started to close, spurring renewed interest in fresh flats.
According to Kostyukevich, the substantial difference in interest rates between subsidized and standard mortgage programs, particularly after the central bank’s rate adjustments, has shifted demand toward new buildings. The appeal of lower payments on long mortgage terms has contributed to price acceleration in the primary market, with buyers prioritizing the perceived security and modern features of new developments.
Konstantin Barsukov, a real estate market expert who previously contributed to commentary for a major industry association, has suggested that developers may respond to rising costs by compressing apartment sizes. He argues that smaller layouts are a practical way to maintain project profitability in the face of higher construction expenses, even as demand remains strong for affordable, modern living spaces.
In national policy circles, officials have cautioned against overly optimistic projections. While subsidized lending has stimulated activity, observers remind readers that the market carries risks if costs continue to outpace wage growth and infrastructure investments fail to keep up with demand, potentially cooling demand in the longer term. The current trajectory highlights the delicate balance between affordable financing and sustainable price growth in Russia’s housing sector.