House prices drop in Moscow and St Petersburg

Data from the Federal State Statistic Service show that Russian real estate is doing better on the whole, but the same cannot be said in Moscow or St. Petersburg as home prices drop in the country’s two biggest cities. Economic sluggishness and new rules that require both Russians and expatriates to register where they live are expected to make things even more difficult.

The financial collapse of Cyprus, where wealthy Russians own 40% of bank deposits, is also complicating matters. The Russian government has already said it will not reimburse investors who lost money in the Cypriot collapse, and the fallout may further impact the real estate market. 

Russian house prices are rising - but only just, after inflation has been taken into account, and not in Moscow or St. Petersburg. The price index for all resale apartments in Russia rose by 10.39% during the year to Q1 2013, according to the Federal State Statistics Service (Rosstat).  Adjusted for inflation this represents only a 3.05% real price rise.
In Moscow, Russia’s capital, the price index for resale apartments rose by only 6.17% y-o-y to Q1 2013. When adjusted for inflation, house prices actually fell by 0.89%.

In St. Petersburg, the country’s second largest city, the price index for resale apartments rose 5.31% during the year to Q1 2013.  When adjusted for inflation, house prices fell by 1.68%.

Russia had a massive housing boom from 2000 to 2007, with secondary market prices skyrocketing by 436% while primary market prices rose 362%.  Property prices started to weaken in late-2008, and began falling in the second quarter of 2009.

At RUB 48,795 (US$ 1,485) per sq. m. the average price of new apartments is still 7.6% down in the first quarter on the 2008 peak price, which was RUB 52,799 (US$ 1,607) per sq. m.

According to the Land Code of 2001, private ownership of land properties is allowed for both locals and foreigners. The legislation was extended to Moscow in January 2006.