Real estate prices rise as supply shortage looms

Russian real estate prices are on the rebound, with the construction halt at the height of the downturn likely to push apartment prices higher as demand grows.

It seems the slowdown in Russia’s real estate market may finally be over. In the first half of this year alone, prices grew by 15 to 20% with an increasing number of transactions, after they virtually ceased during mid 2009.

“Most of the developers declare that their turnover is about 2-3 times higher than it was in 2009. So we could say that, on the basis of that, the demand is growing, and most of the developers could declare today that the prices are growing.”

The rise is seen in every single sector- from economy apartments to luxury homes.

In the part of Moscow where the city’s most expensive apartments are located, the starting price of one square meter tops $30 thousand. And prices are expected to rise even higher over the next year.

The economic downturn hit real estate by forcing developers to halt many projects and shelve more, at the same time demand has continued to grow, and the full impact of the downturn will only be felt when the projects aren’t there for tomorrow’s buyers.

Irina Kirsanova, Marketing director of Peresvet Invest says supply will not keep up with demand and that will push prices even higher.

“I believe the economic situation has stabilized. And it's again become very profitable to invest in real estate. I’m sure we will see further growth in demand as well as in property prices.”

The Russian development market feeling the after effects of the global financial, with this week’s purchase by VTB of a stake in builder DonStroy the latest of a series of bailouts for builders. Analysts say only an increase in the number of well-financed builders, committed to producing quality real estate, can keep prices stable.