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7 Aug, 2008 02:47

Regional property market set for brighter future

Property in Russia’s regions could become an even more attractive investment target than the real estate in the capital. The Ministry of Regional Development says home prices in some of Russia’s remote cities will rocket this year.

Moscow homes are among the world's most expensive – at almost 6 thousand dollars per square meter. Even the smallest studio costs no less than 250 thousand dollars.

The Ministry of Regional development says that is an opportunity for those with broader horizons. In Volga region, Siberia and the Far East, prices are only one third of the capital. Deputy Minister, Sergey Kruglik, sees signs of strong growth ahead.

“We expect to see steady growth in these three regions over the next 5 or 6 years – just as happened in central Russia and in Moscow. It's no coincidence that over the past year, 700 foreign construction companies have come here.”

The ministry says a shortage of land in Moscow has caused construction starts to fall 50% in a year  – while, in contrast, the regions are booming.

But analysts say Russians associate living in the capital, with business success. And that mentality may be slow to change. Denis Sokolov from Cushman and Wakefield says the size and cost of Moscow may encourage people to look elsewhere over the longer term.
“An Apartment in Moscow is a ticket to modern business, but what happens if you are not working in Moscow, if your business or occupation doesn’t require you to stay in Moscow – Moscow becomes a very difficult city to live. I do expect that some people will decide to move out of Moscow, the mentality may change soon.

The Russian government has in the past said the country needs 1 trillion dollars of infrastructure spending over the next decade. If that happens, Moscow may lose its grip on the nation's home buyers.