What is happening to the Russian real estate market now?
Buying or selling real estate is a responsible step. Currently, the Russian real estate market is in a zone of “turbulence” with constantly changing external factors, which complicates the decision-making process. Let's figure out what features should be taken into account when buying a property for investment purposes at the moment.
To begin with, it is worth noting that “investments in real estate are still, as before, the safest and most protected type of investment: acquired square meters will not disappear anywhere, and as statistics show, in correctly chosen locations, their value only increases over time,” notes Development Director VelesClub Int. Bazhenova Natalya.
“The Russian real estate market is going through difficult times. The growth of the dollar and euro, an upward correction in the key rate, and changes in the conditions of preferential mortgages cannot but affect the real estate market. But it’s worth remembering how the real estate market behaved after the crisis of 2008 and 2014 - after that there is always a “rebound” and prices continue to rise at pre-crisis levels. It is worth considering that all the factors listed above are temporary and after “cooling” there is always a “thaw”. Experienced investors will now take advantage of this,” says the chief analyst at VelesClub Int. Shamitko Ksenia.
According to the analytical center banki.ru, “The total volume of investments in Russian real estate at the end of 2023 reached 833 billion rubles, which is more than 1.5 times higher than the value of this indicator for 2022 and this value is the maximum in the entire history of information collection (since 2000).” At the same time, in 2023, prices for residential real estate in the “comfort” segment of the primary market in Moscow increased by an average of 8%, and in the secondary market by 7%. Prices in new elite and deluxe class buildings in the capital increased by 13% over the year. It is worth noting that transactions with objects of this class are rarely combined with mortgage programs; accordingly, they are less susceptible to quantitative fluctuations in the current circumstances; as a rule, installments or full payment are used.
Considering the above, the best decision would be to focus on a portfolio diversification strategy: to purchase both comfort and luxury class projects in a successful location with an already established infrastructure. Moreover, the conditions for purchasing apartments on the primary market remain attractive today, and developers of elite class properties, as a rule, offer favorable installment plans with a minimum down payment and the possibility of resale of the property with the transfer of debt to another person before the completion of construction.
So, in which regions of Russia is it better to buy?
As before, the best investment solution from the point of view of speculative investments is real estate built in cities with large populations, the highest wages, and high rates of economic development. For rental purposes, it is worth paying attention to the same cities and also to cities with high tourism potential. Such cities include Moscow, St. Petersburg, Kazan, Nizhny Novgorod and other large cities with a rich history. The average rental yield will be 4-5%.
According to experts, in 2024 investors may be interested in the following million-plus cities:
Ekaterinburg is the fourth city in Russia in terms of population and is also the administrative center of the Ural Federal District. The market for new buildings is actively developing here. Over the past year, real estate prices (both primary and secondary) have increased by 8%.
Nizhny Novgorod is the sixth largest city in Russia, with a population of more than 1.2 million people. This is the largest industrial, scientific, transport city in the country, where real estate prices show constant growth and in 2023 the city entered the TOP 5 cities with a million population in terms of growth in the cost of apartments on the primary market, prices increased by 13%.
Kazan is another major economic and tourist center of Russia, where real estate is constantly becoming more expensive and is excellent for rent, especially during the tourist season. The secondary market of Kazan in 2023 grew by 8%.
Volgograd is a large city, where the average cost per square meter in 2023 increased by 27%.
Chelyabinsk is the largest industrial city in the country, where there is the highest increase in real estate prices among the regions of Russia; prices here have increased by 30% in 2023. At the same time, the city has the most affordable prices for secondary real estate among all million-plus cities in Russia.
Let's draw conclusions...
As you can see, investing in real estate in Russia remains the most reliable tool for preserving and increasing funds. Currently, sales schemes from developers and mortgage programs on the primary market still make it possible to purchase an apartment on favorable terms. But now, more than ever, it is worth paying great attention to the choice of location and the quality of the infrastructure closest to the site: social, trade, transport. In successful locations, you can always profitably resell or rent out your property.
Remember that a well-balanced investment portfolio is formed from a pool of various objects, that is, from different types of real estate; this will certainly protect you during fluctuations and changes in the market. We recommend seeking advice from VelesClub Int. professionals, who can competently formulate your real estate investment portfolio and accompany you throughout the entire investment period.
