The economic status of Russia has slowed down as it faced a recession but the housing sector is going a different way. New housing construction record was set in 2014 which is higher than that of what is recorded in 2007 to 2008.
Housing is performing well because of the modest overall growth in personal incomes, the gradual development of Russia’s mortgage industry, and, the state programs such as the “maternal capital” program wherein cash payments for the birth of a second or third child could be used by the family as down payments on new apartments, Forbes wrote.
In 2015, the inflation-adjusted incomes fell at around 10%, interest rates became higher and unemployment increased as well. With this, people apparently have less money to spend while borrowing money is becoming more expensive. Even wages also decreased which was highest in 2015 since 1999, Bloomberg reported.
Also last year, a new record was set in the housing industry with 3.8 million square meters of new construction which could mean that there are 41 million or 41,000 new apartments per 1,000 square feet being built. This is three times larger than the new apartments that were built in New York.
Because of the inflation and the wage trends, there is a possibility that Russians will not make real estate investments yet. And in order to encourage them to buy properties, developers might cut prices resulting into major losses.
Real estate website Vedemosti noted that "a lot of the new supply coming online is from projects that were started two or even three years ago, and that while developers would like to extend construction timelines or even mothball some of their developments their actual ability to do so is highly constrained." It also added that developers might "press ahead to completion and try to recoup at least some of their initial investment."