House prices up 11.69% during the year to Q2 2022

Russia recorded a surprise surge in houses prices, despite the ongoing Russia-Ukraine war. Nationwide real house prices soared by 11.69% in Q2 2022 from a year earlier, the second highest annual growth recorded since Q4 2007. It is now its sixteenth consecutive quarter of y-o-y price increases. Though during the latest quarter, nationwide house prices fell by 3.8%. 

In fact in nominal terms, house prices skyrocketed by 29.45% during the year to Q2 2022, as inflation surge amidst a volatile rouble and the unprecedented sanctions imposed by Western countries against Russia due to its invasion of Ukraine.

Moscow’s real house prices were up by 7.17% y-o-y in Q2 2022, a slowdown from the previous year’s 21.48% growth. In St. Petersburg, in contrast, house prices fell by 8.85% in Q2 2022 from a year ago, following an annual growth of 19.56% in Q2 2021.

Nationwide house prices plunged 29% (inflation-adjusted) from 2011 to 2018. The housing market started to recover in 2019 and continued to strengthen in

 

Demand remains strong, but outlook is gloomy

Real estate investment in Russia totalled RUB 395 billion (US$6.57 billion) in 2021, up by 29% from a year earlier, according to the CBRE. In August 2022, total housing loans outstanding rose strongly by 17.7% y-o-y to RUB 12.69 trillion (US$ 211 billion), following growths of 25.2% in 2021, 21% in 2020 and 17% in 2019, according to figures from the Central Bank of the Russian Federation. 

However, the outlook is gloomy as hundreds of thousands of Russians have left the country in recent months and have been purchasing properties in other countries instead, such as Dubai.

Rents, rental yields: yields are poor both in Moscow and St Petersburg, at around 3% to 4%

Moscow apartment costs are high, at around €11,866 per sq. m.

Russia: typical city centre apartment buying price, monthly rent (120 sq. m)
	Buying price	Rate per month	Yield
Moscow	$1,423,920	$3,820	3.22%
St. Petersburg	$  586,320	$2,129	4.36%

Recent news. The Russian economy shrank by 4% in Q2 2022 from a year earlier, in sharp contrast to y-o-y expansions of 3.5% in Q1 2022 and 5% in Q4 2021, amidst the fallout from the Russia-Ukraine war and associated international sanctions, according to the Federal State Statistics Service. 

The economy is projected to contract by up to 12% in 2022, sharply exceeding the Economic Ministry’s expectations of an 8% decline and on course to the steepest decline since 1994, based on projections released by the Ministry of Finance.

In July 2022, the Central Bank of Russia (CBR) decided to cut its key interest rate by 150 basis points to 8%, following a cumulative 1,200 basis points cut since February 2022, to rein in inflationary pressures and boost economic activity. Inflation increased dramatically after Russia launched an all-out invasion of Ukraine in February 24.