The Russian real estate market (particularly Moscow) represents one of the fastest growing real estate segments in Europe over the past twenty years. Having been severely influenced in the last decade by a mix of economic, political, demographic, and other relevant factors, it has now been recovering and providing opportunities to both domestic and foreign investors who consider adding a direct Russian real estate holding to their investment portfolios. This article presents a broad overview of the history of the real estate market in Russia and looks at the opportunities that could be of interest to prospective buyers.

Firstly, it is important to acknowledge that foreign individuals and companies have similar rights to Russian citizens and companies when it comes to purchasing and owning real estate in Russia. The only restrictions for land acquisition for foreigners are placed on land in frontier areas, agricultural land, and land on which a seaport is located.

The history of the development of the real estate market in Russia can be split into several major stages, specifically:

  1. Inception stage: The inception of the real estate market development in Russia, dating back to the first law of property in the USSR, and the subsequent beginning of privatization in 1992. The market was characterized by inadequate valuation methods, overdemand, and the absence of adequate services supporting the industry.
  2. Transitioning stage: The market developed rapidly from 1993 until the 1998 Russian financial crisis when the Russian government defaulted on its debt and the national currency, the ruble, was devalued. The crisis led to the halt in demand and a temporary freeze of the real estate market, although it withstood the crisis better than other segments.
  1. Maturing stage: Starting from the early 2000s, the market developed rapidly but also matured with new professional service providers, improved legislation and market rules, as well as the rise of consumers’ income and sophistication of their tastes. Moscow and Saint Petersburg, the two largest cities in Russia, became the target for long-term real estate investors.
  1. Decline: Until 2014, the Russian real estate market had been trending upwards, however, the Russian financial crisis (2014 – 2016) seriously affected the market structure. With the weakening currency, sanctions, political risks, and the poor economy, investor sentiment was at an all-time low, and a massive divestment from real assets took place, with demand halted and dropped prices.
  1. Recovery: Following on from the financial crisis, the real estate market has been sluggish for a few years but has since recovered, and now presents major opportunities, especially in the business and luxury segments.

Moscow remains the main destination for investment into real estate in Russia. As Moscow has the largest variety of properties by types and value and leads the whole market in terms of number of transactions, it is sensible to look at the capital of Russia and the opportunities it presents.

Generally speaking, by functionality, the real estate market in Moscow can divided into:

  • Residential real estate
  • Industrial buildings
  • Non-industrial buildings and premises (warehouses, offices, etc.).

Residential real estate represents the largest opportunity set, while the demand for industrial buildings and non-industrial buildings is slowly picking up after 2016.

Residential real estate can further be classified into:

  1. Economy class properties: The commissioning of new apartments in Moscow in the past several years has been picking up, and at the moment the volume of supply is at its historical peak. The trend of such apartment availability is shifting towards the south and south-east of Moscow, with the driver for this course being the development of industrial zones and the launch of the Moscow Central Circle (MCC) – a new metropolitan line connecting non-central city areas with each other.
  2. Business class properties: In the business class segment, competition between developers is only increasing – several residential complexes are being commissioned or are already being sold in the territories of industrial zones, the volume of construction of which is comparable to the volume of all Moscow construction (for example, the ZILA territory assumes more than 3.5 million m2 of housing, which is comparable to the commissioning of housing in old and new Moscow in 2015).

At the same time, buyers are also reducing their budget in this segment with the average transaction price in this segment declining.

Differentiation increases; high-quality and constructed properties will retain their value, while unfinished or inconvenient properties will become cheaper.

  1. Luxury/premium class properties: In this segment, the differentiation of projects is even more pronounced: the price greatly depends on its level and degree of readiness. Studio apartments perform better than market projections, as well as all small-sized offers, the full cost of which is lower than that of similar variants of a larger area (for example, a “two-bedroom” studio versus a conventional “two-bedroom” of a larger area).

The large supply volume of modern housing in current or recently new buildings, as well as prices that have sunk over the crisis years, allow re-orientation from outdated housing to new houses, as well as allowing for the choice of offers closer to the city center. For these reasons, the apartments in the center of Moscow and modern houses in Moscow City perform better than market projections.

A number of opportunities in the Russian real estate market, in particular that of Moscow, exist today and are accessible by both domestic and foreign investors attempting to discover value in the market which has been hit hard by the financial crisis of 2014-2016. Nevertheless, real estate, especially in the luxury segment, can be of great interest to potential buyers. If you would like to know more about the real estate market in Russia or how to structure your future investment in Russian real estate, please contact us at