The property market begins recovery

The Russian property sector plummeted from red hot to barely registering a pulse in 2009. Now, however, the residential sector is showing signs of recovery.

So keen was the pre-crisis housing market, potential buyers in Moscow thought themselves lucky just to get the chance to bid on a property. Now, some are even being offered a kilo of gold to move in.

The traction on the market is being driven by purchasers with increased confidence in the recovery of the economy looking to beat the upturn in prices. As activity continues to perk up, the lack of new housing built last year – developers spent 2009 struggling to survive – will add to a supply shortage for some years.

The country’s fledgling mortgage market is showing significant signs of revival. In February, 23pc of purchases were financed by a mortgage, compared with an average of just 5pc or so in 2009. That said, Tigran Hovhannisyan of investment bank UralSib says consumer confidence isn’t steady enough to fuel large growth in 2010.

He points out, however, how the pool of potential buyers in major cities has been swollen by the effects of the crisis on prices. “Now, the cost of buying an apartment is within the capability of the average income. Before, it was at least double the average income.”

Assuming a steady macro picture, when consumer confidence has had longer to recover, Hovhannisyan sees “the potential for a bubble to start developing by the second half of 2011”.

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