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Real Estate in Russia, The modern situation in Russia real-estate market

Housing conditions and real-estate prices. Government plans and programs in real-estate sector.Housing mobility.

Russian women engineers in a front of a building site

Privatization and reforms of 90th.

Russia's transitions from the Soviet-type centralized planned economy to the market economy greatly affected the real-estate market making a key point. Since 1990 massive privatization and selling mainly involved a large proportion of firms and businesses with a number of state-owned industrial assets, whereas privatization of agricultural and urban land has been postponed. Since the state and town councils are the main land and property owners, the owners of privatized buildings only rent the land. During the last decade the government initiated the wave of sell-offs of the state-owned land to the private property. Since then some firms have purchased and now own the land on which they sit, some lease, others occupy the land under the agreement with the state authorities.

While the ownership of urban and agricultural lands is the subject of numerous reforms at the moment, the private real estate in Russia is more or less a decided issue. If a person in Russia says he owns the land or a house or apartments this more likely means he factually has it in his private property.

Housing reforms of 1990 allowed most Russians privatize their apartments and houses in urban and rural areas. A big proportion of country's citizens enjoyed the provision of free or largely subsidised apartments. A considerable number of Russians has pieces of land usually with a small house provided by the enterprise they worked on. Located on the city outskirts it was used as a holiday home, proudly called dacha by Russians. Most dachas have been privatized and Russia is now the nation with the largest number of owners of second homes. The market-oriented economy transformed the Dacha into an asset, which generally reflects the prosperity of its owner and can be freely traded in the real estate market. According to Russian Realty Research one third of Russians (37%) has a dacha and every fifth has an owned piece of land . Around 62% of respondents has none of them.

Over 77% of the country's 142 million citizens now live in apartments though. For the last 30 years Russian citizens have privatized 80% of residential accommodation. Unlike the western standards the property of a residence does not mean the property of the land where it stands.

The question of housing maintenance is sharp though. Local housing authorities either refuse or are unable to maintain the building. This is now the subject of individual attitudes toward routine maintenance of common property. However, in some apartment buildings condominium associations have been formed to advance the common welfare of families in a building or neighborhood.

Most Russians live in aging Soviet-era housing stock, particularly outside the main cities. The process of segregation in the cities is at the beginning and new "elite" blocks of apartments neighbor the shabby districts quite often.

Moreover figures show that despite the mass privatization 2/3 of Russians are not satisfied with their living conditions. Every fourth family complains on bad living conditions. To satisfy the demand in residential space Russia housing resources have to be doubled, the experts say.

National priority project “Affordable and comfortable housing for Russian citizens”, started in 2006. However the growing incomes of Russian citizens since 2006 increased the volume of mortgages and therefore the housing prices. The price is affected by the mortgage interest rates and down payments that are rather high in Russia. The average current mortgage rates in Russia range for 20% in Russian rubles and around 15% in U.S dollars. The down payments make 10 to 25 percent of the total purchase price of the property. The Federal Housing Administration introduces lower mortgage rates and down payments to help middle-to lower-income buyers. The access to them is limited though. Despite the construction boom in Russia in 2006-2008, the housing supply in the market remained considerably lower than the housing demand.

Since the 2008 financial crisis the credit has slowed and Russian real estate development bubble gone bust. The experts say the Russian housing market hasn’t recovered yet despite the predictions. House prices are still declining including both primary and secondary market prices. The volume of construction is low. The current figures show that less than 3% of the required volume of the residential space is constructed in Russia annually. With the decreasing income of Russian citizens at the moment the housing affordability remains low.

Despite the house price falls, per square meter prices in Russia are still one of the highest in the world. Real estate prices vary significantly throughout the country. In 2011 the average price for per square meter was 32,160 thousand rubles (1018 USD) in Saratov, 39604 thousand rubles (1253 USD) for the primary market and 64149 thousand rubles (2031 USD) in the secondary market in Vladivostok; 34 thousand rubles (1076 USD) in Novosibirsk, 44 850 thousand rubles (1420 USD) in St-Petersburg.

Situation in Moscow is not characteristic of all Russia as the Russian capital is the second most expensive locations. The average price per square meter to buy apartment in Moscow city centre is 10,505.55 $. The average price per square meter to buy apartment outside Moscow city centre is 4,542.89 $. The rent per month makes 1,566.24 $ for apartment (1 bedroom) in city centre; 886.88 $ for apartment (1 bedroom) outside the centre.

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