House prices in Russia

[dufflebag 0]

I was wit Elena in St Petersburg and we were discussing the affordability of homes in Russia. She is presently renting, but she told me it is almost impossible to purchase a flat with present Russian wages.

Has anyone helped their wives or fiancee to purchase a flat for their parents or have purchased for themselves? What are the prices like in another city.

Alfa Bank Sees Major Real Estate Drop

30 September 2008

Inflated values, the worldwide financial crisis and softening demand will cause real estate to fall to "West European levels," said Tatyana Orlova, the chief economist at Alfa Bank, in a report released Friday.

Russian real estate is extremely expensive by world standards, with the average price for 100 square meters of luxury real estate equal to 156 times per capita GDP, while West European real estate sells at 30 times per capita GDP, the report said.

"Considering that a sharp decline in worldwide real estate prices recently occurred, we are expecting a major contraction in demand and a drop in prices for the Russian real estate market," the report said.

The report also raises inflation forecasts for 2008 from 13 to 15 percent and significantly raises inflation targets for 2009. The latest government revision puts inflation at 12 percent for 2008.

[eekee 182]

Higher in Moscow, cheaper in other cities, and once your wife is living in the US you can rent it out and get easy money.

[russ 1]

I was wit Elena in St Petersburg and we were discussing the affordability of homes in Russia. She is presently renting, but she told me it is almost impossible to purchase a flat with present Russian wages.

From people I know, prices in Moscow or St Petersburg are higher than what you pay in San Francisco, Boston, or NYC. You get a bit more for your money in the US.

Over the next 5 years, prices will certainly drop in Russia. The fundamentals of the economy do not support such prices.

[akdiver 3]

Over the next 5 years, prices will certainly drop in Russia. The fundamentals of the economy do not support such prices.

That sounds familiar.

[Randy CA 0]

I just got back from SPb over the weekend. I have no understanding of Russian real estate prices. They just don't make any sense to me. Let me illustrate:

I bought an apartment of about 500 square feet, five or six years ago for about $35 K. The place is unrenovated and is basically a dump. However it has an amazing location being on the grounds of the Admiralty, next to the Hermitage, but still, it is a dump. And small. I am told by everyone that it is worth about $300k. Jeesh, that is what my nice 3,000 square foot home in California is worth. How the heck could that be.

An American friend of mine bought a top floor apartment on Sennaya Square about 3 years ago for $85k. It is also a real dump, cooks in the summer and you have to go up five stories to get to it - no elevator. Last night he told me he had turned down an offer for $400k for it. He said it like "well, of course I turned it down". Huh? How the heck could that be.

I have a good Russian friend who is building a few houses on the North side of the the Gulf of Finland about an hour out of town is a small area filled with simple little houses, dirt roads and no order. His friend showed me the house he built this summer. It reminded me of a simple mountain cabin of the type they built in the US in the 1950's -- real simple and no finish to speak of. I wonder if they even had plans when the built it. It cost him something like $25k to build the house. I don't know what he paid for the land. But anyway, he just sold it for $300k. They were saying he made something like $150 to $200k on it. How the heck could that be.

So, my friend is building the nicest house in the area, and really it is not bad but there are some crazy things about it. Like a garage who's door is smaller than the avage car. He does not have it finished inside yet and has something like $50k in it at this point. He was saying it is now worth about $700k. He has actually had offers on it. Wow. Crazy. I was a little skeptical until he took me around some of the developments in the area and showed me the listings in real estate magazines.

I just don't get it. They make so much less then us but the real estate is so expensive. In fact everything there is expensive; coffee for $5 - $6 per cup and the place is full of young people -- a nice photo book of old Russian photos for $200. I just don't get it.

I went there this time thinking I would sell my apartment, but just then the world economy had a heart attack so I thought I should wait till next year, and besides I can keep telling people "I have a little place next door to the Hermitage."

[Blues Fairy 0]

I would not invest in real estate in Russia in the current situation. It made sense 4-5 years ago, but not any more.

[Neonred 3,609]

We bought an apartment in Rostov about 4 years ago. It was a new business class building under construction at the time. Cost was about $35K. My wife's friends were making a lot of money flipping apartments, even unfinished units and we were considering this also. We ended up finishing the apartment and it is gorgeous. Similar apartments are selling now for more than $200K. We would probably sell it now but my step-daughter is living in it until her apartment is remodeled (which no one is in any hurry to complete). It's quite clear that the same thing that happened to real estate in the US will happen in Russia in the future. If we were to sell I haven't yet figured how we would get that money out of Russia.

The other good investment was a high interest bank account in rubles opened before the dollar took its big drop.

Edited October 1, 2008 by Neonred

[eekee 182]

I just don't get it. They make so much less then us but the real estate is so expensive. In fact everything there is expensive; coffee for $5 - $6 per cup and the place is full of young people -- a nice photo book of old Russian photos for $200. I just don't get it.

6 dollar cups of coffee and 200 dollar books of old photos exist solely for those who want to pay those prices. Seek and ye shall find. I spend about 6 dollars a day on food and drink, including alcohol, and eat much better than I did in the US. And you can find that same book of photos for 4 dollars if you're not shopping at a souvenir market or something.

I think for the long-term, real estate is a good investment. As i said, you can always rent it out and you'll make your money back quickly that way. Rent it out to tourists short-term and it's even better.

[Ilya R. 0]

I was wit Elena in St Petersburg and we were discussing the affordability of homes in Russia. She is presently renting, but she told me it is almost impossible to purchase a flat with present Russian wages.

From people I know, prices in Moscow or St Petersburg are higher than what you pay in San Francisco, Boston, or NYC. You get a bit more for your money in the US.

Over the next 5 years, prices will certainly drop in Russia. The fundamentals of the economy do not support such prices.

Russian economy doesnt seem to follow any fundamentals.

[Bobalouie 0]

Same story here. My wife bought her flat in Sochi about 2 years ago and renovated it. Before she came over to the US, it was worth about $190K, but there is no telling with the real estate boom that has happened due to the 2014 Olympics since she left. Coincedentally, that is the same price as our new 2100 sq ft home. Her flat would fit easily, balcony and all into our living room.

She got the money from the sale of her Grandfather's 2 bedroom flat after he died. He got it when all flats were privatized back in the early '90s I think. She got half the money and her sister got half, and they both bought flats and now rent them out. Her father, uncles, grandparents all built a house a little ways out of town on family land 30 years ago which is where her family lives now.

[akdiver 3]

Yeah, I kinda wish we had kept my wife's apartment. It was worth about $50K while still under construction - unfinished. If we still had it today, it would be more like $150-$200K.

[Blues Fairy 0]

I just don't get it. They make so much less then us but the real estate is so expensive. In fact everything there is expensive; coffee for $5 - $6 per cup and the place is full of young people -- a nice photo book of old Russian photos for $200. I just don't get it.

6 dollar cups of coffee and 200 dollar books of old photos exist solely for those who want to pay those prices.

Some people make quite enough for an expensive lifestyle but not quite enough for even a small apartment. Thus, facing the impossibility of making safe long-term investments, they spend money on short-term luxury and travel. Kinda like investment, too, if you treat life as a collection of consumer experiences.

[slim 1,530]

I was wit Elena in St Petersburg and we were discussing the affordability of homes in Russia. She is presently renting, but she told me it is almost impossible to purchase a flat with present Russian wages.

I hope this was one of those "theoretical" talks about general real estate and home ownership and not an attempt to engage you in "investing" in an apartment or home BEFORE you're married.

Be advised, this is a RED FLAG. Consider it how you will, but just remember, if she asks for money before she's here.... proceed with EXTREME caution.

Thus, facing the impossibility of making safe long-term investments, they spend money on short-term luxury and travel. Kinda like investment, too, if you treat life as a collection of consumer experiences.

Although my life isn't a collection of consumer experiences, I've definitely been one to spend on short-term luxury and travel instead of long-term investing. That'll probably catch up to me someday and it's weird because those with money tell me "well, at least you've been places and done things" and those without say "you could've done so much with that money."

Glass half empty or half full, I guess.

[A_I_S 0]

I just got back from SPb over the weekend. I have no understanding of Russian real estate prices. They just don't make any sense to me. Let me illustrate:

I bought an apartment of about 500 square feet, five or six years ago for about $35 K. The place is unrenovated and is basically a dump. However it has an amazing location being on the grounds of the Admiralty, next to the Hermitage, but still, it is a dump. And small. I am told by everyone that it is worth about $300k. Jeesh, that is what my nice 3,000 square foot home in California is worth. How the heck could that be.

An American friend of mine bought a top floor apartment on Sennaya Square about 3 years ago for $85k. It is also a real dump, cooks in the summer and you have to go up five stories to get to it - no elevator. Last night he told me he had turned down an offer for $400k for it. He said it like "well, of course I turned it down". Huh? How the heck could that be.

I have a good Russian friend who is building a few houses on the North side of the the Gulf of Finland about an hour out of town is a small area filled with simple little houses, dirt roads and no order. His friend showed me the house he built this summer. It reminded me of a simple mountain cabin of the type they built in the US in the 1950's -- real simple and no finish to speak of. I wonder if they even had plans when the built it. It cost him something like $25k to build the house. I don't know what he paid for the land. But anyway, he just sold it for $300k. They were saying he made something like $150 to $200k on it. How the heck could that be.

So, my friend is building the nicest house in the area, and really it is not bad but there are some crazy things about it. Like a garage who's door is smaller than the avage car. He does not have it finished inside yet and has something like $50k in it at this point. He was saying it is now worth about $700k. He has actually had offers on it. Wow. Crazy. I was a little skeptical until he took me around some of the developments in the area and showed me the listings in real estate magazines.

I just don't get it. They make so much less then us but the real estate is so expensive. In fact everything there is expensive; coffee for $5 - $6 per cup and the place is full of young people -- a nice photo book of old Russian photos for $200. I just don't get it.

I went there this time thinking I would sell my apartment, but just then the world economy had a heart attack so I thought I should wait till next year, and besides I can keep telling people "I have a little place next door to the Hermitage."

Randy, well...it's like this.

1. Prices are high because SPb/Moscow are prime tourist destinations. Rich foreigners with money who are willing to shell out that kind of cash for a book of old Russian photos.

2. I have no clue where you could find coffee for $5. We stop to eat on Nevsky quite often, it's nowhere near 100 rubles. In fact, you can have quite a very nice dining experience in a restaraunt on Nevsky for $200, that's with a couple of bottles of wine and all. Considering how much we spend on dinners on vacations (without wine), that's quite a bargain.

3. Russian economy in fact consists of 2 economies. There is the real taxed economy with real written down wages. Then there is the shadow economy, black market, whatever you want to call it. In Russia, we call it "left money", levye. Which is magnitudes higher than your real economy. I'll give you an example. My grandfather works as a night watch (no, not that kind of night watch) foreman at a garage complex. He has a set salary. He's also a master welder. He's known by all the car owners (he's the guy who takes their garage pass and keeps their car safe at night), so every time they have a need to build something, weld something, etc, they come to him. He does the job, he gets paid. 2 years ago in the summer I was with him when a guy came up needing to build a set of overhead storage (andresoli), he paid 5000 rubles ($250). That, right there, is the monthly pension that people quote all the time as the official median income in Russia. Also, every single car owner that comes in after hours is essentially expected to "bribe" the crew to let him in. Hey...the garage is closed (says right there, hours of operation), but for 50-100 rubles it could be open.

4. Flats near Admiralty (yeah, it's all dug up, undergoing renovations) or near Sennaya...

have you been near Sennaya? Did you notice these two huge shopping malls they have 2 minutes walking distance from the subway? This is prime location because it's just that...location. It's in the center of the city. Flats on the first floor are all commercialized because this is where people go to shop.

5. Dachas on Finsky Zaliv. Yes, they are far away (hour is not that far actually), no roads, nothing, but it will come. The good thing is the location...you're on the coast, in the middle of a forest. To Russians that's actually good location. Seriously, what's next...wondering why apartments on Primorskaya are so expensive, ones that overlook the Finsky Zaliv and Vasilyevsky?

6. Garage is #2 item that everyone buys. #1 is a car. You gotta keep the car somewhere. Garage that's within walking distance to your apartment is worth it's weight in gold. The streets are already full, and it gets pretty cold in SPb...

The right time to buy into Moscow/SPb was 5 years ago. At this time it's too late.

My wife lives in Kursk and apartments there (50 m2 ones) go for around $100k.

[slim 1,530]

If anyone is going through the process now and their S/O owns a flat, house, etc., by all means, KEEP IT!!!

Even if it means having mama or someone watch over it, rent it out, etc., as long as you actually own it, it will be like money in the bank.