Russian Homebuyers Grapple with Soaring Prices and Unaffordable Mortgages

Affordability Crisis Deepens for Russian Homebuyers

Homebuyers across the Russian Federation are encountering significant challenges as property prices continue to escalate, far outpacing income growth. This trend has been exacerbated by soaring mortgage interest rates, pushing homeownership beyond the reach of a substantial portion of the population. Data indicates a dramatic decline in housing affordability, with the average time required to save for a down payment nearly tripling over the past five years.

Property Prices and Mortgage Rates Skyrocket

The Russian real estate market has seen a substantial increase in property values. The average price per square meter in new buildings surged by 122% from April 2020 to September 2024. More recently, new-build prices rose by 6.4% in the first 10 months of 2025, surpassing the inflation rate of 4.8%. The average cost per square meter has roughly doubled over the last five years, with Dom.RF's housing price index showing an 84.4% increase since early 2021.

Concurrently, mortgage rates have seen a sharp ascent. Sberbank, Russia's largest mortgage lender, raised its rates to over 28% in November 2024, with some market rates approaching 30%. In October 2024, Sberbank offered loans at 29.2% per annum for new constructions. The average mortgage rate climbed from approximately 8% in 2023 to 23.03% by the end of 2024, following the Central Bank of Russia's key rate reaching 21%.

Contributing Factors and Economic Impact

Several factors have contributed to this challenging environment. A key driver was the government's widespread 'preferential mortgage' programs, introduced during the COVID-19 pandemic to stimulate the economy. These subsidized loans, initially offered at rates as low as 6% and later 8%, fueled demand and led to a sharp increase in property prices. However, the universal subsidized mortgage program concluded in July 2024, leaving many homebuyers to face significantly higher market rates.

The Central Bank of Russia has aggressively raised its key interest rate to combat inflation, which peaked at over 9.1% in July 2024, further pushing up mortgage costs. The ongoing conflict in Ukraine and associated sanctions have also destabilized the state budget, impacting support for the construction sector and contributing to financial instability.

The affordability crisis is stark: housing affordability fell by 60% by September 2024 compared to March 2020. A worker earning the median wage now requires 6.2 years to save for a 20% down payment on a 65-square-meter new-build apartment, a significant increase from 2.3 years in 2019. Only 8.3% of working Russians are able to save the necessary down payment within two years.

Consequences for the Housing Market

The current conditions have led to a significant slowdown in the housing market. Mortgage issuance for new builds dropped by 57% in September 2024, and overall mortgage volumes plummeted by 40% in 2024, with a further 20% decline projected for 2025. This has created a paradoxical situation where, despite collapsing demand, some developers continue to launch new projects, leading to an oversupply of unsold housing units, reaching 319,000 by July 2024.

The high cost of homeownership has also fueled a boom in the rental market, with rental prices in major cities like Moscow and St. Petersburg increasing by as much as 40% over the year to July 2024. This situation is also impacting developers, with nearly one-third facing potential bankruptcy due to falling sales and high interest rates. The housing affordability crisis is anticipated to compound an economic slowdown in 2025, and some Russian homebuyers are reportedly seeking real estate opportunities abroad, including in Dubai.