Gloomy times for Russian property market

It’s a gloomy outlook for Russia’s property market – a huge shortage of credit has created a massive slump in demand leading to an average of a 60 percent drop in property prices throughout the country.

The slump in the Russian property market can be seen everywhere with shadowy cranes towering over buildings, unmoving, and building sites eerily quiet. Plans for beautiful tower blocks have been frozen or scrapped, with some now earmarked as car parks instead.

Russia’s largest property developer, Mirax, is in trouble and their plight mirrors that of many developers around the country. Mirax has already seen the threat of a court-ordered seizure of assets at Moskva City, one of their leading developments, and the company has announced that they are stopping construction temporarily on all of their projects. This decision is in part due to the lack of credit available, and in part due to the massive slump in the demand for new property developments.

Two of Russia’s largest state-controlled banks have growing property portfolios as they take over properties thanks to unpaid debts.

However perversely enough, the property market dropped so sharply so quickly that it took many by surprise and it is anticipated that 2009 is likely to see a record number of property completions as property was still seen as a good investment during the first few months of the year.

As property investors in other countries look to buy more overseas property, the massive drop in Russian property prices has opened up an interesting situation. Some of those willing to take a gamble are now looking seriously at Russian property. The lack of investors and the desperation of some property developers means that there are some huge Russian property bargains to be had – as long as the investors are happy to place their money in what many believe to be one of the higher-risk property markets.

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