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The effect of International sanctions imposed on Russia since 2014 on its Real Estate sector

Establish whether imposed sanctions affected the real estate and development in Russia with a focus on international players present on the market.

Draw conclusions based on analysis on past, present performance of key international real estate and development firms at Russian market. Evaluate the prospects for international firms at Russian market for nearest future?

Objectives for the Research

Based on above listed in aims for the research, still thinking on this.

Key Idea for Report:

Main factor that is influencing Russia’s real estate as the result of sanctions is absence of new investments. Most international investors either left the market or suspended their investments into new project.

Lack of investments resulted in dramatic reduction of available credit capital for developers and construction firms.

Despite published official statistical data that is showing the little but still a grows in GDP over last few years, real economy seams to steadily contract as for example:

Most of international design, development and construction firms either left the market or significantly limited their business activity. Mott Macdonald (international building related design company) left the market in 2017 as they could not continue to work with their main local clients as these clients were listed in the sanctions list. ARUP (design) significantly reduced their staff in Moscow office, relocated most of their expats to their European offices due to significant reduction in number and size of new projects etc.

Most of large international construction companies left the market. Local construction companies and local developers are steadily disappearing due to absence of new projects. Moscow housing development market is now dominated by one company (PIK) that is owned (indirectly) by one of the Russian government top officials), Sberbank (the largest state controlled bank) in subsidizing mortgages for all PIK developments at rates that are half the cost of the market rates.

The buying capacity of the population is steadily going down. Despite this fact state owned banks are stimulating relatively cheap mortgages for selected developers like PIK, which could soon become unpayable in large numbers. Looks very similar to the financial bubble that led to serious problems in US in first decade of 2000’s 

 

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