Archived Articles

Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.

He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.

In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.

Global Real Estate Project
News Index

Directories
  Int'l Realty
  US Realty

The Russian real estate market goes up, as usual, considering the major trends since after the financial crisis of 1998 and the beginning of the current oil boom one year later. Since early 2007, the average residential prices have gone up by approximately 10 percent. The rising international oil prices have been the major factor behind this market trend, but not the only factor. Major political events in the country have forced the government to pay special attention to consumer price index on some sensitive goods and services, thus unintentionally pushing up the prices on other goods and services, among those the luxury real estate being on the top of the list. Such political events will miss during the years to come, but the unpredictable oil market may lead to ever increasing residential market levels.

No doubt, the rising international oil prices continue to be the major factor behind the rising residential real estate prices in Russia, especially in the top segment and in the most expensive city, the capital Moscow. In the past year only, the average oil prices have gone up by a third, reaching almost $100 a barrel. Exporting oil (and other energy) represents the most significant source of foreign currency for Russia. For the years to come it will remain so, despite the attempts to produce some diversifications. For reasons which explanation isn't part of this article, in Russia it's much easier to export underground wealth than creating new one. With very small exception being the early years of the Cold War when the Soviet Union exported machinery to its East European satellites, Russia since the tsarist time hasn't been able to supply the world market with anything else than simple resources, agricultural (before 1914) and mineral (ever since 1970s).

The effect of the oil prices on the Russian real estate market can be both direct and indirect, the latter being reinforced by other independent factors, such as the intended government actions. The last months were and those to come would be particularly dense in politically important events, both parliament and incoming president election. The populist kind of oligarchy that rules and will rule in Kremlin is particularly sensitive about its popular image. Among the issues that make much concern recently are still the high rates of inflation, double-digit in 2007, quite probably no less than that in 2008. The problem with the high oil prices is that they quite literally pour oil on the fire, bringing more and more money to a narrow social group of recipients that pour them later over the other social groups. To prevent general, and socially unacceptable, inflation the Russian government tries desperately to defend the purchasing power of those on the bottom; and, at the end, the inflation enters quietly through several 'backdoors'.

After the dust of the presidential election settles down, such political events will miss during the years to come, but the unpredictable oil market may lead to ever increasing market levels. One way of preventing another cycle of inflation will be to buy more foreign currency reserves, but with stronger than ever ruble the Russian government is just stocking a pile of devaluating papers. The oil market can go down, and surprisingly, this is what Moscow is hoping for: less exports, less money pressure on the domestic market, and therefore less inflation. Many domestic industries will be actually very glad to see this, because the foreign competition will be eliminated like in 1998. Unless this sudden sea change occurs on the world oil market, we may expect another upbeat year on the residential market in Russia.

P.S. 2 March 2008. As predicted, Dmitri Medvedev was elected as Vladimir Putin's successor; he won approximately 2/3 of the votes on the first round of presidential election, facing little opposition.

--------------------

See also the directory of companies providing real estate services in, and general real estate information of Russia, and the capital city of Moscow.