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Can somebody who lives in Russia or one of the other former Soviet Republics please explain to me why prices for renting apartments are so high? I've looked at the prices for Moskva, Kiev, Minsk, Sochi and Saint Petersburg and even renting a bad apartment costs a lot of money (2000$ in Moskva for example). Why is that?
Insufficient housing. During soviet times there was no profit motive to construct housing as the government built everything and there was no for-profit private construction industry. No profit=no interest=no construction.
Investment. People in those cities/countries have no real way to invest their money for a return so they tend to invest in the only thing available to them--housing. Then they hang on to it for dear life squeezing every possible kopeck out of the investment in an area of chronic housing shortages.
Current housing construction in former soviet union is almost all high end. Luxury highrises are built with foreign investment and targeted at the rich, providing the highest profit margins. There is little new construction which would be affordable to most working citizens. This keeps the prices of even crappy apartments inflated as no new housing is being constructed for average wage citizens.
Mortgages/banking/loans. The western practice of borrowing money for a period of time to finance a home is fledgling in the former soviet union, and unusual among the populace. Western style banking and finance are in their infancy there. In Russia mortgages may have a five year pay back limit with interest rates of 15%. Taking out a mortgage is an uncommon practice.
People are not mobile. The average Russian moves 1.5 times in his lifetime while the average American moves 13 times. If nobody ever moves, and no affordable housing is being built, there are very very few vacancies. Fewer vacancies create higher prices.
Insufficient housing. During soviet times there was no profit motive to construct housing as the government built everything and there was no for-profit private construction industry. No profit=no interest=no construction.
Investment. People in those cities/countries have no real way to invest their money for a return so they tend to invest in the only thing available to them--housing. Then they hang on to it for dear life squeezing every possible kopeck out of the investment in an area of chronic housing shortages.
Current housing construction in former soviet union is almost all high end. Luxury highrises are built with foreign investment and targeted at the rich, providing the highest profit margins. There is little new construction which would be affordable to most working citizens. This keeps the prices of even crappy apartments inflated as no new housing is being constructed for average wage citizens.
Mortgages/banking/loans. The western practice of borrowing money for a period of time to finance a home is fledgling in the former soviet union, and unusual among the populace. Western style banking and finance are in their infancy there. In Russia mortgages may have a five year pay back limit with interest rates of 15%. Taking out a mortgage is an uncommon practice.
People are not mobile. The average Russian moves 1.5 times in his lifetime while the average American moves 13 times. If nobody ever moves, and no affordable housing is being built, there are very very few vacancies. Fewer vacancies create higher prices.
Excellent overview. I would add one additional factor based on personal experience with several landlords in Moscow. Not all, but many, many Russians can be extremely short-sighted and downright stubborn about things financial. This includes renting out property. If a realtor, neighbor or friend tells an apartment owner that he or she should rent at $x per month, said owner will keep asking $x even if the market is clearly $y. This doesn't necessarily translate into high levels of vacancies - I agree that vacancies are quite low - but it does translate into high rental listings and probably more vacancies than might otherwise occur.
Also, the source of pricing information matters greatly. Anything in English is obviously going to go for more, both due to the fact that those properties are generally better but also due to an "expat pricing" system that still exists. Other types of listing sources aimed at more middle-class Russians (yes, this class exists in the cities at least) have more reasonable offerings. But you need to speak Russian or have a good Russian friend to take advantage of those.
If you can read Russian, try looking on a Russian-language internet site. You're finding the expat- quality sites. You can find flats for less in all locations if you go local.... and get local. Cheapest flats are not likely advertised on the internet (in fact, if it's on the internet, it's the exception... and priced as such)>
I have only begun learning Russian, but I did the same thing for Serbia (search in the local language instead of English) and the prices were cut in half or more!
Can somebody who lives in Russia or one of the other former Soviet Republics please explain to me why prices for renting apartments are so high? I've looked at the prices for Moskva, Kiev, Minsk, Sochi and Saint Petersburg and even renting a bad apartment costs a lot of money (2000$ in Moskva for example). Why is that?
In firstly -many people left small sities and has gone to Moscow,SPb e.t.c.
Secondly - big part of building business in hands of mean friends of officials.
They don't want build much and make the low costs. Why?
Elena Baturina the Third Richest Women of The World.
During the last year she had earned about $1 000 000 000 (billion, no mistake).
She is a chief a biggest company "Inteco".
Why she so rich? She is a smart? She is a good manager?
No! She is simple wife of Luzhkov, mayor of Moscow.
No comments!
Approximatelly 20% of new houses and flats still empty.
More people + less flats = high costs.
I have only begun learning Russian, but I did the same thing for Serbia (search in the local language instead of English) and the prices were cut in half or more!
(Sorry for the gibberish looking link but it will work. My computer is not set for Cyrillic.)
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