The luxury real estate market in Moscow, Russia, is experiencing an unexpected boom. This is because wealthy Russians, facing difficulties in managing funds abroad due to international sanctions as the war with Ukraine prolongs, are taking refuge in domestic real estate.
On the 3rd (local time), Bloomberg reported that Moscow's real estate is enjoying a boom, unlike major global cities such as London and Hong Kong, which are experiencing a slowdown in their real estate markets. According to the real estate consulting firm NF Group (formerly Knight Frank Russia), the number of luxury apartment transactions in Moscow, priced above 1.95 million rubles (28.22 million won) per square meter, increased by nearly 40% last year, and prices have risen by 21%, reaching levels comparable to those in Paris and London.
Ekaterina Lemyacheva, founder of Kalinka Ecosystem, noted, 'As regulations on individuals with Russian nationality are tightening globally, everyone is realizing that the safest place to store assets is their own country.' As international financial sanctions have intensified, wealthy Russians find it challenging to invest in foreign assets, resulting in a flow of funds into the Moscow real estate market.
The sharp rise in inflation (persistent price increases) following the Ukraine war is also a contributing factor to the real estate investment frenzy. After the war, Russia's inflation rate skyrocketed, and the Central Bank raised its benchmark interest rate to record levels. However, the value of the ruble dropped by about 25% last year, increasing its volatility, and as a result, wealthy Russians are using real estate as a hedge against inflation. Andrey Solovyev, a partner at NF Group, said, 'Wealthy Russians are implementing a strategy of diversifying their assets,' adding, 'They especially tend to invest in safe real estate rather than the volatile ruble.'
As demand for luxury real estate increases, various high-end apartment and villa development projects are being promoted throughout Moscow. A notable example is the 'Levenson Project' in the center of Moscow. This project involves the renovation of an Art Nouveau-style mansion designed by architect Fyodor Shekhtel in the early 20th century, transforming it into a top-tier residential complex. The most expensive real estate transaction here last year amounted to approximately 3.81 billion rubles (about 57.4 billion won).
While the real estate market in Moscow is thriving, global cities traditionally favored by Russian elites are showing a sluggish performance. The luxury real estate market in London, which once earned the nickname 'Londongrad' due to the influx of Russian oligarchs, struggled last year and is expected to decline further this year. Even in Dubai, once a preferred area for wealthy Russians, their presence is diminishing. Bloomberg explained that Russian nationals, who were the top real estate buyers in Dubai in 2022, have dropped to ninth place last year.