Despite three years of war in Ukraine and sweeping sanctions, Russia's luxury property market is soaring to record heights. High-end developments are popping up across Moscow as international restrictions keep Russian wealth locked inside the country.

Moscow

Moscow's luxury property market is experiencing significant growth, driven by international sanctions that have made overseas investment difficult for wealthy Russians. Restrictions on travel and financial transactions, along with an unstable ruble, have led affluent buyers to focus on premium real estate within Russia. Sales volumes in the luxury segment have risen sharply, with a 40% increase reported in the past year. 

However, the broader property market faces challenges. High interest rates and increased construction costs, partly due to sanctions affecting building material imports, have made mortgages less affordable and slowed development for ordinary Russians. As a result, while the top end of the market thrives, most people in Moscow are finding it harder to improve their housing conditions.

Sanctions fuelling record growth in Moscow's luxury property market

luxury property market is booming in Russia's capital. Before the war, rich Russians invested in London, the French Riviera or Miami. Now the complexity of investing overseas due to sanctions, as well as bans on entering Europe or the US for many, and the unstable ruble exchange rate, means people are buying at home. The premium class real estate market is doing very well here. Prices show steady growth every year. There's a lot of liquidity in the country. In 2024, the sales volume increased by about 40% compared to the previous year, and it continues to grow rapidly this year. These are projects aimed at the most demanding tastes, drawing on Russia's rich cultural history. This estate is called Residence 1864, because in 1864 the famous Kokorev Inn opened on this site. It was a place of attraction for the intelligentsia of that time. Repin, Tchaikovsky and Tolstoy liked staying here. The most beautiful and expensive projects are located within walking distance of the Kremlin or on the banks of the Moskva River. This is one of the best addresses in Moscow, close to the Kremlin and with fantastic views across the Russian capital. The sellers say it competes with similar properties anywhere in the world in terms of fit-out and features, but it doesn't come cheap. But for all those who aren't part of the 1% in Russia, there are other types of property. Yet nowadays there is little incentive for real development. The previous growth model which existed in Russia for the last two and a half years implied state subsidies and cheaper loans. But due to a high key rate of Russia's central bank, mortgage loans have become very expensive. Plus, less people are now willing to work on construction sites. All that has led to an increase in housing prices for ordinary Russians. Most have to moderate their appetites and not wait for their housing conditions to improve. Sanctions have forced developers to use complicated import methods for building materials, resulting in higher costs that only the more affluent can afford. So for now, the growth in Moscow's real estate market is predominantly at the top end, while the vast majority of the population has to wait for better times. Yulia Shapovalova, Al Jazeera, Moscow.

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