Rising Home Prices in Russias Real Estate Market Heighten Bubble Concerns, Central Bank Reveals

On Wednesday, the Central Bank of Russia issued a warning regarding the increased risks of a real estate bubble, indicating that home prices have been climbing in early 2025.

To assess potential overheating in the market, policymakers monitor several key metrics, including mortgage lending, rental rates, household incomes, and construction activities. The Central Bank noted in its quarterly report that all these indicators were trending upward until the second half of 2024, thereby heightening the risk of a bubble in the primary real estate sector.

“With the conclusion of the large-scale subsidized mortgage initiative and prevailing high mortgage interest rates, the pace of mortgage lending has decelerated, which has contributed to a reduction in bubble risk for the fourth quarter of 2024,” the regulator added.

Nonetheless, the bank referenced data from the UBS Global Real Estate Bubble Index, revealing that as of April, Russia’s primary real estate market had reached a «high risk» status, with the index rising to 1.6, the highest point since at least 2016.

While the Central Bank’s estimates reflect the overall market landscape in Russia, UBS ranked housing prices in major cities like Miami and Tokyo in 2024 to be at a similar bubble risk level to that of Russia’s primary real estate sector.

The primary real estate market encompasses the sale of newly constructed properties directly from developers to buyers. In contrast, the Central Bank observed that Russia’s secondary housing market remains stable without signs of overheating, due to elevated and non-subsidized mortgage rates.

As reported by the business newspaper Vedomosti, the average mortgage loan in April reached a record 4.4 million rubles (approximately $54,900), marking a 10% increase since the year’s outset. Additionally, the average loan duration also reached an unprecedented average of 310.7 months, or nearly 26 years.

In the current market environment, a borrower obtaining a 4.4 million ruble loan with a 20% down payment at an annual interest rate of 30%—a rate currently provided by numerous leading banks—would end up paying a total of 14.6 million rubles throughout the duration of the loan, as highlighted by Vedomosti.