skyrocketing disparity between primary and secondary market prices hits 80% mark
In Russia, the price difference between new and secondary housing markets has reached an alarming 40%, according to recent data. This significant gap, which has grown from a mere 10% over the past three years, is causing concern among economists and housing market analysts.
The primary driver of this housing market trend is the surge in new property construction, stimulated by family mortgages and changing trade dynamics. This oversupply has led to a 26% drop in primary market housing purchases alongside a 12% increase in supply nationwide, particularly in regional markets where supply has jumped by over 40%, but demand has dropped by 20-50% in 2025.
High mortgage rates exceeding 25% after the end of subsidized mortgage programs have further dampened demand for primary housing. This financial burden is causing increased financial stress for borrowers, who face a risk of default if property values weaken relative to loan balances.
The consequences of this gap are far-reaching. Even as prices in the primary market face downward pressure due to oversupply, overall housing prices in major cities like Moscow have continued to rise. This restricts affordable options primarily to smaller cities where supply surges but demand falters. Meanwhile, rental markets in key cities like St. Petersburg show reduced offer numbers with rising rental prices, exacerbating housing affordability challenges.
In contrast, there is growing interest in suburban and individual housing construction, which increased 7.5% in 2022. Banks have adjusted to this trend by offering specialized credit and mortgage products for suburban housing, possibly redirecting demand away from typical primary apartment developments.
The Central Bank has identified the widening gap between new and secondary housing prices as a risk for Russians. Ekaterina Shchurikhina, the Director of Bank Ratings at "Expert RA", stated that these subsidies artificially stimulated demand, contributing to the current housing market imbalance.
In Central Russia, the cost per square meter in new buildings exceeded 294,000 rubles, while on the secondary market, the average price per square meter was 128,000 rubles. On the North-West of Russia, the difference between new and secondary markets was 57%. However, the smallest gap was in the North Caucasus, where the difference was only 12%.
This complex market presents challenges for average Russians, particularly in large urban centres where prices remain resilient despite oversupply elsewhere. Affordable housing options are becoming increasingly scarce, and the rental market is showing signs of strain, with reduced offer numbers and rising prices. As the housing market continues to evolve, it is crucial for policymakers to address these challenges and find solutions that promote affordability and stability for all Russians.
[1] Source: Central Bank of the Russian Federation [2] Source: Bank of Russia [3] Source: Rosstat (Russian Federal State Statistics Service) [4] Source: US-based Mortgage Bankers Association
Finance analysts predict that the increasing trend in investing in real estate outside major cities could be a potential solution to the housing affordability issues faced by Russians. This approach is driven by the lower price differences between new and secondary housing markets in regions compared to major cities.
Despite the drop in demand for primary housing due to high mortgage rates, there is a growing interest in financing options for suburban and individual housing construction, which could help alleviate some of the pressure on the overall housing market.
