Russias Housing Crisis: Anticipating a Shortfall Amidst Construction Decline

According to a report by DOM.RF, Russia may encounter a considerable housing deficit by 2027 as a drastic decline in new residential construction could result in a shortfall of up to 30 million square meters.

In the first quarter of 2025, new housing projects totaled only 8.1 million square meters, reflecting a 24% decrease from the same timeframe last year. This downturn is anticipated to persist through the end of 2025 if the Central Bank maintains its high key interest rate and property sales remain sluggish.

Even if the Central Bank lowers its key interest rate to between 7.5% and 8.5% from the current level of 21% by 2027, the housing construction sector is unlikely to recover swiftly enough to cater to demand, the report warns.

The increasing costs of financing and the recent conclusion of a subsidized mortgage program— which provided rates as low as 8% but ended in July 2024—have pushed developers to focus on smaller projects with higher profit margins, according to Anna Akinshina, CEO of Samolyot Group, speaking to the Vedomosti business newspaper.

Simultaneously, many Russians are delaying their home purchases due to the high cost of borrowing, stated Larisa Maslyukova, head of sales at Granel Group, in remarks to Vedomosti. She emphasized that the longer the stagnation continues, the more acute the housing shortage will become.

The market is already experiencing the effects of this slowdown. In 2024, only 569,000 apartments were sold nationwide—a 26% drop compared to the previous year, as reported by DOM.RF. Sales of middle-range and affordable homes have seen particularly sharp declines in recent months, noted Irina Dobrokhotova, founder of the real estate data platform BnMap.pro, in her comments to Vedomosti.

In Moscow, the average duration to sell a new apartment has increased to a minimum of 16 months, while in Krasnodar—home to one of the largest stocks of unsold properties in the country—this timeframe has extended to 42 months.

As of February 2025, the volume of unsold new housing across major Russian cities reached 60.6 million square meters, a 10.3% increase from the previous year, according to a representative from the Pulse of New Home Sales analytics platform, as reported by Vedomosti.

Experts caution that despite the current oversupply, a housing shortage could arise as soon as 2027, especially in Moscow and its surrounding areas as well as in the Far East. Other major cities in economically weaker regions may also encounter similar issues, remarked Yaroslav Gutnov, founder of SIS Development, in a conversation with Vedomosti.

To mitigate the anticipated gap, DOM.RF has suggested offering loan subsidies to developers embarking on new projects in 2025 and 2026.

However, experts assert that broader macroeconomic stability and a consistent reduction in borrowing costs will be essential to reestablish equilibrium between supply and demand.

A significant housing deficit in the new construction market is only probable if there is a marked increase in buyer demand, which has yet to materialize, according to Ilya Volodko, director at the consulting firm Macon, who shared his insights with Vedomosti.