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Despite rising incomes and the expansion of the middle class, the provision of adequate and affordable housing is still an important issue in Russia. Renewed state investment in housing has been made a national priority alongside efforts to encourage growth in the private housing sector.
The government is planning to invest on a large scale in upgrading Russia’s run-down stock of municipal housing, while also promoting the growth of the private housing. An adequate housing stock is essential to economic growth prospects by raising living standards and increasing labour supply. An active housing sector also has important multiplier effects throughout the economy.
Russia’s housing stock does not meet its housing needs:
Following extensive privatisation of the former state run housing sector in the early 1990s (which effectively amounted to the state ‘giving’ dwellers their apartments), homeownership has increased:
Much of the population still lives in ageing Soviet era housing stock, particularly outside the main cities. More than half of homes need repair and many have not been repaired in 40-50 years.
The new 2006 Housing Code makes owners fully responsible for the maintenance of their property, but this is often a burden for owners of Soviet era housing. In the case of rented accommodation, local municipalities do not have sufficient funds either.
Amid rising consumer incomes, an expanding middle class and the growing provision of mortgage lending facilities by Russian banks, there has been firm growth in private housing demand, particularly in the larger urban areas:
However, there is still a shortage of affordable housing:
An adequate supply of housing stock is vital to economic growth prospects:
Under President Putin, affordable housing has been made one of Russia’s four priority National Projects (along with healthcare, education and agriculture). In the period to 2010, housing will receive significant public investment, funded by a large coffer of state energy revenues:
The government is also keen to promote the development of the private housing sector. Key to this are efforts to reduce inflation and interest rates, and to facilitate wider consumer access to banking and to mortgage debt:
Growth in private housing demand has strong multiplier effects in areas like construction, real estate, financial services and retailing.
Under the government’s ambitious medium-term targets for the housing sector:
Such a strong focus on housing will provide a significant boost to the labour-intensive construction industry, employment and overall economic activity:
The outlook for the mortgage market, still in its infancy, is strong. Mortgage lending is one of the fastest growing retail banking sectors:
As the demand for new private housing grows, related retail sectors like household goods and appliances providers will also see increased activity:
This will attract additional FDI inflows into Russia as more foreign players seek to enter the market.