The Development of a Residential Real Estate Market in Russia

By Allen, Andrew T.; Ovsyannikova, Tatyana Y. et al. | Journal of Real Estate Literature, January 1, 2004 | Go to article overview

The Development of a Residential Real Estate Market in Russia


Allen, Andrew T., Ovsyannikova, Tatyana Y., Prazukin, Denis K., Worzala, Elaine, Journal of Real Estate Literature


Abstract

The housing market in Russia has shifted from one in which the government produced most housing units to one in which the private market produces most units. This research examines the state of the housing market in the Tomsk region, located in the center of Russia. Because of the lack of functional mortgage markets, families must save enough money to finance the full purchase price of the housing unit. This research determines how much savings is available for a typical Tomsk family and how long it will take them to save enough money to buy a housing unit.

Introduction

Satisfying the population's demand for modern housing services is a major social and economic problem in post cold war Russia. In the planned economy of the Soviet Union, housing construction was completed at the government's expense. Most construction projects were apartment units in multi-story buildings. Such units were owned by the state and distributed free-of-charge, although many families waited years to receive their apartments based on the rules of disposition.

The political transformation of Russia after the disintegration of the Soviet Union resulted in a major national economic crisis. Economic and political instability, hyperinflation and the outflow of capital from the country caused a deep investment crisis that spread to the housing market. The housing market opened in 1991 but because of limited financing, housing construction slowed. The annual increase in the housing stock slowed from 3% growth in the decade preceding the reforms to 1% during the reforms (Guzanova, 1997).

Beginning in 1991, local governments could transfer title of state-owned dwellings to their tenants, in some instances for a fee (but after 1992, for free) and the general population was allowed to engage in rental and sales transactions (Kaganova, 1999). The sale of housing has resulted in a redistribution of housing and a change in ownership patterns. At the beginning of the economic reforms, state-owned property holdings accounted for 80% of the housing stock. Today, more than half of the housing stock is privately owned (Daniell and Struyk, 1997). However, the government has not totally withdrawn from the provision of housing. Some families continue to receive free government-sponsored housing, including those who are war veterans, invalids, or have very large families.

With the shift to private ownership, a private housing market has emerged in Russia. High inflation (20.2% in 2000, World Bank, 2002) and little new construction have led to a significant rise in the price of housing, making it unaffordable to the majority of the Russian population. The home purchase hurdle is particularly high because the mortgage market is almost nonexistent. As a result, potential homebuyers must save enough money not just for a downpayment but for the full cost of the home.

This lack of affordability is especially evident in the areas where income growth has been outpaced by the appreciation in home prices. One of these areas is Tomsk, which is located in the geographical center of Russia. This paper examines the housing market in Tomsk and focuses on the severe affordable housing shortage, which is common in many emerging markets. Results clearly show that for the typical Tomsk family, homeownership is not a realistic option given the savings needed to purchase a residence.

Housing Market Characteristics in Tomsk

On the demand side of the housing market, more than one million people live in the Tomsk region. However, the standard of living is extremely low compared to many developed countries. The average annual income in the Tomsk region is $1,110 per person (Tomsk Statistical Bulletin, 2001). In comparison, the World Bank (2003) estimates the standard of living to be $36,322 per person in the United States and $2,127 per person for the Russian Federation as a whole.

On the supply side, the housing stock measures 202 million square feet (in Russia, the housing stock is measured in square feet, not number of housing units), of which 66. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Development of a Residential Real Estate Market in Russia
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.