MOSCOW (RIA, MN) - Real estate prices in new developments across Russia's second city could drop between 20 and 40 percent by the middle of next year, according to a report prepared by consulting company GVA Sawer. The study predicts that the deepening financial crisis could lead to prices as low as 60,000 rubles per square meter on such sites, compared to averages prices in the third quarter of this year of 100,000 rubles.
The study recalls that since 1998 the price of real estate has continually risen in St. Petersburg, despite a wealth of new construction projects.
"After the financial crisis of 1998 apartments in St. Petersburg became 6.5 times more expensive within six years. This growth was uneven... accelerating towards the end of 2003 as private individuals became more active in the market. In 2006 growth reached 120 percent," the study says.
Although last year was characterized by stagnation in the city's housing market, the first half of this year saw further increases of 32 percent in the ruble value of residential real estate.
The report notes, however, that the market in St. Petersburg is characterized by high uncertainty and is highly subject to the influence of external conditions.
"Within the period September to October 2008 there was a 40 percent reduction in the volume of sales. Potential buyers took a ‘wait and see' attitude because of the conditions of the financial crisis," it says.
Depending on how the global financial crisis develops, the report predicts the market will develop in one of two ways. An optimistic scenario sees continuing stagnation and an average price drop of 10 to 15 percent, followed by growth. However, if financial stimulation efforts fail and the global crisis deepens then instability in the labor market will lead to a drop in demand. In such a scenario, there could be up to a 40 percent drop in real estate prices before the end of next year, followed by growth in 2010.
