Russia’s real estate market is undergoing a fundamental rebalancing. While the primary market for new construction struggles with expensive mortgages and declining demand, the secondary market has surged unexpectedly, with transaction volumes rising 28% year-on-year in the first eight months of 2026. This shift reflects not a healthy market expansion but rather a structural transformation driven by high interest rates, the depletion of subsidized programs, and changing buyer psychology.
The Primary Market: Subsidy-Dependent and Slowing
New construction sales have declined sharply. In Moscow, only 5,400 new-build transactions were registered in August 2026, down 39% from the previous year and nearly 20% below July’s figure. Industry participants expect demand for new housing to fall another 10–20% by the end of 2026, with some developers anticipating declines exceeding 20% in mass-market projects.
The core constraint is mortgage affordability. With market mortgage rates hovering around 18%, and the Central Bank’s key rate at 14% as of September 2026, the monthly payment burden has become prohibitive for many families. In Moscow, buyers needed 2.52 average monthly salaries to purchase a square meter in Q2 2026, up from 2.32 a year earlier. Banks have tightened income verification and down payment requirements, pushing buyers with limited savings to postpone purchases or seek cheaper options.
State-supported programs remain the lifeline of the primary market. Family Mortgage accounted for more than 75% of new-build mortgage originations in most months of 2026. However, the program’s terms have been progressively tightened, and its share of total mortgage issuance is declining. In Q2 2026, subsidized programs accounted for 115,000 loans worth 695 billion rubles, while market-rate programs reached 145,000 loans worth 474 billion rubles—a twofold increase in market loans year-on-year.
The Secondary Market: The Unexpected Winner
The secondary housing market has emerged as the primary beneficiary of the current environment. The number of transactions rose 28% year-on-year in the January–August period, while new-build sales grew only 1%. Several factors explain this divergence.
First, price differentials matter. The gap between primary and secondary prices has widened to approximately 23%, making ready-to-move-in housing increasingly attractive. Second, the secondary market offers greater negotiating flexibility and a wider selection of housing stock. Third, the decline in market mortgage rates from 30% to 18% over the year has nearly doubled the number of mortgage loans issued compared to 2025.
A significant portion of this secondary market growth comes from what industry analysts call “fresh secondary”—newly completed buildings where apartments are sold under purchase agreements rather than equity construction contracts. After a building is commissioned, buyers can still access subsidized mortgages, but the transaction is formally classified as secondary market. Approximately 40–50% of transactions now involve housing less than seven years old, and in August, banks issued 219 billion rubles in mortgages for ready housing at an average rate of 12.5%—far below the 18% weighted average for market-rate mortgages—indicating that nearly 45% of these loans were subsidized.
Supply Constraints and Price Dynamics
The supply of housing for sale has tightened significantly. The number of apartments listed for sale is 33% lower than a year earlier, as investor-owners prefer to rent rather than sell. This shortage of available inventory is limiting further transaction growth and pushing prices upward, with secondary market prices rising 13% over the year.
In the primary market, the Central Bank reported that new housing prices accelerated by 12.1% year-on-year in Q1 2026, driven by a surge in Family Mortgage demand in January, the depletion of affordable housing stock, and the launch of more expensive new projects. Prices grew most significantly in Central Russia, largely due to Moscow.
Forecasts suggest this trend will continue. DOM.RF analysts project new-build price growth of 7–8% in 2026, accelerating to 10–15% in 2027—roughly double the expected inflation rate of 4–5%. The primary driver will be a supply deficit: new project launches declined 12% in 2025, and even projects launched in 2026 will not reach the market until 2027 at the earliest.
The Construction Pipeline: A Looming Gap
The construction sector is showing signs of strain. While housing commissioning appeared stable in early 2026, this largely reflects the completion of projects launched in the more favorable conditions of 2023–2024. New project launches tell a different story. In 2025, launches with planned completion in 2027 totaled 11.2 million square meters—1.5 times less than the volume launched in 2024 with completion in 2026.
Developers are increasingly cautious. Project financing costs remain high, banks have tightened requirements for financial models, and new integrated development territory regulations have increased infrastructure obligations and project timelines. Smaller developers are struggling to launch new projects, while larger players are shifting toward smaller, more predictable objects and resort real estate.
The sold-to-ready ratio stands at 69% nationally, above the 60–65% threshold considered healthy. However, this masks regional disparities: Moscow’s ratio is 47%, St. Petersburg’s 40%, but Krasnodar Territory’s is only 20%. The portfolio of housing under construction reached 120.6 million square meters by August 2026, with equity participation sales reaching 14.6 million square meters.
The Mortgage Market: Gradual Thaw
The mortgage market is slowly recovering from its 2025 trough. In Q2 2026, banks issued 260,000 mortgages worth 1.2 trillion rubles—a third more than the previous year. Market-rate programs drove this growth, doubling in both quantity and volume. The average mortgage size was 4.10 million rubles in March 2026, with new-build loans averaging 5.81 million and secondary loans 3.30 million.
The Central Bank lowered its key rate twice in Q2 2026, from 15% to 14.25%, and again to 14% in July. However, the pace of rate cuts has slowed amid persistent inflation risks. The Central Bank’s forecast for 2027 projects the key rate at 10.5–12.5%, higher than previously expected, which will moderate the decline in mortgage offer rates. The full cost of credit fell to 17.10% in March, with new-build loans at 15.33% and secondary at 18.55%.
Credit quality has improved. The share of loans to borrowers with debt-to-income ratios above 80% fell to 4% in Q2 2026 from 6% a year earlier, and loans with down payments of 20% or less fell to 1% from 5%. In response to these improvements, the Central Bank has stopped tightening macroprudential mortgage regulation.
What Lies Ahead
The consensus among analysts is that the market is transitioning to a “soft landing” rather than a crash. Prices will continue to rise—faster than inflation in 2027 due to supply constraints—but demand will remain selective and dependent on mortgage programs and real income growth.
The fundamental demand drivers remain: housing provision stands at only 29 square meters per person against a target of 33 square meters, and 67% of Russia’s housing stock was built before 1995. By 2030, an estimated 30 million square meters will require replacement, up from 15 million in 2024. Real incomes are expected to grow at roughly 3% annually on a long-term horizon.
Yet the market’s near-term trajectory hinges on factors largely outside its control: the pace of Central Bank rate cuts, the trajectory of inflation, and the government’s willingness to maintain subsidized mortgage programs. For now, the secondary market continues to absorb demand that the primary market cannot serve, and the construction pipeline is being shaped by decisions made under very different economic conditions. The result is a market that is not contracting but being restructured—from a subsidy-driven new-build engine to a more complex, multi-speed system where ready housing increasingly leads.
