Construction Slowdown Paves the Way for a Housing Crisis in Russia by 2027

According to a report by DOM.RF, the government agency responsible for housing and development financing, Russia could experience a considerable housing deficit by 2027. This dire situation arises from a marked decline in new residential construction, which could lead to a shortfall of as much as 30 million square meters of housing.

In the first quarter of 2025, newly launched housing projects totaled merely 8.1 million square meters, reflecting a 24% decrease compared to the same timeframe the previous year. If the Central Bank maintains its high key interest rate and sales remain low, this downward trend is anticipated to persist throughout the remainder of 2025.

Even with projections that the Central Bank may lower its key interest rate to a range of 7.5-8.5% from the current 21% by 2027, the report cautions that the housing construction sector is unlikely to recover swiftly enough to satisfy demand.

Increased financing costs and the recent conclusion of a subsidized mortgage program, which offered rates as low as 8% until it expired in July 2024, have compelled developers to shift their focus to smaller, more profitable projects, according to Anna Akinshina, CEO of the Samolyot Group, in an interview with Vedomosti.

Moreover, many prospective buyers are delaying their home purchases due to the high costs of borrowing, stated Larisa Maslyukova, head of sales at the Granel Group, sharing her insights with Vedomosti. She noted that the longer the current stagnation continues, the more severe the housing shortage is likely to become.

The impact of this slowdown is already apparent in the market. In 2024, just 569,000 apartments were sold nationwide—marking a 26% drop from the previous year, as reported by DOM.RF. Sales of mid-range and mass-market properties have particularly fallen off in recent months, according to Irina Dobrokhotova, founder of the real estate data platform BnMap.pro, speaking to Vedomosti.

In Moscow, the average time required to sell a new apartment has increased to at least 16 months, while in Krasnodar, which currently boasts one of the largest stocks of unsold homes in the country, this period has extended to 42 months.

As of February 2025, the total amount of unsold new housing in Russia’s major cities reached 60.6 million square meters, up 10.3% compared to the previous year, a representative of the Pulse of New Home Sales analytics platform informed Vedomosti.

Despite this apparent oversupply, experts caution that a housing shortage could start to materialize as early as 2027, especially in Moscow and its surrounding areas, as well as in the Far East. Other major cities in economically weaker areas might also encounter similar shortages, Yaroslav Gutnov, founder of SIS Development, remarked to Vedomosti.

To mitigate this potential gap, DOM.RF has suggested subsidizing loans for developers beginning new projects in 2025 and 2026.

However, experts emphasize that achieving wider macroeconomic stability and a consistent reduction in borrowing costs is essential to restore equilibrium between supply and demand.

Ilya Volodko, director at the consulting firm Macon, stated to Vedomosti that a significant housing deficit in the new-build sector is likely to occur only if buyer demand surges—which has not yet transpired.