THREE years into the war with Ukraine, Russia’s wealthiest are increasingly bringing their money home, fuelling an unlikely rebound in high-end Moscow real estate.
Faced with fewer options to spend abroad as international sanctions force banks to crack down, many Russians are repatriating cash and parking it in the safe haven of domestic property. Others are using real estate as a hedge against inflation that has surged since the invasion of Ukraine, forcing the central bank to jack up rates to record highs.
“The screws are being tightened on people with Russian citizenship around the world,” said Ekaterina Rumyantseva, founder of Moscow-based luxury real estate broker Kalinka Ecosystem. “Everyone now realises that the safest place to keep capital is in your own country.”
The influx of cash is helping Moscow buck a slowdown hitting other real estate markets from London to Hong Kong. Luxury apartment sales priced at 1.95 million roubles (S$26,703) a square metre and upwards in Moscow gained almost 40 per cent last year, according to NF Group, formerly known as Knight Frank Russia. And prices increased 21 per cent, pushing the Russian capital squarely into the same price tier as Paris and London.
A flurry of high-end apartment and villa projects springing up across Moscow give a glimpse into Russia’s uneven economy as the war grinds on. Government spending related to the invasion has stoked growth, but also inflation and higher rates. At the same time, widening sanctions are choking off the opportunity for Russians to invest overseas, forcing them to repatriate cash and seek a safe haven within their own borders.
And while many large Russian fortunes have been minted over recent years, the latest dynamics are driving some high-end properties to the eye-watering levels more commonly seen in Dubai or London.
Take the 12,500 square feet Art Nouveau-style towered residence in the Levenson project, built in the early 20th century by prominent architect Fyodor Schechtel and located in a renovated mansion in Moscow’s historical core. The project includes two dozen apartments and is being built by Vesper, one of Moscow’s biggest developers of luxury property. The home is near the Patriarch’s Ponds, where the family of Leo Tolstoy used to skate in winter, and was among the most expensive properties sold last year at about 3.8 billion roubles, according to Kalinka.
Many of the high-end projects being developed are located in central areas near the city’s biggest attractions and have vast onsite parks.
“Developers have started to offer unique expensive lots within elite houses more often,” said Dmitry Khalin, managing partner at Intermark Intown Sales, which formerly operated in Russia under the Savills brand. “We see a high demand for expensive residences with good views.”
The Kamishy project, based in the exclusive Zhukovka suburb on Moscow’s western outskirts, is emblematic of the new projects coming online. It includes 11 two-storey villas containing floor-to-ceiling windows and minimalistic interiors, surrounded by gardens and bordered by the Moskva river. Prices start at US$25 million and reach as high as US$45 million. Five have already been sold. The architect is Yury Grigoryan from Meganom, who designed the “skinny” 262 Fifth Avenue skyscraper in New York.
While precise details on the identity of the buyers flooding into the market are difficult to come by, Kalinka said that the majority are aged between 40 and 50. Typically, they are owners of large industrial companies or top managers, but also include clients in IT, show business and sport.
Against the volatile economic backdrop of the war, they see real estate as a refuge from gyrations in local assets including the rouble. While the Bank of Russia’s key interest rate at 21 per cent offers attractive rates on deposits, the local currency sank about 25 per cent last year.
People are taking “a balanced approach to asset diversification”, according to Andrey Solovyev, partner at NF Group.
The dynamics in Moscow’s property market contrast with other global cities traditionally popular with the Russian diaspora. London, for example, gained the Londongrad moniker after attracting residents such as Roman Abramovich and Mikhail Fridman. The UK capital’s top end market had a lacklustre year in 2024 and is forecast to fall this year.
To be sure, wealthy Russians are not turning away from foreign real estate altogether, with the Indonesian island of Bali and Thailand seen as among the most in demand. But they are fast dropping down the leaderboard of buyers in places such as Dubai, a notable development given it was a magnet for many after the invasion. Russian passport holders slipped to No 9 last year in the rankings of the top 10 real estate buyers there, after holding the No 1 slot in 2022, according to local broker Betterhomes. That comes as the city sees a huge influx of global wealth.
Overall, demand among wealthy Russians for foreign real estate fell 24 per cent last year compared with 2023, according to Intermark.
Back in Moscow, high interest rates and rising construction costs may cool the pace of high-end property supply this year. Developers may be forced to accumulate land banks instead of launching new projects, according to NF Group’s Solovyev.
Other developments are also springing up, though, in other parts of the country to take advantage of the influx of cash.
Sochi, the Black Sea resort which hosted the 2014 Olympic Winter Games, is among the most popular locations for wealthy Russians seeking to buy property. More recent high-end projects there include the Mantera Seaview Residence – a complex spreading over six hectares which includes a hotel, residences and a plethora of amenities ranging from saunas to a snow room. BLOOMBERG