**Russia’s Housing Market in Crisis: Construction Plummets Amid High Interest Rates**
The Russian housing market is facing a severe crisis, with new construction dropping sharply due to high interest rates. According to a recent forecast by the state-owned finance company Dom.RF, developers launched only 8.1 million square meters of new housing projects in the first quarter of 2025, down 24% from the same period last year.
The decline is attributed to the Central Bank’s aggressive tightening cycle, which has raised interest rates to their highest level since the early 2000s. Even if rates fall to a more manageable level by 2027, developers would still struggle to cover the shortfall in housing supply. Home sales have also dropped sharply, with 569,000 apartments sold in 2024, a 26% decrease compared to 2023.
To address this crisis, Dom.RF has proposed subsidizing loans for developers launching new projects in 2025-2026 to increase the housing supply. The company also emphasized the need for macroeconomic stabilization and lower borrowing costs to revive both construction and demand.
**Russia’s Central Bank Faces Criticism Over Interest Rate Policy**
The Central Bank’s decision to raise interest rates has drawn criticism from Russian defense contractors and state-linked firms facing rising credit costs. President Vladimir Putin acknowledged the dilemma on December 19, saying some experts believe the Central Bank should consider using tools other than rate hikes to fight inflation.
With inflation still rising and the economy heavily burdened by military expenditures, Russia’s leadership faces mounting pressure to balance financial stability and industrial growth. The housing market crisis adds to these concerns, as a shortage of new construction could lead to increased housing costs and reduced living standards for Russians.
**Global Reaction to Ukraine Conflict Intensifies**
Meanwhile, the conflict in Ukraine continues to escalate, with fresh reports of Russian missile strikes on civilian targets. On April 13, a Russian ballistic missile strike on the city of Sumy killed at least 34 people, including two children, and injured over 100 others.
The international community has condemned these attacks, with European leaders calling for increased pressure on Russia to cease its aggression. The meeting of EU foreign ministers in Luxembourg will focus on upholding peace in the Black Sea after a potential ceasefire, while Hungarian opposition leader Peter Magyar has positioned himself against Prime Minister Viktor Orban‘s policies, promising to reset Hungary’s foreign relations and end what he calls the government’s isolation from the West.
**Commentary**
The housing market crisis in Russia is a symptom of broader economic and political challenges facing the country. The Central Bank’s aggressive interest rate policy may have been intended to combat inflation, but it has also led to reduced investment in key sectors like construction.
The conflict in Ukraine continues to be a major concern for global leaders, with the international community calling for increased pressure on Russia to cease its aggression. As tensions rise, investors and businesses are likely to become increasingly cautious about investing in Russia’s economy.
**What’s Next?**
In the coming weeks, we can expect further discussions between EU foreign ministers and Russian officials regarding security guarantees for Ukraine. Meanwhile, developers and housing companies will continue to face challenges as interest rates remain high.
As the crisis deepens, it remains to be seen how the Russian government will respond to address these pressing issues. Will they prioritize economic stability or maintain a hardline stance on interest rates? Only time will tell.
**Sources**
* Kyiv Independent: “Russia may reportedly face housing shortage as new construction drops sharply”
* European Pravda: “EU foreign ministers to meet in Luxembourg to discuss security guarantees for Ukraine”