Russia’s real estate market is navigating a sharp downturn in 2026, marking a dramatic reversal from the record-breaking years of 2023-2024. The sector, once buoyed by generous state-backed mortgages and war-induced investment, is now grappling with subsidy rollbacks, high borrowing costs, and declining demand.
Investment Volume Declines
The scale of the slowdown is evident in investment figures. The total volume of investment in Russian real estate in 2026 is projected to reach 800-900 billion rubles ($11.25-12.66 billion), implying a decrease of 15-25% compared to 2025. In the first half of 2026, investment stood at 376 billion rubles ($5.29 billion), 12% lower than the same period in 2025.
Commercial real estate investment fared similarly, with the combined total for commercial property and land reaching 362 billion rubles in the first half of 2026 ā€” a 14% decline year-on-year. While offices and warehouses remain attractive to investors due to supply shortages, investment in housing sites is not expected to grow.
Residential Construction Slump
The residential sector has been hit hardest. Housing completions fell to 23 million square meters in the first quarter of 2026, down from nearly 32 million square meters a year earlier ā€” a 28% decline. For the full year, developers are forecast to complete only 35 million square meters, down 15% from 41.3 million square meters in 2025.
The slowdown is palpable on the ground. At housing complexes, homebuyers have faced repeated move-in delays, with some reporting that construction workers have not been paid. Major developers have reported losses due to high borrowing costs and held significant debt by year-end.
Developers are feeling the pressure. Nearly 75% missed their first-quarter sales targets, and over half expect conditions to worsen in the coming year. The value of subsidized mortgages issued by Russian banks fell significantly year-on-year following government restrictions on mortgage programs.
Second-Home Market Shows Resilience
Despite the gloom, one bright spot is the secondary housing market. In the first half of 2026, sales of second-hand apartments rose significantly year-on-year. This growth reflects a widening price gap between new and existing homes.
According to official statistics, the average price gap between new and existing housing widened considerably by early 2026. However, the Central Bank’s more sophisticated econometric model, which accounts for quality differences, estimates the true gap to be narrower. With market mortgage rates on secondary homes remaining high, buyers are increasingly gravitating toward more affordable existing housing.
Interest Rates and Price Outlook
Mortgage rates remain the critical variable. The Central Bank’s key interest rate is expected to decline by the end of 2026, potentially bringing mortgage rates down significantly. If this materializes, mortgage volumes could grow substantially in 2026.
However, not all regions will benefit equally. In southern Russia, real estate prices are forecast to continue rising due to logistics issues and increasing construction material costs. This highlights the uneven nature of Russia’s real estate downturn: while demand and investment are cooling nationally, specific regions and asset classes remain insulated.
Commercial Real Estate
Commercial property has proven more resilient than residential, though cracks are appearing. Completions held roughly steady in the first quarter of 2026. In Moscow, however, new retail space completions are expected to drop significantly from previous levels.
Office and warehouse segments continue attracting investment due to supply shortages, while shopping malls face a more challenging outlook. Investors are also showing interest in data centers, a growing niche in Russia’s commercial real estate landscape.
Outlook
The construction sector, which accounted for a significant portion of GDP in 2025 (and more when related industries are included), faces an uncertain future. The downturn has already caused domestic shipments of road construction machinery to halve in the first quarter of 2026.
Analysts expect a moderate correction in the key interest rate to stabilize investment activity, but the full-year outlook remains cautious. For Russia’s real estate market, the record years are over, and a period of consolidation has begun.
