Moscow: The Next Boomtown?

Moscow is fast becoming the world's latest real estate boomtown, according to a report by Wharton Business School's Knowledge@Wharton newsletter. Properties of all types are appreciating: office prices reportedly have increased 38 percent during the past 12 months, warehouse prices have risen 33 percent and retail assets are selling for a 56 percent premium over 2006.

"The reason is the sort of economic fundamental that was willfully ignored during the Soviet era: Demand is outstripping supply. Moscow simply doesn't have enough safe, modern and spacious apartments that foreigners and rich Russians want. 'You can find deals, but people might be sleeping in the hallways because the front door's not secure,' Mestre notes."

..."So much money, both domestic and foreign, is flowing into Moscow real estate, in particular, that Yakubovich and other Russia watchers have begun to worry about the possibility of a bubble. "It's crazy," he says. 'Apartment prices [are close to] world levels, like London or Tokyo, but the average income of Russians isn't that great. This is what makes the boom really puzzling.' "

Thanks to IREI