A Happy Little Rainbow
Highrises along the Kokshaga River
Yoshkar-Ola was built into the sky, not sprawled out. Most of the city’s residents live in high-rise apartments, ranging in size from one-bedroom efficiency units all the way up to multi-floor luxury penthouses. The people of Yoshkar-Ola live communally, as one big happy family. Doors are never locked, and on warm days, are left wide open. Crime is non-existent. In fact, in Yoshkar-Ola there is a phenomenon known as “reverse-burglary”, where items are left in your apartment by strangers, rather than being carried out. One day I came home after classes and found a big screen TV in my living room!
Once upon a time a fully furnished, centrally located, one-bedroom apartment rented for just $30 per month. Those days are long gone. Obscene price arbitrage relative to western markets has at last flattened.
Prices rose steadily since the market collapse of 1998 for primarily two reasons: As oil prices went parabolic, newfound resource wealth trickled down to the little people. At the same time, cheap credit became available to the middle and lower classes thanks to a government backed mortgage program named "ipoteka", equivalent to Fannie Mae in the United States. When these two planets aligned, millions of Russians hit the real estate market simultaneously and created one of the largest real estate bubbles on earth. An apartment that was lucky to get $5000 in 2001, now lists for $100,000, and sells within hours of being placed on the market.
If you are shopping for that six-bedroom apartment of your dreams, it may be prudent to hold off for a few years until the market cools down and regains its sanity. The Russian stock market recently plummeted 60% and the shockwaves of that collapse will eventually bleed into real estate.
Excluding doomsday scenarios of World War III or $20 crude oil, apartment prices will likely drop 20%-30% and then go right back up. Russians are moving out of villages and into cities in a mass migration that will last several decades. These hardy urban pioneers will exert continuous pressure on demand while supply remains static.
