In the past ten years Moscow’s Golden Mile, an elite district just a stone's throw from the Kremlin, has been transformed beyond recognition. Historically a ramshackle quarter, home to the capital’s artists and intellectuals, it’s now the most expensive

But gone are the days of 200% returns from indifferent construction and marketing. Experts say 2007 was the tipping point when for the first time in recent years housing supply in Moscow outstripped demand.

According to estate agents Knight Frank, developers need international expertise in a highly competitive market.

Moscow residential sales specialist, Olga Bogoroditskaya, says “developers will have to innovate to sell” if they're to make money in 2008.

“That means bringing together a world-class team, from consultants to architects and designers. Presidential elections always slow sales but we still predict year-on-year price growth of up to 35%,” Bogoroditskaya said.

Competition is already forcing developers to innovate to attract buyers, and the Golden Mile is no exception.

Top developer Barkli is investing over $US 50 million in Moscow’s rental sector. The target audience for the mix of fitted-out flats, offices and retail areas are expats on short-term business in Russia.

A riverside flat overlooking the Christ the Saviour Cathedral will cost $US 25 thousand dollars a month, Barkli said.

The developer’s President, who is also the Vice-President of Builders Association of Russia, Leonid Kazinets, says lower returns on property project investments this year would be compensated by Russian bank loans approaching single digits.

“I advise [foreign investors] to study the market in Russia,” he suggests.

The Russian retail market ended 2007 with Europe’s fastest-growing elite property prices, ahead of London and the Bulgarian capital Sofia. Now analysts have reversed the doom and gloom of this time last year, suggeting there’s momentum in Moscow’s housing sector for investment-grade growth in 2008.