The slump in Moscow's housing market may be near a bottom, after big falls since the market peaked last September. With construction at a standstill, there's already talk of future shortages driving up prices.

Developers borrowed to the hilt to take advantage of soaring prices in residential property during the bubble. When the supply of cheap credit dried up, and the crisis slashed incomes, the market crashed.

Building has come to a standstill across Moscow and other cities, prompting fears of shortages in future. But whilst the hardest hit developers have sold stock off cheaply to raise cash, Aleksandr Pypin Head of Analysis at www.gedetotdom.ru says some are still holding on to stock to wait for better prices.

“There is a lot of talks about falling levels of construction. So far it has not affected the deliveries of completed housing – according to the latest figures it's 4.5% higher than last year. There is a delayed effect in that construction which was started 2-3 years ago is only being completed now. Developers still have a large stock of completed residential space that they kept, hoping to sell at a better price before the crisis came.”

Residential real estate prices seem to be bottoming out, with the average price of $3,800 per square meters.

Just how prices will move next year is unclear. Maksim Mokeev, Executive Director of Evans Property Services says they could remain flat for some time.

“Prices have stayed at the same level for several months already. If there will be no major economic turmoil globally, not connected to the real estate market, then the prices have reached the bottom where they are likely to stay up to a year. And we are likely to see growth after that.”

Moscow's first deputy mayor has predicted that prices won't fall much further, and has encouraged potential buyers to take advantage now, with some analysts pointing to a possible longer term supply shortage. Much will depend on any recovery in the wider economy, and the impact it has on unemployment and incomes