The Moscow residential real estate market has been lucrative, with an accommodation deficit driving sales and rental prices over the last decade. But it too felt the impact of the 2009 economic downturn.

With Moscow being not only the capital of Russia, but also the capital of the region, in terms of opportunities and level of living, it is no wonder that the residential real estate market has grown exponentially over the years.

Pre-crisis, a square meter in a luxury apartment cost between $15 thousand and a whopping $40 thousand dollars. To rent the same square meter would go for anywhere between $7-20 thousand. The overall average sale price per square meter was roughly $6,500 and rising monthly.

A lack of accommodation – not to mention quality – was the main driver behind this growth; but even this growth slowed during the crisis says Maxim Mokeyev, Executive Director for Evans Real Estate.

“In the beginning of the year it was very much slow in all segments and in all respects. It started basically with the beginning of the crisis so the end of last year and all throughout January, February and maybe into March it was still – prices were on the decline, demand was very, very low, especially on the sales side, in all budgets.”

Many real estate companies and developers fell during the downturn – either heavily downsizing or even leaving the market completely. But the crisis wasn’t all bad according to Konstantin Kovalev, Managing Director, Blackwood Real Estate.

“In most of the cases it was a really healthy cleaning of the market from all non-professional and non-effective companies.”

Rent prices, especially in the elite segment, plummeted up to 50%, due to personal incomes dropping, bonuses being cut and clients having to relocate to more modest living abodes. But sales prices didn’t drop as much as rental prices did. Kovalev says this is because low supply always commands a premium price, especially in exclusive areas such as the center of Moscow.

“The prices now in comparison to the pre-crisis level are something about 25% lower, not more than that, and if you really face the problem to find something very interesting in the very centre of Moscow in a newly erected building I would say you would face a price of something about $25-30 thousand per square meter.”

With such a constant demand for all things central – and with growing suburbia – it is hard to imagine that this downturn will last for long. Analysts agree that this deficit will only lead to demand growing, supply staying low and prices eventually coming back up – at least for the next three years, before yet another batch of quality accommodation comes onto the market.