In Digest, Russia

By Alexander Mercouris, Russia Insider, April 29, 2015

Russia is in the throes of a housing boom that is transforming the country and hugely increasing its sense of well-being but which has gone completely unreported in the West.

An aspect of Russian economic performance that is never discussed in the West is the rapid increase in the pace of housing construction. Russia built 81 million square meters of housing in 2014.  This was around a fifth more than in 2013 and exceeds the previous all-time high of 72.8 million square meters built in 1987.

Familiar scene in Moscow these days, apartments under construction

Familiar scene in Moscow these days, apartments under construction

Moreover, the overall pace of housing construction is being sustained despite the high interest rates at the start of this year.

House building was actually up slightly in the key Moscow region in the first quarter of 2015, as compared with the first quarter of 2014.  Across the country as a whole, it is expected to drop to 76 million square meters in 2015, less than in 2014 but still more than in the previous record year of 1987.  In “new Moscow” (the huge area added to Moscow in 2012), construction in the first quarter was up by about a quarter over the previous year.

International comparisons are difficult.  Russian construction statistics measure volume rather than individual homes built as is done in other countries such as Britain and the U.S. However, the number of new homes being built in Russia in any one year is probably now around 800,000 to 900,000.  This compares with roughly 1.1 million new homes usually built in the U.S. in any one year. The U.S., however, has more than double Russia’s population. By comparison, Britain, with 44% of Russia’s population, built just 141,000 new homes in 2014, roughly 18% of the Russian total.

A much higher proportion of Russian homes are apartments than in Britain or the U.S.  However, construction of individual homes, as opposed to apartments, is also increasing rapidly in Russia, with 167,200 individual homes as opposed to apartments being built in Russia in the first nine months of 2014 – more than the total number of new homes of any kind built in Britain in the whole of 2014.

Of course, mere numbers don’t tell the whole story.  There is much more quality housing in the U.S. and Britain, with Russia heavily focused on building high volumes of cheap housing to provide affordable homes to its general population.

This is not surprising given that the average Russian occupies 22 square meters of housing. That is half that in Britain, however in contrast to Russia, the size of homes and of housing space per person in Britain is actually shrinking (see for example this article in the Daily Mail).

There are, however, the first tentative signs that as the overall housing situation improves and living standards rise, demand is increasing in Russia for quality homes and, especially in the big cities, house builders are starting to respond. See, for example, this article in the Moscow Times).

Certainly, by all accounts, the quality of homes now being built in Russia is significantly better than it was during the heyday of housing construction in the Soviet period from the 1950s to the 1980s.

The fact that the emphasis on house building in Russia remains on cheap affordable homes, incidentally, confirms something else. This is that the Western image of “Putin’s Russia” as ruled by a “corrupt kleptocracy” selfishly focused on its own interests has to be wrong. The emphasis on cheap affordable housing for the wider population, on the contrary, shows that Russia, as its constitution says, is very much a “social state”.

In other words, Russia is in the middle of a housing boom. Given the very high importance owning a home has to a person’s sense of well-being, this goes far to explain why surveys show Russians are becoming more happy (see Paul Robinson, Increasingly happy Russians catching up to Americans, Russia Insider, 28th April 2015).  As interest rates fall, the pace of house building in Russia is likely to grow even more, making them happier still.


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