The development of russian market: the building sector

The Russian Federation is seeing uninterrupted economic growth.
Growth in GDP for 2007 is expected to reach 7.5% meanwhile investment is growing at a rate of over 20%, on the back of decidedly brisk domestic demand.
Local businesses are in robust health and the influx of foreign capital has picked up again.
Private consumption is rising steeply, thanks to higher employment, wage increases and the growing willingness of households to resort to credit (which is estimated to have reached 17 billion dollars in 2007).

On the downside, inflation is rising in fact, is one of the key objectives of Russia’s 2008 economic policy.
As well as strong demand for consumer goods and rising food prices, a rise in liquidity, deriving from the current account surplus, and the state of the labour market, which has seen unemployment fall to an all-time low of 6%, are also fanning the inflationary flames. Bringing inflation under control is This positive cycle is set to continue for the next two years, with GDP continuing to grow at a rate of more than 6% per year. Domestic demand is expected to keep rising at a steady pace, in terms of both investment and private consumption.

The construction industry has obviously reaped immense benefits from the booming economy and has been growing at an average rate of over 10% per year for more than a decade.
The biggest winner is the residential sector, which has benefited from a major reduction in interest rates – down from 30% in 2000 to 7% now – and the pressing need to modernise the country’s stock of housing.
At least 32% of Russians and 41% of Muscovites have to carry out annual renovation work, while the renovation of entire apartments accounts for 10% of building work in Russia as a whole and 27% in Moscow.
Non-residential building is also continuing apace. And what’s more, the boom is no longer confined to just Moscow and St. Petersburg, but is spreading to smaller cities too and to several cities in the Volga Valley.

Growth is forecast to continue throughout 2008-09, and investment, the dynamism of the property market, in fact, is showing no signs of abating: house prices are rising and so too is mortgage lending.

RUSSIA: GDP and building investments

Source: Confindustria Ceramica Forecast Study 2007

*The complete article has been published on Ceramic World Review 75 (January/February 2008)