'Red hot' Moscow property lures investors

The Moscow residential property market is so "red hot" that it is attracting British and other Western individuals who are buying real estate in the city as an investment, according to Knight Frank, the international estate agents.

The Moscow residential property market is so "red hot" that it is attracting British and other Western individuals who are buying real estate in the city as an investment, according to Knight Frank, the international estate agents.

Knight Frank's recently-opened Moscow office has seen a surge in British and European homebuyers "flocking" to the Russian capital. Kyrill Starodoubtsev, managing director of the office, said that while foreign expatriate workers living in Moscow had been buying property for a number of years, a new phenomenon was foreign nationals living abroad buying purely as an investment. He said the new-found wealth of the élite in Russia and the centralised nature of the economy created huge demand for quality apartments in Moscow.

Also, Western companies are expanding operations in Russia and need to house increasing numbers of employees. "Any new development is sold out even before it has broken ground," Mr Starodoubtsev said.

Knight Frank is currently searching for a £3m to £4m house for a British client, while another, more typical investor, is looking to spend £270,000 on a flat in central Moscow. The estate agency said property values in the city had risen 100 per cent over the past three years. It forecast prices to climb 50 per cent over the next two years.

Steve Mallen, Knight Frank's head of global research, said: "The limited supply of apartments meeting Western standards is acute. Basically, there is only one way the residential market can go and that is upwards." Under the city's plan, 40 per cent of Moscow could be under construction over the next 15 years.

The mayor has already endorsed plans for 60 skyscrapers to be built.

Property prices are roughly half those in London. New flats in Moscow fetch £500 to £600 per sq ft, while a similar standard in one of London's more desirable areas might fetch £800 to £1,000 per sq ft. About £300,000 is needed to buy a smaller apartment in a quality building in the right part of Moscow.

Mr Starodoubtsev said Russia was a stable country now and while there may be a property bubble building up at the bottom end of the Moscow market, top-tier real estate was safe. He said investors should to stick to buying in central Moscow - new developments are safer as there is often confusion over title deeds to older properties.

He dismissed scare stories about lawlessness in Russia and the country's mafia. "I'm not aware of any investor losing the title to a property if their papers were in order," he said.