'Real Estate Moscow and St Petersburg - Local Markets in a European Context' revealed that new-build property in Moscow's prime residential property market experienced price growth of 92.2 per cent in 2006. In comparison, prime property in central London increased in price by a much more modest 28.6 per cent - and even this was the highest level for 27 years.

However, despite this staggering increase, even Moscow, the capital city of Russia, was outstripped by St Petersburg - meaning that those wanting to capitalise on the Russian boom will have to have deep pockets - extremely deep pockets.

Following price growth of 115.3 per cent last year, the average price per square metre of prime residential new-build property in the city founded by Peter the Great in 1703 averaged $5,502 - prices high enough to make everyone's eyes water, except for Roman Abramovich's, perhaps. Compare this to Sofia, Bulgaria's up-and-coming capital, where residential units sell for approximately $1,000 per square metre (although this, admittedly, is at the lower even of the market).

Yet even St Petersburg's property market still has plenty of room for price growth, if Moscow's market is anything to go by: The average price of new-build property in the city last year was $12,589.

So, how much can one rent out such property for? According to the Knight Frank report, in 2006 residential property of between 80 and 150 square metres was being let for an average of $5,366 a month in the capital of Russia. If this rental return was secured every month on an 80-square metre property of average price per square metre, this would have delivered an annual yield of 6.5 per cent.

Despite these apparently astronomical figures, when it comes to the overall level of investment in commercial real estate the market for property in Russia is still very much in its infancy. Although Russia attracted 3.4 billion euros of investment in 2006, an increase of 700%, it was Germany and France that really dominated in this respect.

This is according to the 'European Capital Markets Bulletin 2006', a report just released by Jones Lang Lasalle. In fact, 49.5 billion euros worth of business was done in Germany, and 24.1 billion euros in France - annual increases of 141 and 67 per cent respectively.

The report's authors note that "2006 was a year of records for Europe's property investment markets. European investment volumes have grown nearly four-fold since 2000, with record total volumes of 242 billion euros in 2006, a 68-billion rise on the previous year - the largest year-on-year volume increase on record." In total, European property investments delivered a return of 23 per cent last year, the report stated.

Looking ahead to this year, 'European Capital Markets Bulletin 2006' predicted that property in Russia, Turkey and the Baltics will be increasingly sought-after as "investors will look further east" in the quest for growth.

So, should we expect another record year for property in Russia? Perhaps, but, either way, I won't be investing in its prime residential property market - and that's not because I don't want to.   Writer: Paul Beasley

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Article first published 20th April 2007