The Russian property boom is showing no signs of slowing, as the explosion in global energy prices boosts Russia's economy and the sub-prime problems elsewhere push investors to look for new opportunities. 

Property returns over the last few years have been nothing short of overwhelming – some investors who bought property in Moscow ten years ago have made up to £1 million. 

Average prices in Moscow grew by 10 per cent in 2007, with Knight Frank forecasting growth of 18-25 per cent in 2008 – but is Moscow still the best Russian property investment bet? 

Not according to the Global Property Guide, which recently downgraded its Residential Investment Rating on Moscow residential real estate from 'negative' to 'strongly avoid'. The company pointed out that Moscow property prices are now among the highest in Europe and that demand for residential property is still strong. However, rentals rates have not kept pace with rising Russian property prices – and this is making Moscow a less attractive investment proposition.

St Petersburg, on the other hand, has seen both rising apartment prices and an increase in gross rental returns over the past year – the city was named in the Knight Frank Annual Wealth Report as having one of the highest price growths achieved by prime residential areas (38 per cent). The 'oil towns' of Tyumen and Novabrsk also offer good investment potential, while Russian property on the Black Sea coast is tipped for major price rises. 

Russia's near neighbour, the Ukraine, is also being named by experts as a good investment prospect for 2008. Again, property along the Ukranian Black Sea coast is performing particularly well. According to property investment specialist David Stanley Redfern, investors should buy in this area before prices rise beyond their reach.

"One of the keys to making a sound investment is to strike while the iron's hot and to buy into a developing region before its prices and calibre rise beyond reach," said a company representative. "We've seen it before in emerging markets and we'll see it again I'm sure, but coastal Ukraine on the Northern Coast of the Black Sea has attracted an astounding amount of attention, managing to maintain its low profile and to be an unrealised hot spot of potential."

Russian and Ukranian property investors should ensure that they do their research before buying – both markets have a good deal of potential, but can present legal difficulties for inexperienced buyers.
 
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For more information visit:
www.knightfrank.com
www.globalpropertyguide.com
www.davidstanleyredfern.com

Article first published 02 June 2008