Studies Eastern European Markets
Eastern European Markets
Sergey Boltramovich, Nickolay Lotov, Sergey Baldanov,
Grigory Dudarev, Pavel Filippov ja Hannu Hernesniemi

(ETLA/Ministry of Trade and Industry of Finland 7/2006)
    Construction in Russia has grown at an annual rate of 10 per cent since the year 2000. Owing to economic growth and emergence of a middle class, residential housing has become an important segment for the construction industry. New dwellings are sold to buyers about 90% finished. The residents either do the finishing work themselves or have it done by private professionals or contractors specializing in this field. The quality of the work is poor. It is easy to enter the market and there is a lack of training. Most of the sector belongs to the grey economy. The long duration of the finishing phase is detrimental to the residents because it causes delays in moving or they have to live in the midst of the remodelling work.
    The Ministry of Trade and Industry financed this study on whether and how the supply of finished dwellings could be increased in Russia. The study also investigated other aspects related to housing purchases. The results of the study can be used to promote the competitiveness of the Finnish construction sector in Russia and foster cooperation between the Finnish/Russian construction sectors. Various interest groups of the Finnish construction cluster were represented on the project’s steering committee. The study was carried out by Etlatieto and two Russian subcontractors: Solid Invest, a research and consulting company, and Comcon, a company specializing in research surveys.
    First, the study investigates developments in housing-related legislation and trends in residential construction across Russia as well as in Moscow and St. Petersburg. Next the study presents the results of a survey of some 70 households from Moscow and 70 from St. Petersburg that bought a new flat in 2004 or 2005. They were asked questions about the choice of flat, financing and finishing construction. In addition a small group of construction experts were interviewed in St. Petersburg. The conclusions of the study include the views of the researchers and recommendations about how Finnish companies should develop their activities in Russia. In addition an expanded session of the steering committee was held where potential strategic actions to foster competitiveness were discussed. The results are included in the appendix of the book.
    Some 515 thousand dwellings were built in 2005. The average size of new dwellings was 84.7 square meters. About 25% of Russia’s dwellings were built in Moscow and the neighbouring Moscow region. The Moscow Region has even bypassed Moscow because of a severe shortage of building sites. St. Petersburg ranks as the third largest construction area in Russia. The trends in St. Petersburg are believed to forecast the developments in Russia’s other large cities.
    The choice of dwelling is affected the most by the price and the location. These criteria were more important to residents of St. Petersburg than Moscow. The cleanliness of the neighbourhood and the condition of the building and flat were of particular interest to Moscovites while both regarded well functioning design solutions as important. Residents of St. Petersburg prefer to save and take risks by buying a flat in the early stages of construction. The differences are attributable to the greater purchasing power of the Moscovites as well as greater environmental problems. People want to finish their flats themselves because they want a pleasing result and finished flats are not available on the market. The researchers concluded that particularly purchasers of a medium priced flat would be interested in buying finished ones if they were available. This is deemed to be the most promising market segment for Finns.

Hannu Hernesniemi, Research Director
Etlatieto Ltd.
Lonnrotinkatu 4 B, 00120 Helsinki, Finland
Tel 09-609 901, Direct +358-9-609 90 203
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