Russia is currently experiencing macroeconomic stability. According to A.T. Kearney’s 2005 Foreign Direct Investment Confidence Index, Russia rose from eleventh to sixth FDI location globally. Despite occasional market turbulence, corporate investors see macroeconomic and political risks as less threatening than previously and perceive greater profit opportunities in Russia. This really influences the Russian Real Estate Investment Market. Among the main investors which have already entered the market are Fleming Family & Partners, EPH, London & Regional, JER Partners, Meinl Austria, GE Asset Management, the Raven Group and Quinn Properties.
According to the United Nations Conference on Trade and Development, direct foreign investment in the Russian economy more than doubled in 2005 to USD 26.1 billion from USD 12.5 billion in 2004. The Russian market performed well and the growth rate of gross domestic product (GDP) reached 6.4% in 2005. The growth rate in 2006 is expected to be approximately 6.5% and 6.0% in 2007: it is far higher than the growth rates found in Western Europe.
Real GDP growth in 2Q 2006 was 7.7% compared to 2Q 2005, and up from 5.5% in 1Q 2006. This may result in higher than expected GDP growth for the whole of 2006. This growth is largely driven by domestic consumer demand (which keeps imports high, offset only by high oil&gas exports), and less by the energy sector which remains largely under state control.
One of the strongest performing economic sectors has been construction, fueled in particular by consumer spending. The sector grew by 9.6% (year-on-year) in the first seven months of 2006. this growth has been particularly marked in the residential sub-sector (which grew by 10.1% over the same period), driven by rising incomes. Growth in average wages of 30% in July 2006 (year-on-year) has also fueled strong retail sales growth of 11.7% over the period.
