A crisis is unfolding in Russia's construction industry. In the first quarter, 8.1 million square meters of construction were started, a 24% decrease compared to the same period in 2024. Meanwhile, the volume of new construction projects decreased in 43 out of 86 regions. The most significant drop occurred in Moscow and the Moscow region (-51% year-on-year).
Among the reasons for the worsening situation:
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Decreased demand for housing amid high mortgage rates (an average of 25%) and the cancellation of the state subsidized mortgage program;
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Rising prices for construction materials due to increased demand from Russian companies for materials from other countries and a 2.6% acceleration in inflation from January to March 2025;
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A labor shortage, as 85% of construction companies faced a shortage of workers in 2024;
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The exit of foreign design and engineering firms from the Russian market due to Western sanctions;
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Problems with imported software due to limited access to Western technologies.
The deepening crisis in Russia's construction industry points to financial problems among the population (declining real incomes, accelerating inflation) and stagflationary processes in the Russian economy. If the Central Bank of Russia's key interest rate remains at 21% or is increased, the situation in the construction industry will continue to deteriorate.
