Muscovites Put Their Money in Real Estate

The best investment a person can make is in real estate, according to roughly one-third of 500 Muscovites polled by the ROMIR marketing agency.

It would seem that they are right, say sources on the real estate market.

Sergei Vakhrameyev, deputy general director of City Hall's real estate service, said buying an apartment in the early stages of construction and then selling it later on can net intrepid entrepreneurs 40 percent in profits a year.

One such entrepreneur, Andrei, who declined to give his last name, said profits from these investments could be as high as 50 percent over six months, or 125 percent per annum. Andrei does not have a real estate agent's license, nor does he work for a legally registered company, but he makes a living reselling apartments that he purchases in his own name, or those of his relatives or employees.

Over the first eight months of this year, Moscow construction firms erected 581,800 square meters of commercial housing. Almost all of this was sold in an early stage of construction. According to data from the SAVA real-estate agency, the average price for a two-room apartment in a newly built panel block building in August was between $39,800 in the east and $48,500 in the west.

According to real estate agents, investor-brokers like Andrei are successful to a large extent because developers often under-price their properties. Sometimes companies charge a single price per meter for an entire building, regardless of floor number -- excepting the first and last floors -- the view or the consumer characteristics of individual apartments. As a result, an investor can buy all the best apartments and leave the less-desirable ones for the construction company to sell.