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. Last Updated: 07/27/2016

Alfa Bank Sees Major Real Estate Drop

Inflated values, the worldwide financial crisis and softening demand will cause real estate to fall to "West European levels," said Tatyana Orlova, the chief economist at Alfa Bank, in a report released Friday.

Russian real estate is extremely expensive by world standards, with the average price for 100 square meters of luxury real estate equal to 156 times per capita GDP, while West European real estate sells at 30 times per capita GDP, the report said.

"Considering that a sharp decline in worldwide real estate prices recently occurred, we are expecting a major contraction in demand and a drop in prices for the Russian real estate market," the report said.

The report also raises inflation forecasts for 2008 from 13 to 15 percent and significantly raises inflation targets for 2009. The latest government revision puts inflation at 12 percent for 2008.