The Russian economy continues to struggle under sanctions as high interest rates see mortgage costs soar and housing developers pushed to the brink of bankruptcy.
Interest rates in Russia are at a record 21% as President Vladimir Putin tries to keep a lid on rampant inflation.
Various reports have highlighted how food prices have soared in the last year, with potato costs rising as much as 64%. Recent reports from Russian newspapers also warned butter will see another 12% price hike in the coming months.
Another area of the Russian economy that is reeling from high interest rates is the property market.
Mikhail Matovnikov, head of the analytical department at state-owned Sberbank, admitted in November that home affordability hit “absolute rock bottom” in Russia.
He added that “it has never been so bad from the point of view of what a normal person can afford to buy, taking into account the mortgage and all subsidies.”
RadioFreeEurope reports that the price of homes in Russia soared in 2023 and 2024 as the country’s military spending and housing programmes helped stimulate the economy.
But an end to house-buying subsidies and rising interest rates has brought the Russian housing market to a screeching halt.
Russia’s deputy prime minister, Marat Khusnullin, even had to assure housing developers he would “do everything to prevent developers from going bankrupt.”
According to reports, mortgage volumes in Russia dropped by nearly 40% to around £40 billion.
Experts have warned that this figure could drop as low as £28 billion in 2025.
Speaking to the Daily Express, former Kremlin speechwriter Abbas Gallyamov, now a Russian dissident living in Israel, said “people are struggling” in Russia due to inflation.
He explained that this could lead to more pressure on Putin.
Mr Gallyamov said: “People are struggling and businesses are struggling. These are major factors which have multiplication effect on general weariness with the war and disappointment with the lack of military result.
“Together, these things produce a growing demand for peace, which is already pressing hard on Putin.”
Meduza reported in November that the Russian economy is bracing for a wave of bankruptcies as businesses struggle.
In fact, corporate bankruptcies had already jumped 20% in 2024, according to data from the Unified Federal Registry of Bankruptcy Declarations.
Sergei Chemezov, CEO of the state-owned defence conglomerate Rostec, even warned that Russia will see a number of businesses collapse under the economic pressure.
He said last year: “If we keep operating like this, most of our businesses will go bankrupt.
“If a product’s manufacturing cycle takes a year, advance payments cover only 40% of production costs. The rest must be borrowed, but high interest rates wipe out all profits.”
The International Institute for Strategic Studies’ latest Military Balance report says Russia is now spending 13.1 trillion rubles (£116 billion) a year on its military.
