Three issues are attracting the attention of Russian public opinion and each of them can influence the real estate market in short term. First is the incoming banking crisis, described also by some as consolidation of the banking sector. Second is the final episode of the YUKOS affair, a yearlong soup opera orchestrated by Kremlin to strip of assets one of the most powerful "oligarchs" in the oil business. Third is widespread gossip about a possible real estate bubble burst that could threaten the market in Moscow by early 2005.
The new banking crisis in Russia seems surprising in a country getting recently so huge amount of easy petrodollars. As we have always insisted, Russia isn\\\'t country where the key players obey market rules only. The main among them Kremlin often creates its own rules that could change the fate of companies and banks regardless of their managerial skills. The present banking crisis isn\\\'t just occasion showing who is in charge in the house. The sea of petrodollars that engulfs Russia may only be a temporary factor. To be more precise dollars that come in can get out if their owners feel threatened by Kremlin. In a country with so many banks it\\\'s practically impossible to monitor properly the financial flows. That\\\'s why the strong political leadership will require also a consolidated bank system of fewer and huge banking institutions, all of which in the hands of trusted persons. No new economic group independent of Kremlin would arise in Russia without sufficient credit resource. On the other hand, next time Kremlin decides to penalize some "oligarch" it could do it through banking leverage, without using judicial system and turning the issue into political. It seems that a limited banking crisis won\\\'t disturb the positive trends on the real estate market. Some experts even say that withdrawing money from problematic banks will increase the disposable incomes and make the market go up.
The second issue that is in the center of the Russian public opinion interest is the final moments of YUKOS oil company or rather its final moments as independent company. The last months confirmed our hypothesis about the property rights in Russia as following feudal rather than modern pattern of relationship, the feudal rights being temporary grants against personal services to the superior authority rather than inherent rights of each citizen. The future seems like seeing time and again an old movie. The company assets as a whole or as separate smaller companies will be given to trustworthy companies. No one above certain level will dare to challenge the political power of the "king". For those who don\\\'t get the lesson, they will be the next to be dispossessed.
Third issue that is related to real estate market in Russia is the gossip about a possible bubble burst, especially in Moscow. The argument is that now up to 40% of all transactions are made by investors aiming for short-term returns. With a market that becomes more and more expensive and hard to digest for the ordinary buyers, the returns will decrease and the short-term minded investors will flood the market shortly, making the prices go down. This is expected to happen by early 2005, when the prices will reach in Moscow $2,400/sq.m compared to today\\\'s $1,900/sq.m. This argument is based on the assumption that the main players on the market are short-term investors, an opinion that isn\\\'t shared by all experts. More realistic forecast will be to expect the real estate prices follow the oil market fluctuations, which are now favorable toward Russia