What people got as property was the air within the walls of their apartment. Even the registration of private housing is not always done right: the land under public spaces there also usually belongs to developers or municipalities. Moreover, the author is aware of cases when the communications of a village are located on land plots sold to citizens and the developer does not draw up an easement (the owner’s obligation to provide access to public communications for compensation – or, more often, a discount to the purchase price of the real estate) but reserves the right to dig up the communications in case of an accident.
to the Housing Code adopted in 2020 even allow for demolishing any building “to renovate the living space and create favorable conditions for the life of citizens” – in other words, the authorities can do almost whatever they want. Nevertheless, housing in Russia is still considered one of the best stores of value and most reliable investments.Distrust in the financial markets or experience of generations?
I have many friends still in Russia. All of them are absolutely against the war, Putin and the current political system. Most of them have professions that would let them at least earn a living in an inexpensive country. Often, they make more than just enough for bread and butter. Most have savings. Most invest these savings in a house, considering it an investment. Moreover, almost all my friends who left Russia left behind an apartment – even just a small one – which they rent out.
I have been telling my friends for a long time that renting out an apartment is not the best investment. Besides the above mentioned legal issues, the income from renting out an apartment is, in the best case (an apartment in a good location, not bought with a mortgage, with inexpensive repairs and furniture), 6% per annum. In rubles. Meanwhile, the average annual return of the S&P 500 is the same 6%, but in dollars. The MOEX exchange is returning 18.4% (with dividends).
After all, Russian government bonds are yielding 7-8% – with notional amounts of RUB 1,000, all savings can be invested there – without taking out a mortgage. And that’s not counting the depreciation of the apartment, losses when tenants leave and income tax. My arguments always get a similar response: “You do not know what the stock market will do, but an apartment is always an apartment, nothing will happen to it.”
It is possible that potential investors are put off by the immaturity of the national stock market and its attendant distortions, ranging from widespread insider trading (trading based on information received from companies or government agencies ahead of the market) to the low qualifications of, if not fraud
by, financial advisors and public funds, not to mention high volatility due to frequent economic crises. The traditional distrust
of Russians in institutions – and financial institutions in the first place – should not be discounted either. But there is another reason – the experience of generations.The only safeguard
Economist Yakov Mirkin writes
in his book Rules of Senseless Financial Behavior
that every generation of Russians loses their assets, and the next one starts life from scratch. However, a house, an apartment, a dacha – these assets have often survived 3-4 generations.
There is also a social aspect in people’s attachment to their homes, especially in the capital. Even though in Russia the so-called propiska
, which actually fixed a person within the boundaries of a settlement, was replaced by registration at one’s place of residence, social benefits are tied not to the individual, but to the place of registration. For example, Muscovites receive a pension supplement of RUB 10,000 to RUB 20,000, despite the fact that the average pension in Russia is RUB 19,322
. Since social payments make up a large chunk of income for the majority of the population
, it is not surprising that