Russian Real Estate Market: Identification of the Housing Bubble

The paper is devoted to the identification of the price bubble in the Russian primary property market which is speculated to be present due to the implementation of a subsidized mortgage program. To be precise, the research examines the presence of the housing bubble in eight Federal Districts of Russia in the period of January, 2021 to April, 2024. In order to detect the explosive price behaviour, the data on housing price index in primary market was estimated using PWY and PSY models. The results show that during the observed period the price bubbles were present in North Caucasian, South, Volga and Ural Federal Districts. However, no bubble episodes were detected in Central, North Western, Siberian and Far Eastern Federal Districts. The economic interpretation of the findings suggests that the tightening of terms of a subsidized mortgage program may have a deflationary effect on housing prices. The study provides up-to-date insights regarding a current state of the Russian real estate market. Summarizing, the research contributes to the existing empirical literature and shows the relevance of regulatory measures aimed to prevent the market overheat.