Price per Square Meter: The Structure and Mechanism of Primary Housing Pricing in Russia
Abstract
The housing market is described in terms of the average price per square meter. This single metric allows for comparisons across years, cities, projects, and entire regions. However, behind it lies a more complex system: land costs, design, construction work, infrastructure, financing, completion timelines, the mix of apartments for sale, and the developer’s financial performance.
Trends in the primary market sometimes give a contradictory impression. A superficial comparison of statistics reveals periods when the number of transactions declines, yet the nominal value of new housing continues to rise. Prices for certain building materials stabilize, while apartment prices maintain their previous trajectory. Large developers maintain high selling prices even in a weaker market.
These observations led me to formulate several initial hypotheses. The first concerned price inertia: perhaps the cost of new housing reacts more slowly to changes in demand than the actual volume of sales. The second concerns the limited impact of construction materials on the final price of an apartment. The third concerns the ability of the development model to redistribute market adjustments across price, the number of square meters sold, new project launches, financing, and profit.
I decided to test these assumptions using publicly available data from Rosstat, the Bank of Russia, DOM.RF, the financial statements of major developers, and CM PRO research.
The results turned out to be more complex than the initial hypothesis.
Prices do indeed exhibit significant inertia. However, a decline in demand manifests itself in the market through other variables: the number of transactions, the real cost of housing, installment terms, the cost of capital, and subsequent decisions regarding the launch of new projects. At the same time, stability in sales prices does not always mean stability in a developer’s net profit.
It is precisely the mechanism of this distribution that is the subject of my research.
1. Apartment Price as a System of Indicators
It is worth beginning the analysis with the very concept of price.
The average cost per square meter, the price index, the developer’s published price list, and the actual economic cost of purchasing an apartment describe different aspects of the market.
The average price reflects the cost per square meter based on the total of properties actually sold.
The price index is designed to analyze trends in housing costs. Rosstat’s methodology takes into account registered market prices and apartment characteristics; national averages are aggregated from regional data using the sold area as a weighting factor.
The asking price is the price a buyer sees on the price list.
The contract price is the nominal value of the apartment specified in the contract for participation in shared-equity construction.
The economic price takes into account the payment schedule, discounts, installment plans, and the time value of money.
These indicators are interrelated, but each addresses its own research question.
Table 1. Five Levels of New Housing Prices
| Indicator | What It Shows | Main Application |
| Average Price | The average cost per square meter of units actually sold | Overall market level |
| Price Index | Changes in value over time | Analysis of trends |
| Asking Price | The publicly listed price of a property | Commercial policy |
| Contract Price | The nominal amount of the transaction | Analysis of contract terms |
| Economic Price | The present value of all payments | Comparison of the buyer’s actual financial burden |
This distinction is particularly important when the sales structure changes.
The average price may rise because comparable apartments are becoming more expensive. It may also rise because, in the current period, the share of expensive regions, higher-class housing, small apartments with a high price per square meter, or properties at an advanced stage of completion has increased.
In its simplest form:
Change in average price = change in the cost of comparable housing + change in the structure of properties sold
The scale of this statistical problem is well illustrated by a 2026 study by the Bank of Russia. A simple comparison of Rosstat’s average prices revealed a 52% gap between the primary and secondary markets. After an econometric comparison of apartments by year of construction, class, square footage, and other characteristics, the gap narrowed to about 9%, and when renovation costs were factored in, it reached up to 18%¹.
This study focuses on comparing the primary and secondary markets; therefore, its percentage figures cannot be mechanically applied to the short-term dynamics of new construction. It demonstrates something else: the structure of the properties can significantly alter the observed average price.
2. Price Inertia in the Primary Market
The year 2025 is particularly useful for analysis, as the market went through two distinct phases during that year.
In the first half of the year, sales of new-construction units declined significantly, and developers simultaneously reduced the number of new projects launched. In the second half, demand recovered. As a result, 25.6 million m² of housing was sold under shared-equity contracts for the full year 2025—1% more than the previous year. The monetary value of sales reached 5.2 trillion rubles, an increase of 11%. New project launches totaled 41.3 million square meters, while the portfolio of multi-family housing under construction stood at 116.6 million square meters².
Therefore, the annual statistics for 2025 already reveal an important characteristic of the market: the trends in the volume of housing sold, new project launches, and the ruble value of sales are evolving at different rates.
A particularly clear example emerges in the second quarter of 2026. Following heightened demand at the start of the year, the Bank of Russia recorded a decline in deposits into escrow accounts; the regulator attributes the high baseline in the first quarter to changes in the terms of the “Family Mortgage” program effective February 1. At the same time, the project financing portfolio continued to grow, approaching 11 trillion rubles.
The concept of price rigidity, or price inertia, is used to describe this behavior: prices adjust more slowly than the volume of goods sold.
For housing, this mechanism has a physical basis.
An apartment sold today is part of a building for which an investment decision was made several years ago. The land has already been purchased or registered, the design has been developed, permits have been obtained, a credit line has been established, contractors are working, and utility networks and infrastructure obligations are factored into the financial model.
Therefore, a decline in current demand quickly reduces the number of new transactions, while the project’s existing economics change much more slowly.
Sequence of Market Adjustment
Decline in effective demand
↓
Decline in the number of transactions
↓
Change in commercial terms of sale
↓
Change in escrow account balances and the project’s financial model
↓
More cautious decision-making regarding new launches
↓
Change in future supply
The nominal price operates within this system and tends to react more slowly than physical indicators.
This leads to a more precise formulation of the initial observation:
During certain periods, a decline in physical demand in the primary market is accompanied by a significantly slower adjustment in the nominal price of housing.
This is an established observation for specific market episodes. The hypothesis of constant structural asymmetry across the entire Russian market for the years 2019–2026 requires a separate econometric test.
3. Building Materials, Construction Work, and the Final Price of Housing
The second initial hypothesis relates to production costs.
Here, it is particularly important to distinguish between three levels:
the cost of building materials → the production cost of construction work → the final price of an apartment
According to Rosstat data, in 2023, material costs accounted for 58.8% of construction companies’ expenses, while labor costs accounted for 19.4%. This refers to the structure of the actual cost of production for companies in the “Construction” sector.
This indicator describes the production of construction work. It does not show the structure of the price paid by the apartment buyer.
The final product includes many more components.
Final price per square meter = physical construction + land and land rights + infrastructure + utility connections + design and approvals + financing costs + sales and management + taxes + developer’s profit
Physical construction includes:
Construction work = materials + labor + equipment + subcontracted work + other direct production costs
This hierarchy eliminates the common error of double counting, where the cost of materials and labor is added on top of the cost of construction work, which already includes them.
In March 2026, CM PRO published its own assessment, according to which construction materials accounted for about 21% of the final price per square meter of new housing in 2025, compared to 45% in 2014. The publicly available publication lacks a complete set of input parameters necessary to reproduce the calculation independently; therefore, this figure should be correctly treated as CM PRO’s estimate rather than as official statistics.
Parallel official statistics from Rosstat confirm a more general structural conclusion: even within the production costs of construction companies themselves, material expenses represent only one element of the production model; the final price of housing is determined by a significantly broader economic context.
This leads to a fundamental conclusion for the construction materials market. Changes in the prices of cement, rebar, glass, or insulation affect developers’ production costs; however, the extent of this impact depends on the share of the respective material in construction work and the share of construction work itself in the project’s overall economic framework.
The cost of materials is one of the factors influencing housing prices. The scale of the final price movement is determined by the system as a whole.
The Economic Anatomy of a Square Meter
4. The Financial Dimension of a Square Meter
A mortgage is a financial instrument; however, its tangible impact is reflected in an apartment’s square footage, the density of the neighborhood, its distance from the city center, and the scale of future construction.
The loan determines the budget available to a family. This budget translates into the number of square meters, the type of housing, and the geographic location of the purchase.
Mass-market subsidized mortgages became one of the key institutions of the previous housing cycle. The Bank of Russia conducted a separate study of their impact using a dynamic macroeconomic model. According to the regulator’s calculations, the maximum effect occurred in the second quarter of 2024 and amounted to 19.7% for real prices of new real estate and 10.6% for investments relative to a model scenario without such programs.
This is a model-based estimate. It describes a hypothetical counterfactual scenario and therefore requires this specific wording.
Nevertheless, the mechanism is quite clear:
lower borrowing costs → increased purchasing power → higher demand → partial capitalization of the additional demand into housing prices
When the supply side reacts slowly, this effect is amplified.
On July 1, 2024, the mass, non-targeted preferential mortgage program ended. In the second half of the year, the market shifted to targeted programs, primarily the “Family Mortgage” program, with significantly higher market loan rates. The Bank of Russia recorded a noticeable decline in market mortgage activity following the end of the mass program. (Central Bank of Russia)
Thus, mortgages play a role in shaping the product itself: they influence the availability of living space and, at the same time, the volume of construction that developers deem economically viable to launch.
5. Project Financing and Escrow Accounts
The financial system also operates on the developer’s side.
A modern multifamily residential project is financed by a bank, and buyers’ funds are held in escrow accounts until the terms of the contract are fulfilled. The greater the accumulated escrow balance relative to the project debt, the more favorable the cost of the corresponding portion of financing may become.
Therefore, the developer’s cost of capital depends on several factors at once:
Cost of project financing = amount of debt utilized × effective interest rate × duration of capital use, taking into account coverage by escrow funds
In the third quarter of 2023, the weighted average rate for project financing was approximately 5.57%, and the ratio of escrow funds to debt was approximately 85.9%. By mid-2026, the financial environment had become significantly more expensive, yet project financing retained its advantage over conventional corporate debt.
This creates a closed loop:
Changes in demand therefore affect the project in two ways. They alter the volume of future revenue and simultaneously influence the financial terms of construction already underway.
Economic statistics are directly translated into the physical environment here: today’s sales pace influences decisions regarding the number of buildings, apartments, and infrastructure that will be built in a few years.
6. New Developments as a Temporary Supply Structure
In residential construction, supply has limited short-term elasticity—the ability to quickly change the physical volume of the product in response to demand.
A completed home cannot be removed from the market as quickly as goods from a warehouse. A project already under construction is tied to land, bank loans, contractors, and a completion schedule.
The next project launch becomes a more flexible variable.
In 2025, Russian developers brought 41.3 million m² of new projects to market, while the total portfolio of projects currently under construction amounted to 116.6 million m². DOM.RF characterizes developers’ behavior as more cautious amid unstable demand.
This is precisely where the real options theory comes into play. A prepared land plot represents an investment opportunity: the owner can start a project now, change its parameters, or postpone the launch to a later period.
Therefore, a decline in demand can manifest through the following sequence:
fewer sales today → a more conservative investment model → fewer new project launches → slower growth in future supply
The change in the volume of new project launches is a proven fact. However, the use of these launches specifically as a deliberate tool for maintaining prices remains a research hypothesis.
This distinction is important. When several developers make similar decisions, it may simply be an independent, rational response to identical financial conditions. To draw conclusions about market power, a separate analysis of local market concentration, company market shares, and the substitutability of specific projects is required.
7. Installment Plans and the Economic Value of an Apartment
High mortgage rates have given rise to another coping mechanism: installment plans offered by developers.
As of March 1, 2026, the Bank of Russia estimated citizens’ obligations for the purchase of off-plan housing on an installment plan at 1.6 trillion rubles, or 17% of the value of the shared-ownership agreements signed.
Installment plans change the meaning of the nominal price.
An apartment priced at 20 million rubles, paid for in full today, and an apartment with the same 20 million rubles in the contract, where half of the payment is deferred for two years, have the same contractual value but different current economic values.
In text form, the calculation looks like this:
Economic price of the apartment = the sum of all future payments, discounted to their present value
The longer the interest-free or preferential deferral period, the greater the difference between the contractual and economic prices.
This is precisely why the nominal price per square meter can remain stable while simultaneously increasing the actual flexibility of the purchase terms.
Based on publicly available data, we can confidently say that this instrument is widely used. To estimate the average economic discount in the Russian market, a database of specific contracts with payment schedules is required.
8. Product structure and average price
Newly built properties are a heterogeneous product. A 35-square-meter apartment in a completed business-class building in Moscow and a 70-square-meter apartment in the early stages of a project in a regional center fall into the same statistical category in the primary market, yet they have completely different economic characteristics.
Therefore, the sales structure is significant in its own right.
The Etalon Group’s corporate results provide a clear example. In 2025, the company sold 671,000 m² of real estate for 153.5 billion rubles. The average price increased, with the business and premium segments growing particularly rapidly. In the fourth quarter, business-class sales area grew by 180% year-over-year, while its sales value more than doubled. (Etalon Group)
Consequently, the growth in the corporate average price here reflects both price movements and changes in product mix.
This effect has a spatial dimension. A higher share of high-end segments implies a different location, different infrastructure, and higher requirements for architecture, engineering, public spaces, and finishes.
The average price per square meter becomes more expensive as the nature of the square meter itself changes.
9. Price Stability and Profit Stability
The initial hypothesis regarding developers turned out to be the part of the study that required the most significant adjustment.
A large company is indeed capable of maintaining an average selling price even when the physical volume of sales declines. At the same time, its net financial result depends on a much broader set of factors.
The Samolet Group clearly illustrates this discrepancy.
In 2024, the company sold 1.302 million m² of new-construction real estate, compared to 1.575 million m² the previous year. The average price per square meter rose from approximately 187,000 to 213,500 rubles/m², an increase of 14%.
The price helped partially offset the decline in physical volume.
The following year’s financial statements reveal the second stage of the mechanism. In 2025, Samolet’s revenue totaled 366.816 billion rubles, gross profit was 130.967 billion rubles, and operating income was 99.578 billion rubles. At the same time, financial expenses reached 106.129 billion rubles, resulting in a net loss of 2.291 billion rubles.
Table 2. “Samolet”: Multiple Levels of a Single Economy
| Metric | Value | Economic Meaning |
|---|---|---|
| Primary real estate sales, 2024 | 1.302 million sq. m | Physical sales volume |
| Average price, 2024 | 213.5 thousand RUB/sq. m | Value of the sold product |
| Revenue, 2025 | 366.8 billion RUB | Recognized group revenue |
| Gross profit, 2025 | 131.0 billion RUB | Result after cost of sales |
| Financial expenses, 2025 | 106.1 billion RUB | Cost of debt capital |
| Net result, 2025 | -2.3 billion RUB | Final result for the entire group |
“Etalon” follows a similar pattern. In 2025, adjusted earnings before interest, taxes, and depreciation amounted to 30.6 billion rubles, with a margin of 20%, while the net loss reached 22.3 billion rubles. The company attributes this to the specifics of recognizing interest expenses and the high cost of corporate debt.
This leads to one of the most consistent conclusions of the entire study:
The stability of the selling price and the stability of net income represent different characteristics of the real estate development model.
The price can support a project’s gross economics. Expensive capital is capable of passing market adjustments further down the line—into net income and cash flow.
10. Building Materials Manufacturers and Physical Volume
For manufacturers of cement, concrete, glass, or insulation, the market works differently.
Their products are measured primarily by physical volume. A decline in new construction projects affects production capacity utilization much more directly than it does the market price of an apartment.
This is precisely where the structural difference between participants in the supply chain becomes apparent.
A developer manages a land bank, construction phases, apartment layouts, installment plans, launch dates, and various pricing programs.
A manufacturer of base materials is more closely tied to metric tons, cubic meters, and plant capacity utilization.
From this, we can hypothesize an asymmetric distribution of the market shock: a physical slowdown in construction is likely to manifest sooner in industrial production volumes, whereas the price of finished housing exhibits greater inertia.
For now, this assertion remains a partially confirmed hypothesis. The dynamics of individual materials support it in terms of physical volumes, whereas a comparable financial analysis of manufacturers and developers requires a separate study.
11. The Primary Market Mechanism
Upon closer examination, the initial impression of the primary market’s “unique” logic gains a more precise economic explanation.
Housing is a durable, heterogeneous, and location-specific product.
Its production takes several years.
Land has a limited supply.
The financial model is closely linked to mortgages and bank loans.
Different apartments have different consumer characteristics.
The developer can control the timing of the launch of the next phase.
The contract price may be supplemented by installment plans and other commercial terms.
All these characteristics create a market in which adjustments are distributed between price and quantity over time.
Table 3. How Market Conditions Change Along the Chain
| Participant | Main channel of change |
| Buyer | Credit availability, monthly payment amount, choice of size and location |
| Developer | Sales volume, commercial terms, new project launches, cost of capital |
| Bank | Mortgage rates, project financing, risk requirements |
| Contractor | Volume of construction works |
| Materials Manufacturer | Capacity utilization and physical volume of orders |
| City | Pace of new apartment, utility network, and infrastructure development |
Here, economics returns to the physical environment.
Reduced mortgage affordability means choosing a smaller apartment or a different location. Fewer new launches mean fewer new buildings in a few years. Rising cost of capital means the project is more sensitive to excess floor area and infrastructure costs. Changes in the product mix translate into different densities, housing classes, courtyard quality, and the level of utility infrastructure.
The price per square meter becomes the financial expression of this entire spatial system.
Conclusion: Price as a Result of the System
The study began with a few simple observations.
The nominal price of new construction sometimes continues to rise even during periods of declining physical sales.
The cost of construction materials follows its own trajectory and accounts for only a portion of the total cost of a developer’s product.
A large developer is capable of maintaining selling prices even in a weaker market.
Upon further examination, each of these observations took on a more precise form.
The primary market reacts to changes in demand in a sequential manner. The number of transactions changes most rapidly. Next, the commercial terms of purchase, escrow deposits, and loan terms change. The next level involves decisions regarding the launch of future projects. The nominal price tends to maintain its momentum longer than most other indicators.
The cost of materials plays a significant role in construction. The final price of an apartment simultaneously includes land, infrastructure, design, the cost of capital, management, and the project’s financial results.
Mortgages influence effective demand and, through it, contribute to price formation. The Bank of Russia’s model demonstrates a significant effect of preferential lending on the cost of primary housing.
Developers’ financial statements reveal another important distinction: stable prices and gross margins can coexist with a decline in net profit due to the cost of debt.
As a result, the initial hypothesis regarding unusual pricing is refined into a more accurate conclusion.
The Russian primary housing market is a credit-dependent, locally segmented market for a durable and heterogeneous asset, characterized by pronounced inertia in nominal prices and limited short-term supply elasticity.
Its market adjustment is distributed across time, quantity, credit, product structure, and price.
For the buyer, this system manifests itself in apartment size, monthly payments, distance from the city, and infrastructure quality.
For the developer—in the land plot, construction schedule, cost of capital, and the next project launch.
For the construction industry, it manifests as the physical volume of the project.
For the city, it manifests as the environment that remains after the financial cycle ends.
Prices change.
Loan programs change.
The market goes through another cycle.
Every square meter built remains a part of the city.
Limitations of the Study
The study uses publicly available official and corporate data collected using different methodologies. Statistics from Rosstat, indicators from DOM.RF, data from the Bank of Russia, and corporate financial statements describe different market levels and are therefore compared only within the scope of their respective definitions.
CM PRO’s estimate of the share of construction materials in the final price of housing is considered an analytical assessment by the agency pending the publication of a complete, reproducible calculation.
The evidence base allows us to confidently state that there is a difference in the dynamics of physical volume and nominal price in specific periods. A nationwide assessment of the persistent asymmetry in price reactions to positive and negative shocks requires a quarterly econometric model.
The relationship between a decline in new housing starts and subsequent price support has a theoretical basis and an observable statistical premise; the causal nature of the effect remains subject to further verification.
Estimating the exact shares of land, infrastructure, financing, and profit in the cost of one Russian square meter requires a project-based sample of specific residential complexes.