Year of Graduation
Modelling the Investment in Residential Estate with the Use of Mortgage
Strategic Corporate Finance
The relevance of the present research is defined in the context of expanding the knowledge on the rationality of investment in residential estate in large Russian cities. We construct a financial calculator that provides a matrix of recommendations for making a dwelling choice, i.e. a choice model/tool that can be used at any given date. Obtained results indicate that market terms currently make renting an economically rational choice for Moscow and most Saint-Petersburg districts, mortgage is a robust choice for average Russian cities due to low price-rent ratios. Low average real incomes and high dwelling prices result in the affordable size of an apartment of 33-34 m2, with an exception of Chelyabinsk that has a very favourably priced market. The more expensive an apartment is, the more likely it is to be overvalued in relation to corresponding rent, correlation between prices and P/R ratio is 73%. Prices per m2 generally reflect the change in wages while listed rents are less connected to wages in average large cities. The value of the real option to buy an apartment is valued at least 60% of the down payment throughout the sample.