nalysis of hedonic price indices for Moscow’s secondary housing market and the impact of interest rates

In this paper we construct monthly hedonic price indices for the cost per square meter of secondary housing within the administrative boundaries of Moscow (including New Moscow Administrative District). The data is collected from the most popular platforms, such as Cian, Avito, Yandex, and others. The analysis covers a particularly interesting period from July 2023 to December 2024, during which there was a continuous tightening of monetary policy, which inevitably impacted the secondary housing market. Due to the absence of subsidized programs in this market, mortgage rates are closely aligned with the key interest rate. We analyze the impact of key rate dynamics on real (deflated by the Moscow CPI) hedonic indices, as well as average and median price indices, and find a statistically significant negative effect from the monetary policy tightening. The results of the analysis show that nominal indices (both hedonic and average/median price indices) exhibited growth up until the first quarter of 2024, after which they began to stagnate. By the end of 2024, nominal indices indicated an approximately 10% increase in the cost per square meter of housing in Moscow compared to July 2023. At the same time, real hedonic, as well as simple average and median prices per square meter of housing in Moscow, were below the levels at the start of the sample period. Over the course of about a year and a half, the hedonic price per square meter in secondary housing, according to our estimates, fell by approximately 4% to 5%. Hedonic and standard indices show quite different dynamics in the first half of the sample, as well as significantly different reactions to monetary policy tightening, highlighting the importance of accounting for property characteristics when analyzing the real estate market.