Russia Economy 2016 Update: Moscow’s Once-Hot Real Estate Market Feels Oil Price Slump

Oil prices below $30 a barrel, paired with Western economic sanctions after the annexation of Crimea, have hit Russia’s struggling economy, with Moscow’s housing market dropping by almost 30 percent last year, local media reported Tuesday. The news comes the same day as the International Monetary Fund downgraded its economic growth forecast for Russia.

Moscow’s once-booming real estate market has felt a considerable slowdown as the Kremlin plans for long-term low oil prices. In 2015, over 113,000 apartments, not including new builds, were sold in the country’s capital, down from over 162,000 the previous year, local newspaper Vedomosti reported. The market for new buildings was also down, with 18 percent fewer apartments sold in 2015 compared with 2014.

The spending slowdown comes as the ruble hit an all-time low against the euro Monday, the Associated Press reported. Moscow used to be listed among the world’s most expensive cities to live in, but the ruble’s depreciation has seen the city drop from a ranking of ninth-most-expensive to 50th in a rating released in June.

In its 2016 forecast for Russia Tuesday, the IMF predicted the country’s economy would contract by 1 percent over the next year, Reuters reported. Previously, the IMF had predicted a 0.6 percent contraction in October when oil prices were still above $40 a barrel.

The Kremlin said last week it was already planning for a possible worst-case scenario should oil prices remain low for an extended period. Russia pegged its 2016 budget to oil prices of $50 a barrel. The country’s finance minister has said prices will need to go above $80 a barrel to balance the budget.

The Kremlin is also dealing with economic sanctions levied by the U.S. and EU over Russia’s annexation of Crimea from Ukraine in March 2014. Russian President Vladimir Putin has continued to deny any direct Russian military involvement in the war in Eastern Ukraine, a claim Kiev has rejected.