Property prices near the Kremlin have trebled.

The palace of Grand Duke Alexander in Moscow.

Artist’s rendering of the planned Moscow City Mall.

Historical buildings are torn down to give way to modern projects.

Investment climate in Russia still suffers from weak property rights and inadequate competition.

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Russian roulette?

Russia's new found wealth has seen global investors looking to cash in on its property market. But some reports say it is unsustainable and too expensive. Elspeth Hoare investigates the pros and cons of buying in this emerging market.

What springs to mind when you think of Russia? Communism? Caviar? Cold War? If so, it may be time to think again and embrace Russia's other C: Capitalism.
It's a far cry from the Soviet era - the Russia we know now is famous for its generation of tycoons and oligarchs; it has the second largest number of billionaires in the world, totalling 110, behind only the USA.

This new found wealth has resulted in a booming property market and with it a new flux of investors.

Yes, we may have been so distracted by the Russians buying up London and Dubai's exclusive residences that we failed to see the earlier potential of their home economy where property prices in Moscow have tripled and an 18-25% growth rate is forecast for 2008.

And, true that many smart gains have already been made, however, Russia is the largest country in the world spanning 11 time zones with a rising middle class so there are plenty of opportunities for aspiring "Boris-come latelys".

Three major factors have driven Russia's property revolution in a way that has made it stand apart from other Eurasian economies.

First and most obvious was the fall of the Communist regime where less than 1% of property was privately owned. Under Yeltsin private property ownership flourished as tenants were encouraged to buy their homes; quite a turnaround from the previous "property is theft" mantra under Communism.

Secondly, Russia is home to the largest mineral and energy reserves in the world and so the effect of the growth in global energy prices has been substantial; increasing its foreign reserves by more than 39 times since 1999 to US$460bn by the end of 2007.

This new found wealth from the energy industry inevitably led to a real estate explosion - not just in petrodollars looking to be spent, but also in the growth of other industries, such as the service industries that sprung up to support the oil and gas boom.

This created lucrative jobs for graduates giving them a high level of disposable income. It seems prudent to mention here however, that despite Russia's oil and gas prowess, these energy sources make up only 5.7% of its GDP.

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