Supporters of real estate investing usually start with a simple argument: prices don’t change every day, therefore the risk must be lower than in public markets. There is some truth to this. Real estate is not marked to market every minute. But the conclusion that follows is often wrong. The absence of daily pricing does not mean the absence of volatility. It simply means that volatility manifests differently — less frequently, more abruptly, and often at the worst possible moment.

I came to this realization through experience rather than theory. A few years ago, I was selling my apartments in Moscow. The process took about 3.5 years. In the end, I had to sell at a price roughly 16% below the original level — the very level my broker had been completely confident about at the outset. And that does not even account for accumulated inflation. It is easy to dismiss such an outcome as a “special case.” But the data suggests otherwise: the issue is not the transaction itself — it is a structural feature of the market.

Real estate market

The price in the paper is not the real price

At any given time, several different “prices” exist in the real estate market:

  • the listing price
  • the broker’s or appraiser’s valuation
  • the counterparty’s view
  • and finally, the transaction price

They rarely match. And that is normal.

For example, according to Redfin , in 2025 homes in the U.S. were purchased on average at a 7.9% discount to the original listing price. Nearly two-thirds of transactions were completed below asking price.

This means that even in a calm market, the gap between the listing price and the actual transaction price is not an exception — it is the norm.

Until a transaction occurs, price is merely an expectation. Capital can appear stable even when it lacks a proper structure .

Time as a component of risk

Even if we ignore discounts, another parameter remains — time.

In the same U.S. market, in 2025 the average time to sell a residential property was 50–56 days. More than half of properties did not sell within two months (let alone my 3.5 years). And this is one of the most liquid real estate markets in the world.

A transaction that takes months to complete does not have just a price. It also has time — during which money is being eroded by inflation. The realized return becomes lower than expected. And this changes how risk should be perceived.

Liquidity is not simply the existence of a price — it is the ability to turn an asset into cash here and now, at a price close to market. In practice, this factor is often missing from the overall capital structure .

“Stability” is often misleading

In public markets, prices adjust continuously.
In real estate, adjustments happen in stages:

  • first, the number of transactions declines
  • then, time-on-market increases
  • only afterwards do discounts appear and prices adjust

The data illustrates this clearly. In 2025, the share of U.S. homes sold above asking price fell to about 22.8% ( from over 50% in 2022), while the share of discounted transactions rose above 60%.

When volatility becomes visible

In everyday conditions, real estate volatility is barely noticeable. In stress periods, it becomes obvious.

Recent years provide several examples (Reuters data):

This is not daily volatility like in equities. It is volatility that accumulates over time and reveals itself only when a transaction is forced.

Foreign real estate: diversification or lack of alternatives

After 2022, investors from Russia rushed into Turkey and the UAE. Not only for diversification or capital protection — in many cases, there were simply no viable alternatives.

In many jurisdictions, transactions involving Russian buyers became difficult or impossible: banks refused to process payments, compliance requirements tightened, and in some cases direct restrictions were introduced. In this context, Turkey and the UAE were not just “attractive” — they were among the few accessible destinations.

This is confirmed by Reuters data: in 2022 Russians became the largest foreign buyers of housing in Turkey and were actively purchasing property in Dubai. At the same time, the Turkish lira has been depreciating against the U.S. dollar at an average rate of roughly 31% per year (for comparison, the ruble has depreciated by about 12–16% annually).

However, Turkish and Gulf banks soon followed the lead of their European counterparts and began tightening controls. As reported here , enhanced checks, delayed payments, and additional documentation requirements became common for transactions involving Russian clients.

The final stress test came with the escalation of the U.S.–Iran conflict. The impact was primarily on infrastructure. The conflict disrupted transportation, closed airspace, and affected logistics, including major hubs like Dubai. The energy factor intensified as well: the potential blockade of the Strait of Hormuz — a key global oil route — led to rising energy prices and fears of a global slowdown.

The real estate market did not “collapse.” But:

  • transactions slowed
  • activity declined
  • uncertainty increased
  • investor expectations shifted

As industry reports note , the first consequence of such events is not falling prices, but a pause in decision-making and a contraction of liquidity. These situations often become the starting point for a deeper review of one’s capital structure .

Public markets, of course, reacted immediately. Shares of Dubai developers dropped by 13–17% within a week.

Financial assets react instantly; physical real estate reacts with a delay.

In turbulent periods, this creates an illusion of stability. In reality, the market has already changed — it is simply not yet reflected in transaction prices.

Out of reach

If Turkey and the UAE became “entry points,” real estate in Europe — previously popular among affluent Russian investors — found itself in a different situation.

After the events in Ukraine and the introduction of sanctions, some assets became difficult to manage. In many cases:

  • assets fell under restrictions
  • transactions required special approvals
  • banks refused to service operations
  • cash flows were blocked or delayed

This is reflected in legal analyses by international firms. For example, Hogan Lovells notes that EU and UK sanctions significantly affected real estate markets and access to assets for individuals linked to Russia.

Damned if you do, damned if you don’t: volatility may be absent, but the ability to act disappears. In such cases, an independent review of the capital structure can be useful.

Securities behaved differently. The issue was not the asset itself, but access to it. The “bridge” between Russia and Western infrastructure broke, affecting certain holding structures rather than the underlying investments.

Valuation exists. Verification does not.

Real estate can be valued using the same methods as equities:

  • discounted cash flows
  • comparable analysis
  • income approach

This is standard, for example, in the methodology of the Royal Institution of Chartered Surveyors.

In other words, “fair value” exists for both real estate and securities. The difference lies in how often the market forces us to revisit that valuation:

  • in public markets — daily
  • in real estate — only at the moment of transaction

Until then, valuations may remain unchanged for years — at least in our perception.

Real estate is not “less volatile.” Its risks simply appear differently:

  • prices are formed episodically, not continuously
  • liquidity can disappear
  • exiting the asset takes time
  • infrastructure risk (banks, transfers, jurisdictions) matters
  • currency can materially affect outcomes

This does not make real estate a bad asset.

But it changes the question we should ask.

Not “should I invest in real estate or not,” but “what role does this asset play within my overall capital structure.”

It is at the moment of sale — not at the moment of purchase — that the quality of that decision becomes clear. And that is precisely the moment most investors underestimate at the start.

Vladimir Vereshchak — investment advisor
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