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. Last Updated: 07/27/2016

Moscow Property Psychosis

I personally solved my housing problem three years ago, when I bought a big three-room apartment overlooking an embankment and a church. But the property boom in Moscow goes on and on. Like politics, the housing mania in Russia is something one can't really escape, because it's absolutely everywhere.


A lot of people are struggling with the question of whether to rent, lease, buy or sell. For many, especially the "old rich," as opposed to the "new rich," renting out apartments is the only means of keeping up with living standards. One friend of mine, Sasha, a well-known musician and broadcaster, leases both his apartment and his dacha in order to raise two kids and subsidize his wife's college studies. Another couple, Anya and Sasha, are renting a small studio and lease their huge apartment, inherited from their ex-functionary parents. Some people I know have gone to live abroad and are paying all of their bills there thanks to the flats they let out in Moscow.


An example of another kind is Sergei, in his past life a famous investigative journalist and author of detective novels, who has given up his creative work altogether and become a partner in a real estate agency. His wife, Katya, who's always been a housewife and a remarkable hostess, is now in the same business and is doing very well. Although she says she had never thought about getting involved in real estate, she fell into the work when a lot of her neighbors began looking to sell their apartments to finance moves abroad. Soon, just from commissions, she was making more money than her husband, who eventually decided to give up writing and join her.


To understand the Moscow property psychosis better, we'll have to look back at the situation in old Soviet times. At that time, the property market didn't exist, because all real estate belonged to the state. The key concept was the propiska (registration), a mark in personal passports that attached each person fairly permanently to a certain living space. There were still three ways to improve one's living conditions, however. One way was to swap apartments that were approximately the same size but of different configurations (two one-room flats for one three-room, for example) and in different areas. Another option was to join the never-ending (five years was the absolute minimum) wait for municipal apartments. They were free, but usually in the outskirts of the city and only granted to those living in sub-standard conditions (like five people in one room). The last way was to buy a so-called cooperative flat (long-term credit was available), which again meant a long wait and the inability to sell the apartment if necessary.


The law on privatization of apartments in Moscow was passed at the end of 1989. In the beginning, the market was tiny and chaotic and prices were ridiculously low. At the time, my wife and I lived in a one-room apartment, so we started to look for a bigger one. I remember that in the spring of 1990 we were offered a huge four-bedroom flat on Gorky Street (now Tverskaya) for only $12,000, which we thought was too much. But the prices were starting to double every couple of months, and soon the business took on some sinister features. Ruthless flat-finders would hunt down lonely old people or half-conscious alcoholics, pay them almost nothing (sometimes a couple of boxes of vodka), sign the papers and throw these poor people out on the street.


Any apartment can be sold, and anyone can buy a flat. According to my professional sources, nearly half of the property sold, a majority of which is among the most expensive real estate available, is going to non-Muscovites. Foreigners and businessmen from throughout Russia and the CIS are making up the majority of clientele for real estate agencies.


As far as prices are concerned, they vary from $500 to $3,000 and up per square meter. The rate mostly depends on the quality and security of the building, less on actual location. The most valuable apartments are in modern nomenclature-type houses, which always have guards at the entrance, well-kept halls and stairwells, and parking space. I was quite surprised to learn that flats in a relatively remote ex-Communist Party apartment block in Cheryomushky are substantially more expensive than apartments in the gorgeous Stalinist skyscrapers in central Moscow ($2,500 per square meter, over $1,500). I also read that construction is under way on buildings, specially designed for the new rich, where a penthouse-type apartment will cost up to $7,000 per square meter. It's good news for somebody.