Moscow: From Soviet capital to the world's most expensive city

By Andrew Osborn
26 June 2006

When Andrei, a Russian businessman, wanted to talk to a glamorous female celebrity sitting across the room from him in one of Moscow’s trendiest restaurants recently, he did what all self-respecting new Russians do: he reached for his wallet. He tipped the waiter $1,000 to get him an introduction, ordered a $500 bottle of wine, and started talking.
When the duo embarked upon a relationship soon afterwards, Andrei sent his new girlfriend 101 red roses. A couple of weeks later, he bought her a top-of-the-range Mercedes; a couple of months later, he bought her a flat in Moscow for $500,000. A man like Andrei will go through a similar routine several times a year and may support a wife and children at the same time.
Welcome to dating Moscow-style and welcome to a city where money flows like water. Step aside Oslo, move over Tokyo, and get out of town Zurich. Fifteen years after the collapse of the Soviet Union, Moscow has been crowned the world’s most expensive city.
It is an unlikely and dubious honour for a city that was once the capital of world Communism and the epitome of cheap, state-subsidised living.
Yet in an authoritative report that will have die-hard Marxists screaming about the inequities of capitalism, New York-based Mercer Human Resource Consulting claims Moscow is now the world’s priciest city.
In a survey of 144 countries based upon a uniform basket of some 200 goods from a cup of coffee to a compact disc, Mercer placed Moscow above Tokyo, Hong Kong, London, Geneva, and New York. Last year, the Russian capital was fourth but this year Moscow’s booming property market pushed it into first place.
Prices for flats have more than doubled in the past year and the average cost per square metre is about £2,700 and rising by the day. A modest city centre flat is now hard to find for less than £190,000, a big price when you consider that the average national wage is £170 per month and the average monthly Moscow wage about £350.
Ordinary Russians are embracing mortgages (albeit with interest rates well above 10 per cent) in order to get a foot on the property ladder before it is too late and are rushing to put their names down for apartment blocks that have yet to be built in an attempt to avoid seemingly unstoppable inflation.
Cranes labour over Moscow’s skyline day and night and immigrant workers from across the former Soviet Union toil on building sites for poverty-line wages as developers try to snap up more and more land to cash in on the boom.
There are not nearly enough good quality flats to go around and prices seem set to rise even higher. Indeed, buying a flat in the Russian metropolis is now just a dream for many young Muscovites, who can only rent rooms in rundown flats in the city’s concrete suburbs in Soviet-era tower blocks.
People desperate to get a foot on the property ladder resort to desperate measures; the media often carries stories of contract killers hired to bump off flat owners, of elderly people tricked out of their city centre apartments, and of apartment blocks burnt down “accidentally” to force people to sell.
Renting in the centre of Moscow is also too expensive for many. Western companies regularly shell out more than £5,000 per month in rental costs for their employees and it is hard to find anything decent for less than £1,000 per month. Hotel prices in Moscow are also higher than anywhere else in the world. The average room rate is £165 per night, thanks to the city’s bizarre strategy of knocking down large cheaper Soviet-era hotels and replacing them with exorbitantly priced, Westernstyle four- and five-star hotels, while making no provision for anyone on a more modest budget. Visitors to Moscow are, therefore, forced to choose between slumming it in a hostel or living it up at the Metropol.
The Mercer’s report should be taken with a slight pinch of salt, however. It was primarily drawn up to help multinational companies decide how much to pay their expatriate employees posted abroad.
In other words, the prices it quotes reflect the cost of living for foreigners in Moscow leading a Western-style lifestyle, rather than for locals who have often inherited apartments and live more modestly anyway.
That said, Moscow, a city that was once drab, bereft of restaurants, and whose shelves were once infamously empty, has undergone an amazing transformation in the past 15 years that has pushed prices for everything from caviar to coffee to record-breaking levels.
It is not unusual to pay £4 for a pint of (Western) beer, to walk out of a restaurant after a modest meal with a bill for £20 a head, to choose the cheapest and most mediocre bottle of wine on the menu and find yourself paying £20, to be asked to pay £30 for a taxi from the airport, and to pay £60 for a pair of shoes that might cost half that in the UK.
Perhaps that is not surprising for a city that boasts 33 billionaires and is awash in oil money as the price of “black gold” hovers at record levels. That has inevitably had a trickle down effect which has seen officials and businessmen grow rich on the back of Russia’s oil and gas reserves.
Tasia Kirichenko, 23, a publishing executive, disagrees that Moscow is exceptionally expensive. “London is dearer than Moscow,” she told The Independent. “The products here cost the same as they do outside Moscow. We have cheap and expensive restaurants like everywhere else. Transport costs here also are also cheap.
“What is incontrovertible however is that housing and land here is very expensive. Nobody can argue with that.”
Indeed there are two Moscows – one for foreigners who don’t know what can be a bewildering city and pay a premium for familiarity and one for the locals who have retained their Soviet-style thrift. It is still possible to go anywhere on the famous Metro for just 15 roubles (30p), to find Russian bars serving beer for £1 a pint, to enjoy a three-course “business lunch” in the centre of Moscow for 150 roubles, to buy a packet of cigarettes for 50 roubles, a bottle of vodka for 200 roubles and to hail an unofficial taxi and go anywhere in the city for a maximum of £4.
The fact is, though, that if Russians have money, and many people in Moscow do, they love to flaunt it. A popular anecdote about two “new Russians”, both of whom have recently bought a tie, is a case in point.
“Mine cost 500 roubles,” says one man. “That’s nothing,” says the other man looking at his tie which looks broadly similar to his friend’s. “Mine is much better – it cost 2,500 roubles.”
The man who can claim much of the credit for Moscow’s transformation from grey Soviet metropolis into a neon-lit playground for the rich is the city’s mayor, Yuri Luzhkov.
He is a controversial figure, because his wife, Elena Baturina, is one of the property tycoons who has grown rich on Moscow’s housing boom. According to Forbes Magazine, Baturina is worth £1.3bn, making her Russia’s richest woman. There is a darker side to Moscow’s glamorous oil-driven boom though. It was on display on 23 February in the form of 66 lifeless bodies lying beneath the twisted snow-covered wreckage of what had been one of Moscow’s busiest markets.
When the roof of the Baumansky market suddenly collapsed in the early hours of the morning during the coldest winter in a generation, it was not Muscovites who were crushed to death but the people who work in the shadows to keep Moscow booming – the immigrants.
As rescue teams picked over the debris of the market, relatives of the dead stood and sobbed.
Though they had lost brothers, friends, and fathers, they knew it was useless to make a scene or complain for fear of offending the authorities.
Too poor to rent a room and working 12-hour shifts for £9 a day, these workers had slept and worked in the cavernous fruit and vegetable market thousands of miles from home. Tellingly, 64 of the 66 market traders were non-Russian immigrants from former Soviet republics such as Azerbaijan and Georgia.
Later it would emerge the building was unsafe and that many of those killed had, like so many of Moscow’s immigrant workers, been illegals.
Official Moscow did not mourn their passing for long – within days mayor Luzhkov announced he planned to erect a glitzy shopping centre on the site (while it was still being cleared).
The relatives of those who died were told that they would receive no compensation if their loved ones had been working in Moscow unofficially. Lured by the promise of a wage unattainable in their own countries, such immigrants toil on Moscow’s building sites summer and winter, sell fruit in its markets, and clear snow from the streets in sub-zero temperatures. They do the jobs that Muscovites do not want and though crucial to Moscow’s booming economy they live, and in this case die, with little recognition or reward.

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