In July 1991, then-President Boris Yeltsin signed a law privatizating housing in Russia, granting people ownership of the property they lived in for the first time in over 70 years.
Within a decade prices of once-valueless property were to shoot up to become some of the most expensive in the world.
Like most things in the early 90s, the privatization of the real estate market turned swiftly to disarray, with people across the country buying and selling property without any conception of its value.
“The state of the market back in the days could only be described as chaos,” said Natalia Katz, managing director of the Usadba real estate agency.
Crafty entrepreneurs quickly cleared residents out of apartments in the center of the city, correctly guessing that property there would rocket in value. Others cleared entire floors of apartment blocks, making vast apartments to sell to a newly established class of ultra-rich businessmen.
Criminal gangs, which blossomed in the lawlessness of the transition period, forced helpless residents out of their homes.
For the first time, value was placed on real estate that used criteria other than size. With their thick walls and high ceilings, Stalin-era apartments became a must-have status symbol for anyone who had benefitted financially from the clumsy transition to Wild West-style capitalism.
“Stalinist-era apartments and places near the center were the most prestigious and expensive at that time,” said Anna Levitova, managing partner at Evans Property.
A dingy Khrushchyovka-era apartment near Belarussky Station was valued at $3,000 in the early 90s, an unheard of fortune for its residents. In less than a year, the same property was worth $50,000, and in two years – over $200,000.
Décor took on a life of its own as a growing class of nouveau riches found they could afford anything their imaginations could dream up. Houses that resembled small castles began to spring up on the outskirts of the city, while former kommunalkas were stripped and embellished with all manner of ornate designs.
“In the mid-90s, during the ‘wild market,’ apartments with moldings, marble and gold were regarded as prestigious,” said Alexander Ziminsky, director of the elite property department at Penny Lane Realty.
Over time, as tastes began to develop, the compulsion to demonstrate riches was replaced by a demand for functional and comfortable accommodation, more akin to Western requirements. As Russia entered a new millennium, the rough and tumble of the transition period began to abate, bringing with it a more orderly real estate market.
The early 2000s saw a massive construction boom, brought on by an economic revival following the 1998 financial crisis.
A new phenomenon emerged in which brand new apartments were valued far higher than apartments in historical buildings, many of which were left to fall into disrepair.
“In Moscow, in contrast to London, New York and other cities, new buildings are two to three times more expensive than apartments in historic buildings nearby,” said Levitova, of Evans.
As more and more people flocked to the Russian capital in search of employment and prosperity, the demand for housing escalated, with thousands of new high-rise apartment blocks swelling out the rapidly expanding suburbs and prices steadily rising.
While a growing number of real estate services made the industry more professional, the construction and real estate sectors have remained some of the country’s most corrupt. It is characteristic that until late 2010, one of the industry’s key players was Yelena Baturina, the billionaire wife of long-serving Moscow Mayor Yury Luzhkov, who was fired by President Dmitry Medvedev last October.
New construction boom?
After grinding to a halt during the 2008 world financial crisis, the Moscow real estate market is now slowly beginning to grow again.
Prices of luxury properties are breathtaking, with a top-range apartment in the center of the city selling for around $1 million.
Experts say a growing trend is developing for townhouses and loft apartments, while a recent city government decision to expand Moscow's boundaries holds out the promise of a new construction boom to the southwest of the city over the next two decades.
Source: The Moscow News