Russia » Economics

How much is default's square meter?

Federal authorities plan to bring down Moscow's building industry

Only deaf-muted with blindness remain completely unaware of present-day building boom in Moscow. Also, Moscow's over-the-top apartment prices make even an Afghani heroin dealer raise his eyebrows. However, only specialists are aware of the fact that no less than 80% of the city's business and 70% of city's budget are being fulfilled precisely by means of this building business. They do not like to talk about this much though. Basically, without its skyrocketing building industry, Moscow does not really differ much from any mediocre town of our vast Motherland, except for its size, of course.

Well, what can I say; Moscow is going through a real building revolution these days. Who is going to live in these fabulous apartments, one might question? Thing is, there are a lot of Moscow residents, mainly invalids, veterans and those with many children, who have been on the waitlist for a new apartment since early 80s. It was only after the recent tragedy in “Transvaal Aqua Park” that everyone started talking about how all of these new buildings violate all norms and regulations. At last, the tragedy has attracted everyone's attention to the quality of such fast growing building industry in Moscow. It is hard to imagine how many living and industrial buildings have been erected in the capital within the past decade. One can hardly recognize the city now. Everything appears civilized, beautiful. The question concerns a different matter—how long is this beauty going to stand?

Mayor of Moscow Yuri Luzhkov has been criticizing Moscow's chief builder Vladimir Resin several times already. It is hard to imagine however that something is going to change drastically. According to the information from Moscow's city hall, about 30-40% of all newly constructed buildings do not pass the government commission’s test and therefore, are not being connected to service lines.

According to real estate experts, such building rush along with incontrollable rising prices, is a rather common occurrence in cities in times of economic uprising. Russia is not the only country to go through this stage. Experts point to such countries as Japan along with other developing “Asian tigers”, such as South Korea, Singapore and Taiwan. However, everyone is also aware that Japanese building rush ended abruptly with dreadful consequences as the market crumbled.

Popular media sources have been prophesizing the same consequences for Moscow's building industry in the course of the past six months. Specialists are certain that the capital’s market is “overheating” just as the Japanese one during 90s. If we are to add to this the terrible Moscow corruption and the fact that Moscow's building industry is practically monopolized by members of a single financially-political clan, it becomes obvious that some unprecedented measures could be taken in order to prevent prices from falling. Another words, the city's budget comprised of our own tax money may end up directly involved in the possible crisis. Also, if we take into account the fact that more than a half of economic growth of the entire country is being accumulated in the Russian capital, it is possible to imagine the consequences that may follow in case of the market collapse.

Political factors are also at stake here. Federal government and Moscow government have both been involved in a rather unpleasant dispute over the capital’s land. Mayor of Moscow Yuri Luzhkov does not wish to give away the land to the federals. In the end, he will have to. A new law “concerning government’s and municipal property” (prepared by deputy chief of the president's administration Dmitry Kozak), entails complete land redistribution in favor of the federal center. No doubts, the "United Russia"'s majority in the State Duma will willingly accept it.

It is a known fact that Yuri Luzhkov sits “firmly” in Moscow. No “foreign construction” workers will be able to enter the capital. The mayor in turn does not intend to share profits with anyone. And what can be better for real estate market. Some signs already begin to emerge, which point to the fact that the feds are seriously harvesting such thoughts. Besides, the planning stagnation of the capital’s “square meter” favors such plans.                                 

An interesting paradox emerges: construction workers began criticizing each other. Or perhaps, their sponsors pay them the wrong credit. Is it therefore possible to talk about continuation of the building boom in Moscow in such conditions at all?

So, are you still tempted to purchase an apartment in Moscow? Don't rush! Perhaps, tomorrow, it will be twice as cheap. However, think twice before purchasing real estate in today's gorgeous apartment complexes, for they might simply collapse right before your eyes.

Timofei Iznorkin   

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