Gold rush

Sergei, a 38-year old businessman, prepared a special New Year present for his family of three -- a six-room flat in a 19th-century building near Chistiye Prudy metro station. The move to a new home cost Sergei $175,000, all of which he paid in cash.It was one of the more expensive deals on the fledgling yet booming Moscow real estate market, where 120,000 flats changed owners in 1993. This year sales are expected to double to 240,000 apartments.Newspaper ads and mailbox flyers tempt Muscovites daily to sell their flats, which were obtained for free from the state in the Soviet era but have gained value every month since buying and selling real estate became legal in the late 80s. Moscow is home to an estimated 600 to 800 real estate firms hunting. All of them are hunting for property downtown, where one sale could bring them tens of thousands of dollars in profit.Most clients are businessmen who can pay six figure dollar prices in cash, and firms buying apartments for employees. Real estate companies also say more and more foreigners are investing in Moscow flats. The number of foreign buyers may be larger than it appears, however, because many use Russian middlemen to speed up the paperwork and reduce the risk of being cheated.The interest in real estate is so great that television's Channel One this month launched a four times weekly program, "The Real Estate Market Review." In one episode the show explains why a flat in a brick building is worth more than one in a panel building. It also gives some tips on how to avoid being cheated when selling or buying. The newspaper Kommersant regularly covers the changing price of a meter of real estate in various parts of Moscow.At a recent conference of realtors, lawyers and police officials organized by Izvestia newspaper and Zakon (The Law) magazine, Russian realtors predicted the real estate boom would continue in 1994 and said it would be bigger if a mortgage system existed. The absence of a legal procedure for evicting defaulters inhibits most mortgage banks from lending, and forces them to get by on bizarre system of interbank credits while they await mortgage legislation.Despite this handicap, Moscow flats are changing hands at a prodigious rate -- and reshaping the lives of many modest city residents. Many people choose to sell their homes in central Moscow and move to smaller apartments or to more remote areas of the city. Some even manage to get two flats in exchange for one, playing on the difference in the price of apartments in the center and the suburbs.Irina Timakova, a 62-year old retired researcher, sold her spacious three-room flat on Leninsky prospect in January to buy two apartments on the outskirts of Moscow."I've lost a privilege of living in central Moscow but managed to buy a two-room flat for my daughter's family and a one-room flat for myself," she said.Nothing illustrates the real estate gold rush more than the crowded hallways of the one place in Moscow where apartment sales can be registered. The Mosprivatizatsiya offices are packed with furious sellers, buyers, swappers and heirs, and three days is often not enough to get the sale or swap registered. While officials say the system was created to provide better control over the real estate business, notorious for crime, one realtor called it "just another bribe opportunity.""I'd pay $500 to jump the line and finally get out of here," said Nikolai, a businessman, 26, who just bought a one-room flat for $25,000.Smoking nervously outside the headquarters of Mosprivatizatsiya, he said he has been saving money to buy a flat for three years and chose a spacy one-room flat in a brick building near Timiryazevskaya metro station in north Moscow. Nikolai said the real estate agency offered him a dozen flats to choose from and the size of the kitchen was decisive for him.But for a flat to be sold it must first be privatized, and hundreds of Muscovites come to Mosprivatizatsiya every day to register a privatization. The registration is only the final, most pleasant part of the process. It takes at least a week to obtain all necessary documents from a local police office, house maintenance agency and three or four other authorities, while another week could be lost while city housing officials estimate the market value of the flat. Since Moscow apartments are considered among the few assets in Russia with some guarantee of endurance, demand continues to grow while supply of good-quality flats is more limited.Yevgeny Kuznetsov, deputy sales department at Interkont, one of the largest realtors in Moscow, said most people who wanted to move out of increasingly expensive Moscow or sell their second apartment to live with parents, have already done so."We feel a certain deficit of good apartments at the moment and this trend is likely to continue," he said. Kuznetsov said that in the first weeks of the year prices on good quality one and two-room flats began to rise, while the price of three-room flats and "bad" flats was stable.Even though new times have brought Russia new values, some preferences remained unchanged -- modern biznesmeny and pop stars love living in the center of Moscow just as much as top party chinovniki and official artists liked it in 70s. While the poor are pushed out of the center Moscow, Russia's new rich are moving closer to the Kremlin, no matter what it costs. The most prestigious areas in central Moscow are Patriarch's Pond and most of the area within the Garden Ring Road, Ulitsa Alexeya Tolstogo, Ulitsa Gertsena and Maxim Gorky Embarkment where the price of a square meter of a flat could be as high as $2,000.According to realtors, Moscow does not have what would be known strictly in the west as "good neighborhoods;" apartments are valued more for the type and condition of a particular building. Yevgeny Kuznetsov, deputy sales director at Interkont firm, said that there are no good areas in Moscow, but there are good groups of houses. For instance, a group of brick houses near Noviye Cheryemushky metro station in south-west Moscow, initially built for the government officials, is among most wanted locations, with the price of a square meter as high as $2,500.A small neighborhood, called Tsarskoye Selo, has its own shops and security and will not let in outsiders without first checking with a tenant. Another small group of buildings of that type, called Lebed, is located on Leningradskoye Shosse, Kuznetsov said.According to dealers, flats in traditionally popular areas along the green metro line from Belorusskaya to Sokol and around Krylatskoye, Yugo-Zapadnaya and Frunzenskaya metro stations remain among the most wanted, with an average price of up to $1,000 per square meter."There are no good areas in Moscow, but there are areas where people do not want to live," said a dealer at Delovaya Strategiya firm. Unpopular areas include Kapotnya, a badly polluted industrial zone, the southern suburb of Biryulyovo and other parts southeast and northern Moscow, with the price of square meter not exceeding $400-450, he said. "It is very hard to sell flats in these areas and most commonly buyers are not Muscovites who do not know much about the city."Surprisingly, since they are generally in remote locations, flats in new neighborhoods like Mitino, Zhulebino and Butovo are becoming increasingly popular. A dealer with Start firm, who asked not to be named, said that his clients paid as much as $600 per meter in a such areas. "They prefer to have normal people, not alcoholics, living next door," he said. Size and design were also important to clients. "People are tired of 6-meter kitchens where they can hardly move," he added. The dealer said that another attractive aspect of buying a newly-built apartment was that it avoided having to wait for the previous owners to move out -- something that can take a while because of Russia's residency permit regulations. "It is funny but a new map in the metro convinced many people to buy flats in a new neighborhoods, as it showed that metro would appear there relatively soon," he said. Kuznetsov of Interkont said that as buyers have become more choosy, bad apartments have lost value. Some clients do not like the wooden floors and ceilings in downtown buildings and prefer to have the metro 200 meters from their home, he said. Others hate the low ceilings in modern flats and like a park nearby."You offer them a flat, and the only question they ask could be if ceilings were 320 centimeters," he said. There is, of course, a darker side to this, one of the most lucrative businesses in Russia. Methods of obtaining property can be illegal.Recently a Russian artist lost his apartment when he was forced to sign a sale title a week after he rented out his large flat in center Moscow. The new tenant used a gun to convince his host to sign the paper.Another relatively common way of obtaining expensive flats for nearly nothing involves searching for sick elderly people or alcoholics. Such people can be convinced to sell their flats in exchange for several million rubles or life-long care. The Russian press and television have reported on a number of cases of people disappearing after signing such deals. With so much at stake in the city's real estate boom, they may not be the last.