Economic Boom Makes Moscow Most Costly City

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MADELEINE BRAND, host:

This is DAY TO DAY. I'm Madeleine Brand.

In a few minutes, a look at Nevada's Senator Maggie. She's a woman who leads a double life.

But first, Russia will host this year's G-8 Summit later this week, in St. Petersburg. The country's feeling a new financial self-confidence, due largely to huge oil profits.

As NPR's Gregory Feifer reports, those oil profits have made Moscow one of the most expensive places on the planet.

GREGORY FEIFER reporting:

Gone are the days when Americans in Russia could live like royalty. The once disdained ruble, has firmed up against the sinking dollar, and Moscow has become shockingly expensive.

A new survey by New York's Mercer Human Resource Consulting Group, has named it the world's costliest city for foreigners.

American John Mann(ph), works for a major Russian investment company. He says prices have skyrocketed since his arrival five years ago, because of the many opportunities to make money.

Mr. JOHN MANN (American Businessman): I think a lot of it has to do with the price of oil because - oil and other commodities - because what you have in Moscow are what, more billionaires than any other city besides New York. And then, on the next level down, there are just hundreds of millionaires in town. There's a lot of money floating around Moscow.

FEIFER: But, while Mann says Moscow is among the priciest cities in the world, he agrees with many Muscovites, that it's not the most expensive. He says cost of living surveys, don't take local bargains into account.

The Mercer survey didn't measure the cost of metro rides: 50 cents. Or the price of the city's ubiquitous gypsy cabs: $3.00 to $6.00.

Still, groceries, house wares, even a cup of coffee, can see steep. The Mercer survey put a cup bought at a coffee shop, at over $5.00.

The average wage in Russia is around $300 a month. But the manager of a central Moscow coffeehouse, says its exorbitant-seeming prices haven't scared off customers.

(Soundbite of foreign language spoken)

Coffeehouse Manager: (Through Translator) They're willing to pay a lot for coffee, because they like to drink from expensive coffee cups, eat cake with natural ingredients, and enjoy good service.

FEIFER: Economist Mikhail Dilyagen(ph), says Moscow's high prices are the result of a serious failure on the government's part, to address the issue.

Mr. MIKHAIL DILYAGEN (Economist, Moscow): (Through Translator) By far, the largest amount of the country's income is concentrated in the hands of a tiny part of the population, three to five percent. That vastly inequitable distribution of wealth, doesn't have any sound economic justification.

FEIFER: Dilyagen says the government is doing nothing to regulate prices as they gravitate toward the highest levels.

(Soundbite of car horn)

FEIFER: Still, money is changing the face of Moscow. In just a few years, the streets have become crowded with countless late-model luxury cars: Audis, Mercedes, Bentleys.

(Soundbite of construction crane)

FEIFER: The city is also spouting construction cranes, as office buildings and apartment houses transform the skyline. Real estate is leading Moscow's boom. Prices have more than doubled in the past year.

Ilya Mezulskaya(ph) is head of the sales department at Moscow's Delta Realty. She says her company often rents out two bedroom apartments for $10,000 to $25,000 a month.

(Soundbite of foreign language spoken)

Ms. ILYA MEZULSKAYA (Realty Sales): (Through Translator) The market is very hot. Prices are rising, but people are buying. When properties first come on the market, sometimes the prices seem inflated. But the market keeps rising and quickly catches up.

FEIFER: As the city expands, it's pushing up against its Soviet past, in the form of suddenly valuable dachas(ph), whose residents don't want to sell.

(Soundbite of foreign language spoken)

FEIFER: In a suburb of Budva(ph), 40 families are making national news by refusing to leave their wooden cabins to make way for new high-rise apartment buildings, prompting the city to send in riot police to disperse their protests. Residents complain of beatings and threats their houses will be burnt down.

Yuri Dubvijian(ph) says his family is being offered a small, one-bedroom apartment, for five people.

(Soundbite of foreign language spoken)

Mr. YURI DUBVIGIAN (Budva Resident): (Through Translator) The authorities want to buy our land for $9000 for 100 square yards, but they want to sell it at auction for a starting price of $100,000. That's what they're fighting for, here.

FEIFER: Dubvigian, a construction worker, says he can barely afford to live in Moscow, let alone visit a restaurant.

(Soundbite of foreign language spoken)

FEIFER: Restaurant? he said. What restaurant? I can't remember the last time I went to one.

Gregory Feifer, NPR News. Moscow.

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