Middle classes of Moscow discover the mortgage

Despite lingering economic worries and fears that President Vladimir Putin is becoming increasingly author- itarian, Moscow is experiencing a property boom to rival any in the West, and house prices are as much the topic of dinner party conversation as they are in London or Sydney.

The price of flats in or near central Moscow rose by more than 30 per cent last year. Some prices - in what are becoming the most prestizhnye, or sought-after, districts in the old centre and the nearby suburbs - increased by far more. "Flats are just snapped up off-plan, for millions of roubles; there are people buying several flats at once," said a local source. And increasingly, buyers are not the super-rich "oligarchs" and their clans, but professional and business people.

The centre of Moscow and its ever-spreading suburbs bristle with cranes, and a good many brand new towers. Moscow newspapers include glossy weekly property sections which are bursting with advertisements for new and renovated housing, and the services to go with them. One promotes a new suburb "with Western-standard infrastructure, including surfaced roads", showing a tree-lined street that would not be out of place in Surrey.

The capital now has hundreds of estate agents, while banks are pushing "record" low long-term interest rates and - a completely new concept in Russia - mortgages. A host of new businesses have sprung up to provide everything that goes with home-ownership in the mind of an upwardly mobile Russian: fitted kitchens, leather settees, saunas and - climate notwithstanding - open-air pools.

Lacking the words for such an unfamiliar phenomenon, Russian has borrowed from English for property terms, if not always appropriately: "cottages", pronounced kottedgi, actually refer to detached mansions, while townkhauzy are semis or terraced houses that have around twice the floor space of their British equivalent.

"Nimbyism" has also passed into Russian as the new middle class flexes its muscles. The developer of one of the most sought-after suburban developments, in a bend of the Moskva river, called Serebryayny bor (silver forest), said that he would stop building houses there soon, otherwise prices would fall as the rural charm of the place was lost. Already the new suburbanites are complaining about people chopping down trees in their neighbourhood for firewood, as they have done for decades.

In the Communist era the only evidence of any housing market in Moscow were the myriad notes written in tiny handwriting that appeared on lamp-posts and then on community notice-boards, proposing an exchange. The only way most people could realistically move then was to swap: one district for another, a large one-bed for a small two-bed (or vice versa), a two or three bed for two smaller flats - for those divorcing or with grown-up children.

In late Soviet times, it was possible for the better-off to buy into a co-operatively owned complex, where the flats were fitted to higher specifications, but allocation was still the rule. Most people were beholden to the party, trade union or their professional organisation. Friends in high places or corruptible officials were crucial to a satisfactory outcome.

But black-market bottles of premium cognac no longer work their magic; housing is more and more a matter of money. Most Muscovites are excluded from the market and fear that the prospect of escaping the shackles of renting and one day being able to buy a home is receding ever further. Many young Russian couples and families look aghast at the prices and the gap between the payments on even the cheapest mortgage and what they earn and pay for their state housing.

But the question that vexes everyone with even the faintest ambition of home-ownership is whether to dive in now, or wait in the hope that prices might dip. Estate agents argue that prices in the Russian capital are still cheaper than in, say, London, and that a shortage of decent accommodation means they must still have some way to rise. All that proves, however, is that estate agents are the same the world over.