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Moscow’s Real Estate Problem

An article in the Washington Post reports that the slowdown in Moscow’s construction boom due to the financial crisis could begin to create some serious political problems.

Polonsky’s move, suspending more than 80 percent of his company’s portfolio of projects, is one of many signs that the global turmoil that has pummeled the stock markets and banking system here is also beginning to be felt in the rest of the Russian economy, especially a real estate sector that has been soaring for more than a decade. (…) A slowdown in construction growth could present a political problem for the Kremlin, which has made providing more affordable and comfortable homes a priority in a country where surveys show as many as two-thirds of residents are unhappy with their current housing. Most Russians are still living in the cramped, Soviet-allocated apartments that were given to them in the first round of privatization in the early 1990s. The housing crunch is especially severe in Moscow, where a mix of growing demand and speculation — and tight control over land by the city and its powerful mayor, Yuri Luzhkov — has caused prices to triple over the past three years to nearly $465 per square foot.