Working meeting with Moscow Mayor Sergei Sobyanin 2015-03-02 13:40:00 Novo-Ogaryovo, Moscow Region Mr Sobyanin briefed Vladimir Putin on Moscow’s development trends and the preliminary results for 2014. President of Russia Vladimir Putin: Mr Sobyanin, today we will discuss the whole range of issues concerning the capital. A capital city is a complex organism and a large one too. Let’s start with this fact that Moscow is a major metropolis. The world has quite a few other big cities. How does Moscow compare to them in your opinion? Moscow Mayor Sergei Sobyanin: Mr President, this is an interesting question because, as you know, there are numerous ratings agencies that present their vision of the situation in various areas of different cities and countries’ development. These ratings are mostly based on subjective perceptions, unfortunately, and in many respects are politicised in nature. This means that Moscow, together with Russia in general, comes in at 100-something, or 50-something, or wherever, and we are left each time trying to work out the objective truth of the matter. We decided to work out the real situation not relying on subjective criteria but by actual facts and statistics. We ordered a study from one of the world’s leading analytic agencies to see how much capital investment is really coming in, how much investment there is in Moscow, and how much real estate is coming onto the market. We compared the results with those of other major cities such as New York, London, Berlin, Beijing, Shanghai and others to see where Moscow stands among them and get an idea of the development trends taking place here. The result shows that over the last four years, Moscow has outpaced the other major world cities by a two-fold rate on average and is in first place.  You could of course say that the trends are all very well but the absolute figures are small, and that is why the trends look so good. But we looked at the absolute figures and we see that they are not bad at all. In terms of bringing new real estate onto the market over the last four years, for example, Moscow is in fourth place behind Beijing, Shanghai and Tokyo.  You should also bear in mind that these cities differ from Moscow in that Greater Beijing, say, encompasses the entire region, and this amounts to the same thing as combining the results for Moscow Region with those for Moscow. Even fourth place among the world’s major cities is certainly not the same as being down in the 50s or 100s in terms of investment. This is a good and serious result. In some other areas, such as new office space coming onto the market, for example, which is an indicator of business activity, Moscow is in first place. Moscow came first for new office space over the last four years and is in fourth place for real estate in general. These are good results that show that all the talk about our country or our capital city not being attractive for investors and people not wanting to put their money here is nonsense because the figures show quite the opposite. VladimirPutin: I see. You mentioned the investment attractiveness of real estate. In this respect, as you know, there are a lot of issues with the recent decisions on real estate valuation, on whether real estate should be valued according to its cadastre value or according to the old system. This was one of the issues raised at my meeting with trade union activists. Many other audiences have raised these issues too. How do you see the situation in Moscow?  Sergei Sobyanin: For a start, we have introduced a four-year transition period and optimum tax rates for real estate. Second, and probably the most important thing, is that business activity has not decreased. How do we measure this? Everyone thought that if we introduce higher tax rates (or a tax on real estate) for offices and retail, this would immediately impact the small and medium-sized businesses that rent this space and rents would go up. In fact, rents have gone down for retail space and office space. This is partly a result of the crisis, but we saw this trend emerging even before the crisis began. Why is this happening? It is happening because the owners of the real estate found it not to their advantage to have the space on their hands and inflate prices. They were forced to put the space on the market. This has pushed prices down slightly, and, taking the crisis into account, rents are at acceptable levels now for small and medium business. We see this reflected in company registrations too. In 2013, there were fewer new companies and businesses registered, but in 2014, we registered around 20,000 new companies and 11,000 new individual entrepreneurs. This shows that business activity is quite high, and business requires commercial premises of course, retail and office space. (Mr Sobyanin went on to talk about the flaws in the previous tax system on the balance value of office and retail space). Vladimir Putin: Let’s discuss the results of your work last year. Sergei Sobyanin: We have not summed up the final results yet, but Moscow is showing positive trends for the main indicators such as growth of gross regional product, real wage growth and investment growth. The figures are not in the tens of percentage points, but it is already good that they are positive and not negative figures. Taking into account the high growth figures that we had over these previous years, the results show that we have preserved the city’s potential. The main task now, as we discussed just a few days ago with businesspeople and investors working in Moscow, is to maintain investment levels and stability, including in terms of housing and commercial real estate construction and investment in infrastructure. Vladimir Putin: Good. <…>