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Cover Story

What does it Really cost to live in Moscow?
We wanted to find out whether Moscow is really as expensive a city to live in as some claim. So we gathered prices for a basket of goods in four comparison cities and analyzed the results. Here’s what we found.
By Jillian Ong

The world’s most expensive cities: London, Paris, Tokyo, New York…Moscow? Many of us have read or heard that Moscow is one of the world’s most expensive places to live, but is this really the case?

The extravagant spending habits of Moscow’s newly minted millionaires are well documented, and there is certainly no shortage of foreign bankers and businessmen living large in Russia’s capital at their companies’ expense. But for all the aspiring oligarchs in this town, scores of trolley-bus drivers, artists and schoolteachers are getting by on the tightest of budgets.

Depending on who you talk to, you’re likely to get a wide range of opinions about the cost of living in Moscow. Mercer Human Resource Consulting’s annual cost of living survey, which is used in calculating expatriate compensation packages and measures the prices of over 300 “international quality” goods and services in 250 cities, ranked Moscow the third most expensive city in the world this year (down from number two last year). But is this ranking justified? And, if it is, should you be demanding a raise from your boss? The answer is “maybe.” But, then again maybe not.

Another global survey, this one conducted by the Economist Intelligence Unit — which compares prices for 160+ products in 130 cities — places Moscow in 34th place overall. A third survey, carried out by investment bank UBS, ranks Moscow 46th, way behind usual suspects London, Paris and Rome, and even trailing regional counterparts Budapest and Ljubljana.

So, why the disparity between the surveys? And how should you respond to someone back home the next time they ask, “Is it really that expensive to live in Moscow?”

In order to find out, we at PASSPORT assembled our own basket of goods and services, and compared the prices of each item in Moscow, New York, London, Tokyo and Paris. In the process, we’ve drawn a few conclusions of our own which may help to put things into perspective.


TABLE 1: MAJOR COST OF LIVING SURVEYS AND WHAT THEY MEASURE

Mercer Human Resource Consulting Cost-of-Living Index Calculator

Economist Intelligence Unit Worldwide Cost of Living Survey

UBS Prices and Earnings Survey

WHAT IT’S USED FOR
To determine expatriate compensation packages
To determine expatriate compensation packages
To compare purchasing power around the world
WHAT IT MEASURES
Over 300 goods and services in 250 locations. Only records prices in outlets where expats can buy goods and services of “an international quality.”
Over 160 items in 130 cities. Correspondents in each city record prices in places they judge expats are likely to frequent. (A related study, the Big Mac Index, takes a light-hearted look at whether currencies are under— or over-valued against the U.S. dollar.)
Prices for goods and services, wages, taxes and working hours in 70 cities. The study then assesses the relationship between prices and earnings in each city.
KEY DIFFERENCE FROM OTHER STUDIES
Assumes that expats consume exactly the same products and use services of the same quality that they would at home. Most of the products in its Moscow basket are imports, driving the overall cost of living up.
The index calculation excludes housing rents, international schools, and health and sports facilities, all of which typically come at a premium in Moscow.
Although the basket of goods is based on Western consumer habits, wherever possible the survey
focuses on local products.


TABLE 2: HOW THE SURVEYS RANK OUR COMPARISON CITIES

TOKYO

LONDON

MOSCOW

NEW YORK

PARIS

Mercer Human Resource Consulting Cost-of-Living Index Calculator

1
2
3
10
17

Economist Intelligence Unit Worldwide Cost of Living Survey

1
6
34
27
3

UBS Prices and Earnings Survey

3
7
46
4
13

The Method

Since our basket contains less than 30 items, this survey is, of course, by no means definitive. Rather, it is a survey of the cost of goods and services that typically feature in daily life, including food, transport, clothing and accommodation.

Bearing this in mind, we tried to maintain consistency across the markets by looking at identical goods and services to the greatest extent possible (for instance, a Big Mac hamburger at a High Street McDonald’s). Where it wasn’t possible to come up with exact analogues in all the survey cities, we substituted as closely as we could. The cinema ticket prices that we recorded were all for Western, city center, English-language cinemas showing first-run Hollywood films, while the costs of basic food items came from supermarkets considered “mid-priced” in each city. We then asked five intrepid and very obliging individuals – one in each city – to collect prices for the goods and services, all on the same day.

The Verdict

The good news is that prices for many food items are low in Moscow. Bread and milk were cheaper here than in any of the other cities. According to the UBS study, a basket of 39 standard food items together cost $232 here, versus $453 in Paris and $612 in New York. One explanation of why Moscow is cheaper is that the UBS study focuses on local products whenever possible, as opposed to relying only on recognized Western brands. Another is that government subsidies help to keep the prices of certain food staples such as bread, butter, milk, salt and sugar artificially low in order that everyone can theoretically afford them. Even at middle-of-the-road supermarket Perekryostok, an unsliced loaf of white bread still costs just $0.43, compared to $2.23 in Paris and a hefty $4.21 in Tokyo.

The same trend holds true in McDonald’s, with fast food fans in London paying $3.58 for a Big Mac compared to just $1.54 in Moscow. However, for those who don’t consider burgers and fries to be proper fare, dining out here can be an expensive proposition. To illustrate the point, at $27.72, a 12-ounce Char-Grilled New York Strip steak at Moscow’s popular Hard Rock Cafe (the only up-market chain we found in all five cities) commands close to a 40% premium over its counterpart in New York, given that it has to be imported, and taking into account the generally high costs of doing business here.

Indeed, as anyone who has dined at one of the city’s more exclusive establishments knows, a meal for two including wine can easily come to a few hundred dollars or more.     

Luxury goods such as designer clothing and jewelry are also generally more expensive in Moscow than elsewhere, with a man’s silk tie from Italian designer Salvatore Ferragamo costing $127 here, compared to $99 in Paris. That fabulous Tiffany sterling silver heart tag charm bracelet will set you back almost $300 at the company’s Tverskaya ulitsa outlet, 30% more than you would pay for it on Fifth Avenue in New York.

At the other end of the spectrum, however, public transport is still staggeringly cheap here, with a metro ride costing a mere $0.34. By comparison, central London’s commuters get a pretty raw deal, paying a minimum of $3.71, and New Yorkers have to cough up a flat fee of $2.00 to ride their “subway.” Even an official Moscow taxi, at less than $12 for a 20km ride, costs about a fifth as much as a cab in Tokyo.

So, it is not possible to say that Moscow is consistently expensive across the board – or consistently cheap. In fact, Moscow prices turned out to be either the most expensive or the least expensive of the five cities for most of the items we surveyed. Ours is a city of contrasts.

But Why The Difference?

The question still remains: why are some things in Moscow so expensive compared to other cities, while others remain so cheap?
One reason is the disparity in cost between domestically produced goods and those which are imported from abroad. Since two of the studies cited (Mercer and the Economist) include items considered to be of an “international” standard, they are often restricted to using imported goods whose prices would have high labor, transport and tariff costs built into them.

Imports to Russia (like your steak at the Hard Rock) also reflect the large amount of bureaucracy that companies face doing business here. For example, all products brought into the country need at least one certificate showing that the item meets all applicable Russian quality and safety standards. Food products need an additional two – a hygiene certificate and, for meat and fish, a veterinary certificate. Once these are obtained, there are import tariffs to be paid of up to 35%. Finally, a value-added tax (VAT) of 10 to 20 percent is slapped on top of the entire amount.

Luckily for Moscow consumers, more and more goods that are up to “international standards” are being produced locally. Some of these are “home-grown” brands, while others are recognized foreign brands produced in Russia under official license.

Let’s look at the price of Heineken beer as opposed to Moet et Chandon Champagne to illustrate what this comes down to. Despite its Dutch origins, Russia’s Heineken is now brewed in St. Petersburg, so we don’t end up paying the high shipping costs or import duties when we purchase that frosty pint. As a result, the price we pay for a “Russian” Heineken is about half of what we would pay if it were still actually being imported from Holland.

On the other hand, since champagne technically comes only from the Champagne region of France, a bottle of Moet et Chandon arrives on a Moscow dinner table packed with as many extra costs as it does fine bubbles – labor, transport, taxes, and a hefty premium for its recognized brand name.

This brings us to another key factor determining retail prices in Moscow: consumer demand and brand preferences. If you’re partial to Italian fashion designers, but are of limited means, perhaps you’d best avoid the exclusive downtown shopping enclave of Tretyakovsky Proyezd, where Prada, Armani and Dolce & Gabbana sit shoulder to shoulder. The market for international luxury goods is still growing rapidly in Moscow, even though shoppers are aware that prices here are higher here than they are for the same products abroad. In general, well-off Russian shoppers may be more sophisticated than they were a few short years ago (you might remember the old joke about the New Russian who derides his friend for spending only $150 on his new Versace tie when he actually could have paid twice as much for the same tie at the store across the street!). Nevertheless, rich Muscovites are still paying top dollar to wrap themselves in the “right” designer duds. As one analyst observed, “The prices [of luxury goods in Moscow] simply reflect the amount that people are willing to pay.”

High demand (and limited supply) also goes some way in explaining why apartment rentals are so steep in Moscow (and continuing to rise), though notably still not as expensive as in some of the other cities surveyed. “Right now, there are many people entering the property market, pushing prices up,” said one project manager for an international property development firm. However, as new housing stock continues to come online over the next few years, many analysts predict that prices will level off or even come down as a result. 

What can a moscow salary buy?

Prices, however, are only one side of the picture. Using Zurich as the baseline, the UBS study compares price levels to salary levels in order to work out what people in a given city can actually afford. As UBS analyst Simone Hofer explains, “For our basket of goods and services, a worker in Moscow would have to work five times as many hours as would one in Zurich.” According to the report, the average Muscovite has to work 12 minutes to earn enough money to buy one kilogram of bread and 30 minutes to buy a Big Mac.

By the same proxy, Moscow’s earners have between three and four times less purchasing power than those in our comparison cities. Expatriate salaries, on the other hand, are adjusted to reflect the costs associated with a living standard to which they are accustomed at home, and are therefore much higher. To paraphrase Orwell, some salaries are just more equal than others. 

The Verdict – A Split Decision

So, in the final analysis, what does it all mean? Well, in a nutshell, if you crave the Champagne and caviar lifestyle and you’ve got the money to pay for it, Moscow has just about everything any of the other major world capitals have to offer, and in some cases a lot more. But, you may have to act quickly if you’re going to keep up with this boomtown’s billionaires. The new Bentley dealership that opened last year on Tretyakovsky Proyezd sold out its annual allotment of luxury autos in under two weeks. And, at Arkady Novikov’s new upscale Italian eatery Cantinetta Antinori, you might have to book a table a week or more in advance – just to earn the right to pay $500 for a dinner for two with wine in the company of the capital’s rich and powerful.


TABLE 3: COMPARISON OF PRICES FOR PASSPORT’S BASKET OF GOODS IN FIVE SURVEY CITIES

 

 

MOSCOW

LONDON

NEW YORK

PARIS

TOKYO

  FOOD
1

Half kilo of unsliced white bread

$0.43

$1.53

$1.94

$2.23

$4.21

2

Big Mac

1.54

3.58

3.19

2.67

2.37

3

12 oz. Char-Grilled New York Strip

27.72

26.89

19.49

25.99

22.64

4

1 liter of pasteurized semi-skim milk

0.86

0.95

1.00

0.87

1.79

  TRANSPORT
5

20-kilometer taxi ride

11,63

44.24

26.50

32.56

49.45

6

2005 BMW 525i sedan

59,534

46,761

45,000

40.933

54,336

7

Liter of regular unleaded gasoline

0.51

1.51

1.20

1.22

1.09

8

1 metro ride

0.34

5.22

2.00

1.61

2.99

 

RECREATION/LIFESTYLE

9

DVD of Finding Nemo

10.26

21.56

15.99

23.57

34.41

10

Cable/Pay TV

41.06

59.35

60.00

30.89

19.02

11

Toshiba Satellite P25 laptop computer

1,925

1,796

999

1,600

1,793

12

A pair of cinema tickets

20.53

28.78

20.50

22.33

16.30

13

1 year’s gym membership

1,700

1,583

690

1,488

1,195

14

Domestic postage stamp

0.16

0.50

0.37

0.62

3.83

15

Shipping rate of 1 paperback book from amazon.com

8.98

4.95

3.99

4.55

2.72

  ALCOHOL AND TOBACCO
16

Bottle of Stolichnaya vodka

8.06

33.38

31.99

30.89

72.45

17

0.5 liter of Heineken beer at a bar

3.42

4.93

5.28

6.22

5.34

18

Pack of 20 Marlboro Lights cigarettes

0.92

8.43

7.50

6.80

2.72

19

Box of 25 Davidoff No. 2 cigars

517.24

456.00

302.50

403.13

407.52

20

Bottle of Moet & Chandon Brut Imperial champagne

116.35

37.75

49.99

31.01

21.87

  CLOTHES
21

Boy’s Levi’s 501 blue jeans

102.66

53.94

60.00

48.38

360.43

22

Ferragamo silk tie

126.61

118.68

120.00

99.23

125.21

23

Tommy Hilfiger Baker Crew Sweater

107.79

89.91

80.00

80.63

135.84

24

Louis Vuitton Navona (Damier canvas clutch)

349.04

288.10

330.00

304.51

407.52

25

Tiffany sterling silver heart tag charm bracelet

287.45

215.82

175.00

235.68

262.62

  ACCOMMODATION
26 Medium-range furnished 4-room apartment 2.690 4.810 5.500 2.850 5.890
27 A night in the Marriott 305.53 486.04 396.55 589.19 217.56

* All prices stated in USD

EXPLANATIONS
  1. Store brand in a mid-priced supermarket: Perekryostok in Moscow, Sainsbury’s in London, Gristede’s Foods in New York, Franceprix in
    Paris, 7-11 in Tokyo
  2. From a McDonald’s on a main shopping street: Tverskaya in Moscow, Bond St. in London, Fifth Ave. in New York, Champs-Elysees in Paris, Ginza District in Tokyo
  3. Park Lane in London, Montmartre in Paris
  4. Store brand in a mid-priced supermarket: Perekryostok in Moscow, Sainsbury’s in London, Gristede’s Foods in New York, Franceprix in Paris, 7-11 in Tokyo; in New York, figures converted from a half gallon of milk
  5. In Moscow, an unofficial "gypsy" cab can be significantly cheaper, depending on your negotiating skills 6
  6. Basic sticker price in a BMW showroom for the 6 cylinder version of this model
  7. From a BP station in the city center
  8. Moscow, New York and Paris charge a flat fee for their metros; London and Tokyo have "zone" pricing schemes. Traveling in more than one zone can be expensive: a trip from London’s Heathrow airport to the center costs $6
  9. From a main shopping street; price is for a legitimate DVD, which are frequently three times more expensive and rather rare in Moscow
  10. We chose the provider with the largest market share: NTV in Moscow, BSkyB in London, Time Warner in New York, Canal+ in Paris, Wowow in Tokyo
  1. Intel Pentium Processor, Windows XP, 80 GB hard drive and a DVD burner
  2. City center, English-language cinemas showing first-run Hollywood films: American Cinema at the Radisson, Leicester Sq. in London, Odeon in New York, Les Halles in Paris, UGC in Tokyo
  3. Gold’s Gym in Moscow, London, New York; Body Gym in Paris, ARF in Tokyo
  4. First class for standard domestic letter
  5. From the nearest Amazon shipping center: amazon.co.uk for Moscow and London, amazon.com for New York, amazon.fr for Paris and amazon.co.ip for Tokyo
  6. 1 liter bottle from our mid-priced supermarkets
  7. from a city center bar or pub
  8. from our mid-priced supermarkets
  9. from Davidoff boutiques: on Tverskaya in Moscow, St. James St. in London, Madison Ave. in New York, Rue St. Honore in Paris and the Ginza in Tokyo
  10. 0.75 liters from our mid-priced supermarkets
  11. from a Levi’s brand store
  12. From a Salvatore Ferragamo shop
  13. from a Tommy store or on main shopping street
  14. From a LV store, with the exception of Tokyo where came from Seibu department store
  15. from Tiffany
  16. Borrowed from UBSW Prices and Earnings study
  17. Rack rate for a standard king room, including taxes

But what about those of us who can’t afford – or simply aren’t inclined – to dine in the most expensive restaurants or to splurge on the latest designer fashions? Is there a home in Moscow for us, as well? Fortunately, as most of us know, while it is certainly possible to live extravagantly in Moscow, it’s also feasible to live a much more modest existence – and, in fact, more so here than in any of the other cities we’ve looked at.

If you consider the disparity in local prices, for example, a loaf from the corner bread kiosk is a mere 6 rubles, compared to over 100 rubles for the most expensive loaf in Stockmann. And, for those who are a little less particular about the origins of their sparkling wines, a bottle of Sovetskoe Shampanskoe will only set you back three or four dollars. Independent “gypsy” cabs are usually even cheaper than official taxis. Finally, avid movie fans who are averse to spending $10 on a movie ticket (and who don’t have copyright qualms) can pick up pirated DVDs at Gorbushka and elsewhere around town for about $3 apiece, a third of the price of licensed copies.

And therein lies one of Moscow’s great dichotomies: If you’re willing to live in the suburbs (or at least outside the Garden Ring), rely on public transport, and buy your food in the local rynok, or market, then it’s possible to eke out a comfortable existence here, even if your company hasn’t bestowed on you the corporate gold card.

How expensive Moscow is, therefore, depends entirely on where you choose to spend your money, and on what you choose to spend it. So, the next time you’re back home for the holidays and someone at a cocktail party looks at you askance and asks, “is it really that expensive to live in Moscow?” you’ll know exactly what to tell them: “Yes…and no.”

Now, could someone please direct me to the nearest rynok?

Special thanks to Olga Mironenko in Moscow, Thusala Ubaya in London, John Martin in New York, Andrea Low in Paris and Akira Hitosugi in Tokyo for gathering data for this article.







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