Mic Drop: Russia’s unexpected wartime real estate boom

Summary

Click Here Podcast: Mic Drop Episode Summary Title: Mic Drop: Russia’s Unexpected Wartime Real Estate Boom
Host: Dina Temple-Raston
Release Date: January 10, 2025

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Introduction

In the latest episode of Click Here titled "Mic Drop: Russia’s Unexpected Wartime Real Estate Boom," host Dina Temple-Raston delves into the surprising economic developments unfolding in Russia amidst the ongoing conflict with Ukraine and severe international sanctions. Through an extended interview with Stan, a former tech professional who returned to Russia after initially fleeing the country, the episode explores grassroots economic shifts, the emergence of a housing boom, and the troubling phenomenon dubbed "deathonomics."

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The Unexpected Housing Boom

Contrary to expectations of economic stagnation due to war and sanctions, Russia is experiencing a notable housing boom. Stan observes that despite tightening lending terms and reduced government subsidies on mortgages, the substantial military salaries are compensating for the shortfall, enabling a surge in property purchases.

Dina Temple-Raston explains, “In the middle of sanctions and a war, there's a housing boom. Somehow, against all odds, builders are building, banks are lending, and people are buying” (04:13).

Stan elaborates on the impact, noting that military recruits have become prime clients for realtors:
Stan: “They would rather sell to a military recruit than to who they know will get money than a guy like you who maybe might not always have money coming in” (05:04).

This influx of military personnel, attracted by lucrative salaries—$20,000 for enrollment and $2,000 monthly—has transformed rural areas into economic hotspots. The average Russian wage stands at approximately $800 per month, making these military salaries highly enticing.

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Military Recruitment as an Economic Driver

The Russian government's aggressive recruitment campaigns are not only bolstering the military but also inadvertently fueling economic activity. Military billboards proliferate across the country, advertising the financial benefits of enlistment.

Unnamed Interviewee: “You see a lot of ads for who they want. Military, military, they. They're trying to attract new recruits, but they pay like $20,000 for enrollment and also like $2,000 per month. So it's a big salary for the average person” (02:07).

Stan highlights that this trend extends beyond the countryside to major cities like St. Petersburg, enhancing the real estate market by providing a steady stream of buyers.

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Deathonomics: The Cost of War

One of the most alarming revelations in the episode is the concept of "deathonomics," where the Russian government compensates the families of deceased soldiers with substantial survivor benefits. Alexandra Prokopenko, a researcher at the Carnegie Russian Eurasia Center, explains:

Alexandra Prokopenko: “Most of them are actually dead. So people just selling lives of their loved ones, of their relatives for money” (08:36).

These payments, estimated to total around $30 billion, have injected significant capital into the Russian economy. Widows and families of fallen soldiers are purchasing real estate that they might never have afforded otherwise, further stimulating the housing market.

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Economic Challenges and Inflation

Despite the housing boom, the Russian economy faces severe inflation and a declining ruble. Food prices have surged, with bread up by 12%, apples by 14%, and milk by 15% over the past year. The ruble has plummeted to 114 against the US dollar, though it has recently stabilized slightly.

Unnamed Analyst: “Food staples have become especially expensive. Bread, up 12% over the last year. Apples, up 14%. Milk, up 15%. Cabbage” (06:12).

President Putin has allocated $126 billion for national defense in the 2025 budget, accounting for nearly a third of government spending, which analysts believe is overheating the economy.

Dina Temple-Raston: “With inflation accelerating, analysts say the Russian economy is overheated” (06:51).

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Future Outlook and Predictions

Looking ahead, Stan expresses skepticism about the sustainability of Russia's current economic trajectory. He anticipates worsening economic conditions as funds continue to be diverted to the war effort at the expense of essential sectors like healthcare and infrastructure.

Stan: “I think that Russian economy will fall down because all the money is spent to the war and all the other areas like healthcare” (11:26).

The episode concludes with a somber reflection on the human cost of these economic policies, emphasizing the long-term instability and ethical dilemmas faced by Russian society.

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Notable Quotes

• Stan: “They would rather sell to a military recruit than to who they know will get money than a guy like you who maybe might not always have money coming in” (05:04).

• Alexandra Prokopenko: “Most of them are actually dead. So people just selling lives of their loved ones, of their relatives for money” (08:36).

• Stan: “I think that Russian economy will fall down because all the money is spent to the war and all the other areas like healthcare” (11:26).

• Unnamed Interviewee: “You see a lot of ads for who they want. Military, military, they. They're trying to attract new recruits, but they pay like $20,000 for enrollment and also like $2,000 per month” (02:07).

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Conclusion

The "Mic Drop" episode of Click Here provides a compelling exploration of how Russia's economy is paradoxically experiencing growth in certain sectors despite the turmoil of war and sanctions. Through firsthand accounts and expert insights, the episode uncovers the complex interplay between military recruitment, economic incentives, and the devastating human cost, painting a nuanced picture of Russia's current state as it navigates the third year of conflict.

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For more detailed discussions and in-depth analyses, listen to the full episode of "Mic Drop: Russia’s Unexpected Wartime Real Estate Boom" on the Click Here podcast platform.

Transcript

[Dina Temple-Raston]

From Recorded Future News and prx, this is Click Here. When did we last speak?

[Stan]

We thought maybe 20, 22 or something like that.

[Unnamed Interviewee]

Yeah, I think it's. I don't know. So many things changed from this time. So. Yeah.

[Dina Temple-Raston]

I'm Dina Temple Reston and this is Click Here's Mic Drop, an extended interview we think you'd like to hear more of. Earlier this week, we brought you the story of Stan, a tech guy who was part of the exodus of professionals who left Russia in the months after the invasion of Ukraine.

[Unnamed Analyst]

And now he's returned home and seas of Russia under pressure.

[Dina Temple-Raston]

On today's Mic Drop, we get a sort of grassroots economic analysis from Stan, and the parts of society he sees thriving or declining as we enter the third year of the war may surprise you. Stay with us.

[Unnamed Interviewee]

Foreign.

[Dina Temple-Raston]

I'm Dina Temple Rooster and this is Click Here's Mic Drop. In this week's main episode, we talked about how there's this surprising thing happening in Russia. Their economy in the middle of a war and heavy sanctions is kind of defying expectations. The Kremlin is managing to goose economic growth not just in a traditional way by having factories run around the clock to produce weapons, but in more subtle ways, too. Like with these military billboards Dan says are everywhere you look these days.

[Unnamed Interviewee]

You see a lot of ads for who they want. Military, military, they. They're trying to attract new crude, but they pay like $20,000 for enrollment and also like $2,000 per month. So it's a big salary for the average person.

[Dina Temple-Raston]

Stan said this recruiting is attractive not just for your average person, but to Russians who are in debt or have had run ins with the law. They're all signing up for a very basic reason. In a place where the average wage is about $800 a month, these kinds of military salaries are hard to resist.

[Unnamed Interviewee]

For them, it's a big chance, big lift if they. So right.

[Dina Temple-Raston]

That is a big if, of course. But for a lot of people, it seems taking the risk has become a rational economic choice and it's turned rural areas in Russia into boom towns.

[Stan]

We have been reading that these salaries are really changing the economy in the countryside and the farming lands. Is that true?

[Unnamed Interviewee]

It's not only in the countryside. My city, St. Petersburg, is the second biggest city, like 5 million people. But I think that the percentage of that, that who accept this in the countryside is much higher. But also when I speak with the realtors, they say that these recruits, they're a great client for the realtors.

[Stan]

So, Stan, is there a Housing boom.

[Unnamed Interviewee]

Yes, yes, yes. The effect on the property.

[Dina Temple-Raston]

That's right. In the middle of sanctions and a war, there's a housing boom. Somehow, against all odds, builders are building, banks are lending, and people are buying. Part of it is the government stepping in and subsidizing mortgages like crazy. Last summer, Russian home buyers were getting mortgages for about 8%. Since then, the government has been tightening lending terms and reducing state subsidies. But Stan says now these huge military salaries are picking up the slack. Suddenly, a whole new swath of society is looking to buy.

[Unnamed Interviewee]

They can buy or rent bigger partners for the realtor. This recruit is more, more valuable than an entrepreneur because they have lower risk.

[Stan]

So they would rather sell to a military recruit than to who they know will get money than a guy like you who maybe might not always have money coming in.

[Unnamed Interviewee]

Yeah. Yeah.

[Stan]

Wow.

[Dina Temple-Raston]

That's crazy.

[Unnamed Interviewee]

That's crazy. Yeah.

[Dina Temple-Raston]

But as happy as recruits who survived the war may be with their newfound wealth, Stan says the overall sentiment about the war isn't quite so enthusiastic, at least not compared to the beginning of the war when there were Russian flags fluttering from every rooftop and a huge patriotic movement.

[Unnamed Interviewee]

There is no flags anymore. I think maybe like, still 10% of that that were, like, two years ago. So I think that the locals, they understand now that they are not so emotional like, we will win and so brave.

[Dina Temple-Raston]

Which may have a lot to do with the cost of living there right now for anyone. Without that military subsidy.

[Unnamed Interviewee]

When you go to the shop, you understand that we have problems.

[Unnamed Analyst]

Food staples have become especially Expensive. Bread, up 12% over the last year. Apples, up 14%. Milk, up 15%. Cabbage.

The Russian ruble has been falling to levels we haven't seen since the earliest days of the war. Recently, it tumbled to about 114 against the US dollar, though it's clawed back some ground since then. Putin has just approved a budget for 2025 that sets aside some $126 billion for national defense. That's an increase over last year's budget and accounts for nearly a third of the government's overall spending.

[Dina Temple-Raston]

With inflation accelerating, analysts say the Russian economy is overheated.

[Unnamed Analyst]

When we come back, we look at something bleaker. Deathonomics. That's after the break. Stay with us.

[Unnamed Host]

You come to the New Yorker Radio Hour for conversations that go deeper with people you really want to hear from. Whether it's Bruce Springsteen or Questlove or Olivia Rodrigo, Liz Cheney, or the godfather of artificial intelligence, Geoffrey Hinton, or some of my extraordinarily well informed colleagues at The New Yorker. So join us every week on the New Yorker Radio Hour wherever you listen to podcasts.

[Dina Temple-Raston]

The Russian government is not just paying for recruits, they're paying for deaths on the battlefield too. A 35 year old man who fights for at least a year and is killed in battle could have survivor benefits of some $150,000. One economist told the Wall Street Journal that's the equivalent of what he'd make working until the age of 60 in some Russ regions. Economists are now calling it deathonomics. Alexandra Prokopenko is a researcher and fellow at the Carnegie Russian Eurasia center in Berlin. And she says a lot of these recruits who took the signing bonus and monthly salary have actually died.

[Alexandra Prokopenko]

Oh, most of them are actually dead. So people just selling lives of their loved ones, of their relatives for money. Those who are more successful survive, but they can be injured and lost their health and their ability to work for the end of their life.

[Dina Temple-Raston]

Alexandra said casualties on the battlefield are so enormous that some estimates say the average time between recruitment and death is just weeks or a few months.

[Alexandra Prokopenko]

So they're signing contract with Ministry of Defense getting payments to their relatives and in 10 days, because Russia now conducting offensive new record can be dead.

[Dina Temple-Raston]

So many soldiers have now been killed. The payments are thought to have poured some $30 billion into survivors pockets and the Russian economy at large. That means widows are now buying apartments their husbands would have otherwise spent their whole lives saving for.

[Unnamed Analyst]

Stan returned to Russia a few months ago and he's had to ask relatives for loans until he gets back on his feet.

[Dina Temple-Raston]

In the past, he was the person.

[Unnamed Analyst]

People in his family came to when they needed money. He has this relative in the cargo business.

[Unnamed Interviewee]

He is feeling great of his business because they're transiting everything for war. So his business is going up. So I asked him to borrow some money. He said that he never felt this success before.

[Dina Temple-Raston]

Right.

[Stan]

So if someone is in the defense industry or helping the military, they're doing great. But maybe not everybody.

[Unnamed Interviewee]

Yeah. But you know what's funny? This guy is making services for army, but his parents are living in Crimea, which is very close to this. So it sounds like it's okay that you make this business and your parents are there. Like for me it was not ethical, but for him it's okay.

[Unnamed Analyst]

Stan says of all things, he's counting on President elect Trump. He hopes somehow he can convince Putin to end the war.

[Dina Temple-Raston]

Sure.

[Unnamed Interviewee]

So I hope that he will find the way to arrange this piece. I don't know, but I'm not sure I'm skeptical. I'm skeptical.

[Stan]

And do you think that 2025 will be worse?

[Unnamed Interviewee]

Of course. I think that Russian economy will fall down because all the money is spent to to the war and all the other areas like healthcare. Even these elevators in the, in the.

[Stan]

In the apartment buildings, in the apartment.

[Unnamed Interviewee]

Buildings are imported and the, the government is not investing in in the new ones. So every person who will go to this 15th floor by foot will understand that there are some sanctions that are working.

[Unnamed Analyst]

For Recorded Future News, this has been Click Here's Mic Drop. It was written and produced by Erica Gaeda, Megan Dietrich, Sean Powers and me, Deana Temple Raster. It was edited by Karen Duffett. We'll be back on Tuesday with an all new episode of Click Here Here. Have a great weekend.

[Unnamed Host]

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