in the absence of major topographical and legal constraints, the ratio between the land price in the central business district and at the fringe of the built-up periphery is usually on the order of 10 to 1. In spite of their correct slope, the profile of these normative curves was highly arbitrary as nobody knew either the highest nor the lowest values. Such normative prices could greatly improve the traditional urban master plans made in Russia. but they would be of' no value for the choice of a specific location for a given investmenit.

# B. **Housing Privatization and Rapidly Emerging Implicit Land Price Gradients**

With the beginning of housing reforms. actual apartment sales transactions between private parties have been taking place in Moscow since 199 1. Privatization and opportunities to trade ullits are now rising dramatically.|! A preliminary empirical analysis of 2.000 transactions carried in the first trimester of 1992 and of another group of transactions in the fourthi trimester of the same year provides an important first look at emerging real estate and land prices. The study analyzed the residuals _from_ an apartment sales model that uses only building-specific variables based on resales of privatized apartments. It is possible to construct a land price gradient by plotting the residual as a functioni of distance from the center of the city as show in FIGURE 3. These preliminary results provide sonie critical informationi. First, the emerging price gradient is downward sloping from the ceenter. Clearly. housinig kombinats are not providing the housing that household value the most. As FIGURE 3.a shows, the land price index decreases from 100% in the center to 70% at 25 km. -- a negative price gradient -- with the greatest decreases coming in the first 8 km. This model suggests that, at present. imputed land prices are only about 1.5 times higher at the center than at 25 km. This is still a very weak price dif'ferential to trigger the urban restructuring that Russian cities need. Various factors can explain this flat price gradient inclLiding the collapsing economy, ambiguities about land values. and the disequilibrium state of an emerging market.

What is rathet striking and unanticipated is that the land price gradient seems to be rotating very rapidly during the transition to market.<sup>7</sup> The analysis for the second period in Moscow shows that the slope of the price gradient has steepened from **I** 00 percent in the center to 58 percent at only 1 5 kilometers from tile center. This a real adjustment of 20 percent in less than a year. It can be expected that, withi new legal clarifications of land ownership rights in December 1992, privatization, as well as continuiLig relative price changes regarding energy the gradient will continue to rotate For reference. it is estimated that about 125,000 housing units were exchanged or sold in 1992. Since there are about 3.1 million apartments in Moscow, this represents a rate of about 4 percent of the housing stock. In a market city. the annial ratio of housing trades is often of the order of 15 percent of the stock. A major social change is taking place with the rapid privatization housing units by their occupants. Between late 1992 and the end of 1993, 35.5% of the state stock was privatized in Moscow and 26% in Russia. By the end of 1994, the share of privately owned Moscow units was expected to reach 55 %, in dramatic contrast to a ratio of less than one percent in 1990. This Muscovite rate of privatization remains much higher than other cities.

Privatization of housing units has been particularly rapid in Moscow and St. Petersburg. By the end of 1994. The share of privately owned units **in** Moscow has risen dramatically from less than one percent in 1990 to more than 55 percent **by** the end of 1994.

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