Falling from Olympian heights

It might not be news to you, but this was the most expensive Olympiad ever, costing over USD 50 bln to prepare. The second most costly was Athens in 2004, which coming in at a much more modest USD 11.9 bln almost seems like a school sports day in comparison. A large portion of the cost of the Sochi games was incurred by the most expensive construction project in Russian history – a 50 km stretch of motorway and railway between Sochi and the Olympic skiing centres at Krasnaya Polyana. This has run up a bill of USD 9.4 bln. Twelve tunnels, 45 bridges and a railway line were built together with the road itself. In defence of the organisers, most of the new structures needed for the event had to be built from scratch. The building programme therefore saw the construction of the Olympic Park, the Olympic Village, a ski jump as well as skiing centres in the mountains with new ski-slopes. The announcement alone of all this investment was enough to utterly transform the local real estate market. As recently as 2002 it was possible to buy an apartment in the resort for just USD 250 per sqm – now USD 3,300 is the average and for luxury apartments you can easily pay more than USD 6,000. Those who bought homes in the city at the right time have been able to make a more than tenfold profit. Sochi has since metamorphosed into a huge construction site. The majority of the contracts were subsequently awarded to companies managed by Putin’s friends. Suspicions immediately arose about the huge values of the contracts, prompting Putin himself to express his irritation on air. The Olympic ski jump cost USD 265 mln instead of the projected USD 40 mln. Somewhat pushed into the background by all these projects, is the tragedy of those who have been forced out of their homes to make way for the new structures. Reports have been circulated around the world about the personal traumas of the people displaced under Act 301. The compensation they have received for being evicted is not even enough to buy an apartment in a block of flats, now that property prices in the city have ballooned. “I can’t think of anything I hate as much as these Olympics, as they have made me and my family homeless,” complained Nina Toromonyan, one of the displaced residents who was quoted in the 'Los Angeles Times'. She now lives in a rented apartment because she cannot afford to buy a new flat out of the compensation provided. However, in the kaleidoscopically shifting situation in Sochi such tragedies have quickly faded from view to be replaced by other topics. When reporters who were sent to the Olympics encountered privacy-preventing sit-down toilets in the same cubicle for the first time, it was not long before a photo was posted and went viral on both Twitter and Facebook.
The history of the huge investment in the resort is not yet complete. What the ending will be depends on whether the world will want to go skiing in Sochi after the games. The Russians would have to account for much of such tourism. But from St Petersburg it is closer to the pistes of Austria; and Moscow is only a little closer to Sochi. And Sochi desperately needs a cash injection from the outside. The cost of operating the new infrastructure comes to a staggering USD 1.9 bln per year. Experts estimate that the 4 mln sqm of residential and hotel space that has been built is five times more than the local market can absorb – and it could take another ten years to sell it all. Already the media is reporting that banks have foreclosed some of the projects of residential developers and are selling the apartments with a 35 pct markdown. Large sporting events are planned for the city in the near future: for the next seven years it will be the venue for the Russian Formula 1 Grand Prix, which is returning to the country after a century-long hiatus; it will also be a host city of the football World Cup in 2018. But even these might not be enough to fill the hole in the budget. Whatever happens, we shall certainly be hearing about Sochi again.