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Selling to Russians News: Russian Buyers: A view from the streets of Moscow
January 28, 2009
This interview is the courtesy of Ashley Rigg of www.globaledge.co.uk
"Kim Waddoup misses the old days. Business was less regulated and more corrupt in Russia in 1992 when he started his first business; but it was easier to get things done by making sure the right people got paid!
"Today Kim runs AI Group, a Moscow based overseas property business. We caught up with him to get his views on the Russian buyer market and to ask his advice on the best way to do business in the country.
AR: Hi Kim, how's business at the moment?
KW: Very busy. It's a good market for us right now, there's plenty of business around.
AR: Do you think overseas agents misunderstand Russian buyers? What are the most common misconceptions?
KW: Russian buyers are a lot more educated and sophisticated than they are often given credit for. They've certainly become better educated over the past few years. The stereotype is that they turn up with paper bags full of cash. The truth is that this happens very rarely but many are "cash buyers" which means they don't need mortgages which makes the purchase process much quicker.
AR: How would you characterize the Russian buyer and how are they different from say UK buyers of overseas property?
KW: I like to group buyers into three categories. The high-end buyers, the middle market and the lower end mass market. The high-end buyers have been buying for years. These are people looking for properties in the €15 to €20 million range. They are mostly successful businessman and they'll employ a Portfolio Manager full time to look after their assets which will include property.
AR: Will they not use asset managers and IFA's?
KW: Not really, there isn't that culture. They'd rather employ someone than trust a third party. Employing Russian nationals with a foreign education is common. They like to employ young Russians with Harvard or Yale on their CV. The elite will buy in London, New York, Cote d'Azure, places with international cache.
AR: What about the middle market?
KW: These buyers are looking at properties in the €1 or €2 million range. They tend to be successful business people, but just not as successful as the elite. They'll buy in mainland Europe, Spain, Italy and France mainly. They may also buy in the UK or US if their kids are at school there. They want something where they can live among their peers. They want to join the same golf club as wealthy Germans and Brits. This market is suffering a bit at the moment as many of them are sitting on their hands and waiting for prices to fall further. I have a client like this who is looking at a villa in Marbella that has been reduced from €6 million to €2 million but he's waiting for the price to drop further.
AR: That's an expensive middle market. What's the low-end like?
KW: This is the market that has really developed over the past 3 years. The Russian middle classes buying properties in the €80,000 to €350,000 range. The most popular destinations are Bulgaria, Turkey and Egypt as these are the top holiday destinations. In Turkey and Egypt Russians get a visa on arrival and it's only a 2 to 3 hours flight from Moscow.
AR: Any tips for targeting these buyers?
KW: Russians are often after a different concept of apartment. For example security is very important and they tend to buy 1 or 2 bed apartments rather than larger family villas. Having Russian speakers is important too. Russians tend to like the outdoor life and to have things to do, so proximity to the Beach or Ski slopes is important. They love the Black Sea in Bulgaria as many have spent their childhoods there. It's interesting, many UK and Irish developers have failed to attract Russian buyers, but Bulgarian builders have been much more successful as they understand the market.
AR: How's the credit crunch affecting things?
KW: People don't use the word recession in Russia, they use "crisis" which everyone associates with 1998 when the banks collapsed. The oligarchs may have lost half their fortunes but they are still rich and they need a safe place to put their money. It's actually increased the desire to invest in overseas property.
AR: What's the best way to target buyers? How easy is it to partner with Russian agents?
KW: The market at the moment is quite fledgling. Most agents in Russia are focused domestically as the local market has been good for so long there's been no real incentive for them to diversify into overseas. This is beginning to change, but at the moment if we ran a trade day at one of our shows I doubt we'd get more than 20 or 30 Russian agents show up.
AR: Do Russian agents have a High Street presence like in the UK or have signs above shops like in New York?
KW: No, they are more like your typical overseas agent in the UK, no high street presence. They advertise online and in the press and build their databases of potential buyers.
AR: What's the key to making sales to Russian buyers?
KW: Hard work, persistence and dedication. I shouldn't say this, but I think people that come over to our shows just once don't really get a return. It often takes 18 months over here to make things work. You need to build relationships and trust and that takes time. Once you make a sale to one Russian buyer, you'll get business from his friends and business contacts and it will snowball from there.
AR: Do you need a physical presence in Russia to make it work?
KW: Not necessarily. You need a local number and a receptionist that speaks Russian though. We call all our magazine advertisers in Russian to see if they have Russian speakers. Many of them don't and they lose business because of it. Ideally though, having a local presence is best. Savills and Knight Frank are in Russia and many agents are following them.
AR: How easy is it to set up a business in Russia? Do you have good legal protection?
KW: It's a lot easier than it used to be, but I still don't' have much faith in the courts. In the old days you used to have "a Roof", a protector to ward off rival gangs trying to extort money from you.
AR: That doesn't go on now?
KW: Not as much but there is still lots of bureaucracy and it helps to "oil the wheels" to make things happen. Many western businesses give up and go home after 6 to 9 months. It's not that easy.
AR: How easy is it to recruit and retain staff?
KW: It's easier now the economy has taken a turn for the worse. I've had a few bad experiences. Twice, I've had staff leave and steal all the office furniture and computer equipment. Now I only employ people I know. If you treat people well they tend to stay and we try to do that. "
To your best business success,
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