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Selling to Russians News: Russians invest in residential properties abroad. Part 1 of 2
November 17, 2009
IRN, a Russian analytic real estate portal, conducted the online conference "Investing in residential and commercial properties abroad for Russians – what to choose?" in October 2009.
The portal analysts prepared the 2-part resume of the results, separately for residential and commercial real estate abroad that Russian buyers are seeking and purchasing. Here is my English summary for you of Part 1, Residential Properties Abroad, while Part 2, Commercial Properties Abroad, will follow in the next issue of this newsletter.
Residential properties abroad have been of the most interest to Russian buyers so far.
The most popular among Russian buyers foreign countries are as follows: Bulgaria, Spain, Montenegro, Ukraine (the Crimea), Cyprus, Turkey, Germany, Egypt, Czech Republic and the USA. These top 10 countries attract 62% of the Russian buyers' demand for properties abroad.
Financial crisis has affected various countries' real estate markets, but not in the same way. Property prices have been corrected almost everywhere, but to a various extent. The same statement relates to demand for properties and volume of sales. Some real estate markets continue to fall, but some start recovering and even grow with various rates.
Looking at the above mentioned countries of high interest to Russian buyers of properties abroad, Russian analysts say that in their opinion there is practically no real estate price fall in Germany, some minimal price decline of 10% in Cyprus and Egypt and 15% in Czech Republic in comparison with the last year 2008. In other countries the decline is more substantial. The leaders in real estate price decline are the USA and Ukraine where prices have dropped by 50 and 55% accordingly.
There are other countries of historic interest to Russian buyers where prices have dropped even more – in comparison with the last year there is some 60% to 65% decline of real estate prices in Latvia, Estonia, Kazakhstan and UAE. Russian analysts predict some real estate market growth in Latvia and Ukraine (the Crimea and Kiev) in the next year, but they think of caution about investing in UAE for a while.
The Russian real estate analysts recommend the following top five foreign countries for Russians to invest in properties these days:
-Portugal. The real estate market is more stable than in the neighbouring Spain as Portuguese prices have dropped by 5% while Spanish by 30% to 40%. At the same time the average per square meter price in Portugal is still lower than in Spain.
-Israel. This is one of the few countries where the real estate prices have grown in 2009 – by 12% in the first half year and by 3.5% more in July and August. It means the Israel’s property market has not only made it up for the previous year, but actually grown by 4% in comparison with the before-crisis level.
-USA. Very popular with Russian buyers California and Florida have experienced the 40% drop of real estate prices during the last year. Also there are plenty of possibilities to buy foreclosed properties from banks with up to 60% discount. Now the USA real estate prices are at the level of the end of the 90s, which means they are at the minimum level during the last 10 years. Marketing experts have various opinions on the time of the end of the crisis, but what they do agree upon is that the USA real estate market will be one of the first to start growing regarding the prices and number of properties sold.
-Montenegro. The real estate price drop in comparison with 2008 is about 35% which makes the market attractive again. It's interesting to mention that during the last 4 years the real estate prices in Montenegro were up first and then down, but the proportion of Russian buyers among all foreign real estate buyers in this country has been growing anyway and now reaches 52% at the middle of this year.
-Cyprus. First, as mentioned above, the Cyprus real estate price drop was not that significant (about 10%) which confirms the market’s stability. Second, the important thing is that Cyprus is one of the very few European countries where Russians are able to get a mortgage. Now it's possible to receive a 5% interest loan for up to 70% of the property price for 30 years. Even better than that – sometimes a Russian buyer can get 70% from a bank and the remaining 30% from a developer.
Talking about the purchasing budget for a piece of real estate abroad, the limits are very wide. It can even start from something like 25 000 Euros for a small condo in Latvia.
For 150 000 to 200 000 Euros Russians have many choices in Cyprus and the USA. Also for this money a Russian buys a small house in Montenegro near the sea, or a house in some areas of France, or a new 4-br condo in West Berlin, Germany.
One of the most popular reasons for buying a property abroad is to get income by renting it out. This method is being used by those Russians who buy real estate as investment and also by those who buy a home or condo for their personal use.
To come to visit a property for holidays and rent it out for all other times, one should buy in a country with the all year round warm weather or in a big city with the high business activity. Both options allow the owner good chances to rent the property out.
Taking rental income into consideration, Russian analysts recommend Russian buyers the following countries to invest in real estate:
-Spain, the area of Costa Bravo. It's close to Barcelona, and in winter people stay there and go skiing to Andorra (4% rental income)
-Portugal, the area of Algarve. Golf all year round (4 to 5% rental income)
-Israel. All year season, rentals are in demand, apart-hotels are available. In an apart-hotel one owns a property where he can stay with family and friends for 90 days and get the 5 Star hotel services, while the rest of the year the hotel takes care of renting the property out, so at the end of the year there is a profit and no maintenance expenses (5 to 6% rental income)
-USA, the state of Florida. All year round resort, and tourists are plentiful despite of the crisis, so renting out is not a problem. The same system of apart-hotels is in place (5 to 6% rental income)
-Germany. The rental market is highly developed and reliable. This is a country of renters where more than half of people prefer renting instead of owning. Renting in Germany is strictly regulated. There are special regular publications with rental prices in various cities and regions of the country, so that a renter can check out the price he was asked to pay. The renter's rights are legally protected, and only a registered property can be rented (5 to 6% rental income)
-Montenegro. A favourite country for Russian buyers as mentioned above. There are residential complexes under a managing company that can guarantee the rental income of 5 to 7% annually.
So, whether or not your country has been mentioned in this summary, I hope you'll find it useful for your marketing to Russian buyers.
Good luck and watch for Part 2 (Russians are buying commercial properties abroad) in your inbox soon.
To your best business success,
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