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Selling to Russians News: Why Russians do not invest in real estate in Russia?
June 05, 2013
Russian analytic portal IRN reported average residential real estate prices per sq. m. in rubles in 20 largest Russian cities at the end of 2012. Here are the top 5 and the last one, in rounded dollars:
1. Moscow - $5500 per sq. m. or 550 per sq. f., +4% over a year ago
2. St. Petersburg - $3400 per sq. m. or 340 per sq. f., +14% over a year ago
3. Moscow region - $2800 per sq. m. or 280 per sq. f., +17% over a year ago
4. Khabarovsk - $2500 per sq. m. or 250 per sq. f., +25% over a year ago
5. Yekaterinburg - $2300 per sq. m. or 230 per sq. f., +14% over a year ago
No wonder that Moscow and St. Petersburg are much more expensive than others, but even the last city on the list of 20 –Chelyabinsk – has the price tag of $1300 per sq. m. or 130 per sq. f. (no data on the growth over a year ago). So we can see that the residential real estate prices in large cities in Russia (except expensive Moscow and St. Petersburg, of course) are hovering around $2000 per sq. m., or for those of you who are used to measure in square feet - $200 per sq. f.
Overpriced? Absolutely! Especially if we look at the quality of old and new constructions in Russia in comparison with Europe, the US, etc. The old buildings from the Soviet era have all kind of issues by now, the newly built ones usually do not have any finishing inside, which means both new and re-sold properties will cost a lot to a buyer to get them up to livable condition, so the price is even higher if we take this into consideration.
So, what an average middle-class Russian family would do after they already have their own residential needs fulfilled and have some extra money to invest in real estate? They would look at other countries, no doubt.
I'm not an expert on the entire world's real estate, but I have found on the internet that according to globalpropertyguide.com the average residential real estate price in Bulgaria was under $600 per sq. m. or $60 per sq. f. at the end of 2012 (and mind you, there is no finishing to do for a new owner). See the difference? One has fun in the sun in their second home, warm sea and beaches (that Russia has almost none, except for Sochi area...) for 3 to 4 times cheaper in Bulgaria than real estate costs in Russian big provincial cities and almost 10 times cheaper than in Moscow. No wonder that Bulgaria is #1 country where Russians buy vacation homes. What would you do if you were in their shoes, eh?
Another darling of Russian buyers is Florida (the beaches are all year round here unlike Bulgaria which is a summer-only resort, but on the other hand the distance and visas might be a problem for some Russian buyers). According to zillow.com median residential sales price was $900 per sq. m. or $90 per sq. f. at the end of 2012, and the real estate market is already recovering with a remarkable pace in Florida. Still Florida real estate is approximately twice cheaper than all over the board in Russia on average. (Yes, I realize that there are mansions and modest condos mixed up in this total; and the price/per sq. meter or foot does not say anything of the properties included in calculation... and many properties sold in Florida were foreclosures and short sales that's why in need of renovation work...)
Well, today it was all about average middle class Russian buyers; rich Russian buyers have their own considerations and buy different types of properties worldwide of course.
In total, Russian buyers spent more than $12 billion on international real estate in 2012. You can be a selling part of this spending spree.
To your best business success,
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