Why Russia May Help Overseas Property Investment

The global financial crisis and European sovereign debt situation has not surprisingly meant that European overseas property investors have become more cautious .  The release of positive growth figures from Russia could see international real estate agents and developers now target their efforts towards Russian buyers.

Russian retail sales are on the increase along with wages, while unemployment is dropping and the Russian inflation is also falling to 6%. A Morgan Stanley Economic Report, growth in Russia is poised to accelerate by 5% by the end of this current year, and up to 5.5% again in 2012.

Meanwhile the Business environment is healthy, with many companies achieving excellent capital growth. However corruption is still abundant, so off shore investments are a popular alternative method to allow for secure profits and capital gains.

It has been estimated by many press reports, that over US$12 Billion will be invested by Russians overseas in the next twelve months.

Much will be earmarked towards international real estate, and this was echoed by the record attendance at last weekend’s Moscow International Investment Show.

The rising middle classes are seen as the new investor with huge potential for overseas investment.

The middle class have increasing wages, low monthly overheads, (US$100 will pay for general overheads such as gas, electricity, water and telephones for a month.) only 13% tax on declared income and less than 8% have mortgages to repay.

Proof that this sector is moving towards buying property abroad is echoed by Yandex, Russia’s largest search engine. Yandex showed massive increases in specialized searches for property aboard. Over 512,572 searches were made in just four months up to May 2011, against 382,979 during a similar period in 2010. Cyprus had the largest increase with 56.5% more searches, with the USA achieving a 48.8% increase.

Statistics from 1-property.ru Russia’s leading real estate online portal, showed searches for international real estate also had a dramatic increase. Bulgaria topped the list with 17% of all searches. Easy destination, language and similar mentality were the main reasons given. Spain came in second, however over 21% of all searches were for other non European destinations.

International Residence magazine held a recent survey and asked Russian investors what their main reasons were for buying abroad. Over 55% stated that it was for a safe investment, 30% for personal enjoyment and 20% wanted to create income with buy to let property.

Although a large percentage of Russians read magazines and go online, another important source where they like to conduct their own research is at property expos. During the past 12 months over 119,000 visitors attended thirteen real estate expos held in Moscow, while another eight expos held in St Petersburg attracted over 66,500 investors.

According to aiGroup the Moscow based exhibition organizers, they are having to turn away exhibitors due to lack of space. The Russian market is completely different from more established markets across Europe, so developers and realtors are now being encouraged to attend conferences and seminars providing valuable information on how to sell to Russian based investors.

CEO of the aiGroup, Kim Waddoup said, ‘Russian’s have in the past invested heavily in Europe, but with that region’s financial difficulties, we are seeing a swing towards more secure markets. For example Asia, where there are number of direct flights from Moscow is seen as a secure market and is becoming a top target for Russian end users and investors alike. ’

Their 2^nd Russian Summit is being held on 17^th-18th November in Moscow enabling overseas developers and agents to listen to experts on ‘how to sell to Russians.’ This event will also hold a networking expo with over 150 Russian based realtors looking to represent overseas companies. The full list of speakers and their topics is available at www.russiansummit.com

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