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23.10.07
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Home, Sweet Home
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By Svetlana Kolchik
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For Russians, Affording Property Overseas is Becoming Easier
It didn’t take Tatiana and Igor Potapov a long to make up their minds about buying a two-storey villa in the Jimbaran Bay resort in the northeastern part of Bali, Indonesia. The couple, who asked that their real names not be used, live in Moscow and both work for international law firms. They were vacationing in Bali in April earlier this year and were pleasantly surprised by the property prices.
“They just paid the whole amount, $450,000 in cash, and we had most of their papers done before they left for Moscow,” said Eduard Vorobev, sales manager at Karma Jimbaran, a Balinese ocean resort consisting of 38 luxury villas, each with a private pool and garden. The resort is part of Karma Developments, one of the region’s top property developers with projects in Australia, Thailand and Indonesia. Vorobev, who moved to work in Bali from the Russian city of Volgograd three years ago, said that the demand for real estate had recently been so high there that the company’s sales office even had to hire a native Russian speaker to cater to clientele from the former Soviet Union.
But Indonesia is not the only location where more and more Russians are buying property today. While the Russian economy is still far from being stable, and real estate prices in Moscow and its environs for many are beyond reach, a growing number of potential buyers are looking abroad – some to invest funds, others to purchase a longed-for vacation property or simply a second (or third or even fourth) home. Experts observe that within the past five years, the top destinations of choice for property-keen Russians have included countries like Bulgaria, Montenegro, Spain and Cyprus as well as France and the UK.
“Look, what can you really afford to buy in the Moscow region even if you have as much as $500,000? A modest apartment in the city or a small cottage out of town, most likely in a dubious neighborhood. But somewhere like Spain, you could get a decent house or great condo right on the beach for that very same price,” said Sergei Rymov, editor-in-chief of Homes Overseas, a Russian edition of the 37-year-old British magazine that covers trends on selling and buying residential property around the world.
“Abroad, there’s a much bigger choice, and the real estate market is much less prone to extremes,” he said.
And today many Russians who would like to buy a home in a foreign country often have the means to do so. In London, for instance, it’s no longer only the likes of Roman Abramovich and Boris Berezovsky who are able to afford prime property. In this city, estate shoppers from Russia have already been called the “new Arabs” for a while now, indicating the utter extravagance of their purchases. According to Knight Frank, a 110-year-old British property development company with a network of more than 165 offices in 37 countries including the former Soviet Union, Russians buy up to 39 percent of London homes that cost over 8 million pounds ($16.3 million).
“Since Britain boasts great education opportunities, many Russians send their kids to study there. It’s handy to buy an apartment in London and maybe also a residence in the English countryside,” said Ekaterina Thain, a partner at Knight Frank/Russia and head of the company’s residential department.
In Cape d’Antibes, an exclusive Mediterranean resort in the south of France, the figures are even more striking: reports say that Russian customers account for some 80 percent of high-end real estate deals there.
“Russians have an emotional connection with France,” said Thain who herself owns a three-storey 19th century chateau near Toulouse in the south of France. “We grew up reading French literature, and getting property there for many of us is a gift for the soul.”
Those “gifts for the soul,” Thain explained, range from a “modest” 500,000 euro ($708,000) Paris apartments for leisurely weekend visits to 25 million euro ($35.4 million) Cote d’Azur or Biarritz mansions featuring a swimming pool, English garden, one or two guest houses and a private marina.
Apart from extravagance, such customers tend to be quite picky as well. “If Russians are buying a house in France or elsewhere, they always want a sea view,” Thain said. “Always. This puts them aside, from, say, the Brits, who are the most active property investors worldwide, but they don’t care as much for the beach and stuff. But Russians would always pay extra for [the sea view].”
Still, it’s not only the super-wealthy Russians who are aggressively buying property outside their homeland. Experts say that countries like Cyprus, Spain, Finland and Greece are quickly becoming the real estate shopping meccas for the emerging middle class. During the last two years, industry watchers say, Croatia, Bulgaria and Montenegro have joined the club. Good infrastructure, safety and quality of the estate, as well as relaxed or even non-existent visa policies and, above all, affordable prices make real estate markets abroad a better alternative to the one in Russia.
“If you are looking for a house on the beach, what we have at home is often hardly an option,” said Valeria Mozganova, editor-in-chief of Zagrandom (Home Abroad) a monthly digest covering both foreign and domestic real estate.
“The infrastructure around Russian sea resorts is only beginning to develop, and demand is far greater than the supply,” she said.
Montenegro, as Zagrandom’s recent findings indicated, is the only country in the world where Russians are now the number one property investors, and in Bulgaria, more than 50,000 Russians have recently bought either an apartment or a cottage.
Marina Petrovskaya, 43, a stay-at-home mother of two, had always enjoyed going on vacation to Crimea, a scenic Black Sea-washed peninsula in Southern Ukraine. Yet when it came to doing her first-ever house-shopping, she opted for an apartment near Southern Bulgaria’s Varna, a famous resort on the other side of the Black Sea. She paid about 120,000 euros ($170,000), mostly funds borrowed from friends, for a 120 sq. m fully furnished three-bedroom apartment in a newly constructed complex a 10-minute walk from the beach.
“For this money, we could only afford a shabby little house more than 80 km (50 miles) from Moscow,” Petrovskaya said. “Besides, our summers last on average two months, and in Bulgaria, it’s warm at least five months a year.”
She stressed that a month in Bulgaria costs at least half what a month spent at any Russian beach resort would. “Everything is so cheap there,” she said. “And everyone speaks Russian. I can send my elderly mother there who’s never been abroad before and she’d feel at home.”
Despite the significant debt, Petrovskaya, whose husband is a professor at the Higher School of Economics in Moscow and the family’s only breadwinner, regards this newly-acquired asset as a promising investment. “We might sell this apartment one day and get a little house in Spain or maybe an apartment in Moscow for my mom,” she said.
Petrovskaya may well have the chance. Real estate experts insist that when Russians come to town, the market in the region starts booming, and property prices swell almost immediately, as they recently did in Montenegro. According to Zagrandom’s Valeria Mozganova, in the last two years prices in that country surged by at least 300 percent.
“It’s a given: Russian buyers do affect the market dynamics a great deal,” Mozganova said. “They are often willing to pay more than other nationals, but their demands are more sophisticated. As a result, thanks to them the quality of real estate noticeably improves.”
Ekaterina Thain of Knight Frank agrees. “Russians now not only have the money, but good taste as well,” she said. “Normally, they speak the languages, boast good education and are well-traveled. They don’t buy the property to show off. They’ve got nothing to prove. All they want is to integrate with the community, and the locals do welcome them.”
But natives of the former Soviet Union are exploring real estate markets further afield than Europe. Recently Russians have been seen in such remote and exotic locations as Central America, the Caribbean and even Brazil and Uruguay. And while for some owning a condo in the Dominican Republic is still more of a status purchase, for others it’s getting a chance to occasionally escape the hecti? life back home.
“It’s trendy today to own several homes in different parts of the world,” said Alexander Kokhanov, the co-owner and head of the Moscow office of Tropical Fellgate, a real estate development company with offices in Toronto, London and Costa Rica in addition to the Russian capital. The company’s primary focus is developing and selling real estate projects in Costa Rica and other Central American locales.
“Today you can stay connected and work no matter where you are, even if it’s a remote mountain area in Costa Rica,” Kokhanov said. He added that Tropical Fellgate’s clientele ranges from top managers at Moscow-based international companies to ‘successful and progressive individuals’ from Perm, Krasnodar and Veliky Novgorod to entrepreneurs from Kiev and Kazakhstan. The lack of a direct flight from Moscow to Costa Rica’s capital of San Jose doesn’t seem to be an issue.
“Costa Rica is a country with a stable economy, which for Russians is incredibly important,” Kokhanov said. “It’s also a great investment opportunity – Americans are nearby, which makes it easy to sell the property at any time and make a profit out of it.”
Kokhanov’s company is about to launch a number of development projects in Nicaragua, a country which until recently has been on the list of the world’s most dangerous spots. Even so, he believes that Russians would be up for buying property even there: “Why not? It’s a wild and unexplored country, but it’s also a rapidly growing market. Many wouldn’t mind gambling on it.”
And he might very well be right. |
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