Emp Latest News

Up to 30% decline in Russian buyers of overseas property expected

With increasing frequency, Russian-speaking clients are viewing overseas property not only in terms of being a possible residence, but also as a profitable investment. Tranio.com Study ‘12 revealed that investment was the third most important reason cited for buying property; while Study ‘14 indicated that investment was the second most important reason. George Kachmazov, head of Tranio.com, says that in 2012 the market had not yet fully recovered from the economic crisis. Now, however, prices are rising, and investment in overseas property is gaining in popularity. At the same time, many investors are placing more emphasis on the preservation of capital than on securing a profit.

According to Tranio.com’s study, the last few years have shown an increase in the number of Russian-speaking clients investing in overseas property. In many countries, Russian-speaking investors take leading positions in the residential property market, though this trend is not reflected in the commercial property market.

Russia’s shrank yet still present middle class will linger to invest in real estate property abroad in 2016 as investors seek to protect their capital from domestic risks. Most Russian-speaking investors are successful entrepreneurs, owning and operating businesses in Russia and/or CIS countries. Due to the volatile financial situation in the region, they are looking for income-generating property with moderate yields and stable returns in a dependable currency.

The broker firm Tranio has noticed stable activity in cross-border transactions for investment property, particularly in terms of income-generating buy-to-let residential and commercial premises. The overall total of cross-border remittances gained 9 percent quarter-on-quarter by Q1 2016, rising from US$5.8 billion to US$6.4 billion.

Now, the fallout from Russian economic and political troubles is transforming the buying habits of the country's international property investors who are turning from the residential sector towards higher yielding commercial real estate deals. The reason is that they are searching for higher yields from buy-to-let residential property or commercial real estate, predominantly in Europe. As a result, there is set to be a significant switch in 2016 for Russian buyers of international property and a possible 30% fall in volume.

The number of Russian-speaking buyers for overseas residential property will shrink by another 20-30% in 2016. It is also expected to see 30-40% more Russian nationals trying to sell their foreign property as a weak ruble induces higher maintenance costs. Nevertheless, the amount of Russian-speaking investors for commercial property should grow by 20–30% in 2016.

Foreign property purchases by Russian buyers were halved following the successive Russian ruble devaluations in 2014–2015. However, the percentage of commercial property investments increased, the study discovered.

Most of the top 10 destinations according to search results by Yandex – Russia's largest search engine – for commercial property in 2015 were all in Europe. The United States and Turkey were the exceptions. Germany on 22.1% of all foreign commercial property searches in 2015 was the clear winner, followed by Spain on 6.5%, the United States on 6%, the Czech Republic on 4.9% and Italy on 4.8%. User requests for foreign commercial property in 2015.

Tranio survey results confirm the popularity, though not necessarily the rankings, of these countries. The top twenty destinations as reported by participants in the survey are mostly in Europe with the exception of Turkey and the USA as well as Thailand and the UAE.

Wealthy Russian investors are likely to continue their foray into commercial real estate, seeking the security of income-generating real estate assets.