Putin's Victory Could Trigger Overseas Real Estate Buying Frenzy
Vladimir Putin's victory in Russia's presidential election last month could trigger a fresh wave of buyers from the former Soviet Union, according to a leading UK estate Agent.
Rupert Sebag-Montefiore, chairman of Savills Residential UK said," The Russian authorities have a history of seizing assets from wealthy oligarchs, but a London property is considered a long-term investment out of reach of the Kremlin's grasp.'
With headlines of vote rigging and fraud, the media around the World reported on Vladimir Putin's victory recently in the presidential poll, but for most Russians, the result had been expected.
Russian markets reacted calmly, but experts expect the economic prospects to become clear in a few months as the new government is appointed.
Russian markets traded in black with the MICEX ending up 1.1% and the RTS up 1.51% after presidential election. Though experts agree that investors feel relief as political uncertainty decreases, they remain cautious about future demonstrations and opposition claims about fraud during the elections.
The economic future of Russia will be determined whether political stability is reached and serious reforms, promised by Vladimir Putin during the presidential campaign begin. Russia entry into the WTO in June will also influence the state of things.
Individuals are still doing well and in fact January saw real wages increase by 9.0 percent year-on-year, higher than forecast, with nominal wages up by 13.5 percent. Rapid growth in real wages has been supported by falling inflation, which slowed to a record low of 4.2 percent in January, after the government postponed planned increases in utility tariffs until July.
The move is one of several steps that have been taken by the government of Prime Minister Vladimir Putin to support living standards. However even with this background many Russians, particularly the middle classes, are still weary of the Russian banking system plus widespread corruption and prefer to invest their cash abroad.
Overseas real estate is still seen as the preferred route for many to protect their investments, and this has already been backed up by several foreign countries.
According to new reports, wealthy Russian investors accounted for more than 16% of home purchases in high-end London neighborhoods such as Kensington, Knightsbridge, Belgravia and Chelsea. In the fourth quarter of 2011, Russian's actually increased their share in London's luxury home market more than any other group.
Nigel Lewis, property analyst at PrimeLocation said, "Most of the Prime homes being bought by non Brits in London are Russians buying at the top end and Chinese looking for investment properties but they aren't buying in large enough numbers, just very high prices instead".
According to the British law firm McGrigors LLP, the number of the so-called 'investor visas' for wealthy foreigners willing to invest at least 1m pounds in the British economy has grown by six times in the last three years.
About one third of recipients are citizens of Russia and republics of the former USSR, first of all, Azerbaijan, Armenia and Kazakhstan. Russian citizens have become the most numerous group of all recipients of such visas, taking 21%. The second largest group of foreigners receiving 'investor visas' were Chinese with 15%. As a rule, recipients of such visas invest their money in high-class property in London and other large cities of the country.
Adam Challis, head of residential research at Hamptons International, said referring to the presidential elections in March, "It's a precaution against things going too far in the wrong direction. The very well-connected folk realized that there was going to be some serious political uncertainty and that they're better off putting their money into London property."
Asia and particularly Thailand has also prospered, with many Russian realtors setting up shop in the Kingdom. Pattaya has as many Russian signs as in the local language.
According to recent data released by the Tourism Authority of Thailand (TAT), the tourist flow from Russia to Thailand increased by 57% in 2011. Thailand received 1, 014 000 Russian citizens in 2011. Even the flood in Thailand didn't affect the tourist flow from Russia. Every 20th tourist was Russian in Thailand in 2011.
Andrea Marston, a partner of agency Montenegro Prospects, has also seen a big influx of Russian interest in their real estate, stating that, 'nearly 40% of buyers in 2009-2010 were Russian."
In Finland in 2010 Russians bought more than 400 properties in Finland for a total of 56 million Euros ($75 million). According to 2010 figures from Finland's National Land Survey, Russians bought 413 properties in Finland that year, with more than 300 of those purchases concentrated in two regions. There were about 400 properties picked up by Russians in 2009 and 780 properties in 2008.
Now however due to concerns re money laundering, there is a proposed federal bill to limit the purchase of real estate to Finns and other European Union citizens. This will leave Russians wanting to buy property in their northern neighbor, facing a cold gust of Nordic air.
Pertti Salolainen, vice chairman of the Finnish parliament's foreign affairs committee and a member of the National Coalition Party, told The Moscow Times that his party isn't backing the proposed legislation. The country's new president, to be sworn in March 1, is a National Coalition member. "We think that it's a good thing that there are more Russians buying in Finland."
Indications from the round of Spring Property Shows held in Moscow are that investors, who were just looking last season, are cash buyers in 2012.
This year's Moscow International Investment Show
(Invest Show) held at the T-Modul Exhibition Hall at Tishinskaya Sqaure, central Moscow, was an outstanding success. The show, now in its 5th year, attracted over 200 exhibitors promoting residential real estate outside of Russia. Approximately Euros 34 million worth of deals was made directly at the show, with 6,790 investors attending over two days. Almost all the visitors were Russians although a few expats living in Russia were in evidence.
Kim Waddoup CEO at Russia's leading property media and Exhibition Company aiGroup
said 'We had to turn down many top class foreign companies who wanted space, as all existing exhibitors all returned. In fact all our spring 2012 events are completely sold out.'
Andres Cepkauskas, ESPHOUSES, Alicante, Spain said: "the market is exactly the same as last year, its stable. Russians are not dependent on mortgages. Many of them are, however, pleasantly surprised to find out that they can take out a loan from developers in many countries and thus can effectively buy a property twice the value of their capital.'
Property portal www.1-property.ru
is regularly attracting 5,000 visits a day from Russians eager to find out what properties are available overseas.
With many markets suffering and with banks selling off assets cheaply, the canny Russians are picking up some exceptional bargains.
As they say, 'The Russians are coming." This time the realtors are welcoming them with open arms.