“Back from the freezer”: Kim Waddoup, president of aiGroup, talks Russian overseas property market amid the crisis“Back from the freezer”: Kim Waddoup, president of aiGroup, talks Russian overseas property market amid the crisis
The aiGroup has been organising international property shows in Russia since 2003. We met up with president Kim Waddoup at the latest Moscow International Property Show at Tishinka Trade and Exhibition Center to hear how his company and the market as a whole are surviving the recent economic and political crisis in Russia.
— At the end of 2014, your company’s website highlighted, that despite the economic turmoil in Russia, aiGroup had seen a surge in Russian overseas property purchases. What’s going on in the market now, in April?
— By the end of last year, we found that, whilst everything was doom, gloom, crisis and looking very bad, there were people actually buying property and they were buying quick. Today, the market is down, there is no question about it, but people are still buying. We have no figures unfortunately and there is no way we could find out how much money exactly has been spent on real estate abroad. In my personal estimation, the market at that time was probably down 50%. Now, even at the beginning of this year despite lots of difficulties, lots of challenges, including the fall of the ruble, the situation is getting better – the spring is eventually coming. When spring arrives, this city just changes. It goes from being somber and grey to beautiful and happy. The same is true for the markets. More than that, it’s been three or four weeks now when everything’s been quiet in politics and the economy. There hasn’t been any incidents or press frenzy about Russia and the news about her has been a little more positive. All this helps the market.
— How has your business survived the troubles?
— As I said, we’ve been 50% down, which is very difficult for exhibition organisers because our budgets are very limited. So, we consolidated several events, pulling them into one to make this one successful. We canceled our Saint Petersburg show because the market was not looking so healthy and we didn’t want to waste everyone’s time and money. We’ve been nervous and working hard and now I feel hope and energy on the market. We opened minutes ago and the exhibition is already moving. When you went to our competitors’ shows, in three days you can have so many people. When this crisis came along, we used a crisis management book that we created based on what that we’d done in the past Russian crises (which I've seen a lot working in Russia since 1992). Today, every one of my staff is still working for me, we haven’t reduced salaries, we’ve managed to keep going. We are lean and mean and we can survive. Our biggest advantage is that we have a good reputation and no debts. We don’t have a waiting list for participating countries anymore, as we did in the past, however we sold a full show.
— What news and trends have you registered in the market recently?
— I don’t think there is a particular trend emerging at the moment. At the heights of this crisis, when all was getting worse, there was tremendous demand for economic citizenship and opportunity to get a work permit or obtain the passport of certain countries. It is still of interest but it doesn’t seem like a trend.
Furthermore, we have Dubai back: the largest Dubai developers that haven’t been here since the crisis of 2008 are now with us.
In addition to that, I personally feel that there is a lot of shunned desire to have a property abroad. There are people who were interested in purchasing a year or six months ago. Then all this crisis and media frenzy begins and they say: “Okay, we’ll wait”. Last autumn, everybody I spoke to described the market as frozen. It was like you put your sausages into the deep freeze. They are frozen but you still can take them out again, defreeze and eat. Today, it’s like taking the market back from the freezer.
We have about 150 companies at this show whereas our maximum number in the previous years was 212. So, yes, we are down but not significantly down. And the exhibition is full, there are no empty spots either in this or in our second pavilion.
— You’ve been in this business in Russia for a dozen years. What were the most challenging and the most interesting periods in those years?
— 2008 was very interesting because it was not really a Russian crisis, it was a world crisis that started to affect Russia. That was when everyone in Russia noticed that the main problem America and Europe had was debt. Russia in general and people working here didn’t have debts. So, we actually saw our business growing at that time while other international property shows – those in the UK, Germany, Scandinavia – were struggling and disappearing. And the Russians were still buying! So, in that time we recovered quite quickly.
— Since 2003, the Russian overseas real estate market has changed, as did your company’s tools and goals, didn’t they? What were those changes?
— In 2003, I don’t think any real estate portal existed. In those days, we were looking very much to up-market real estate and we were targeting people with a lot of money. I remember one great idea we had: we printed the tickets to the exhibition and gave them to our team of students. Those students went around Garden Ring in opposite directions putting the tickets on cars – not on every or any car but only on the Western ones. In those days, only one in five cars in Moscow was Western-built. Today, we have Yandex and other online instruments. By the way, we realised quite early that Yandex is going to be our major partner. I should mention that we were also working with Google and found it ineffective comparing to Yandex. As of now, there are specialised portals too – like yours – which give us another avenue for customers. What did not change is our objective to have only those visitors who really want to buy property. We still do not want the people coming to the supermarket in this building to visit our show. That is why we don’t have people outside who give out free tickets, no lightly-dressed girls, free drinks or balloons. Everybody who’s coming here has seen our advertising, registered on our site or found a flier in a magazine. Such people come here because they are interested in buying, or learning about real estate abroad. That’s the key to what we do. We make our advertising highly targeted because we want only people really interested in real estate.
— How has the Russian market changed since 2003? Does the fact that you have a special event to promote Bulgarian real estate mean that Bulgaria is still the most interesting destination for Russian buyers?
— What was the most interesting in Russian market, back in 2003, it’s that it was very specific and a very narrow market. Then suddenly Russians started buying considerable amounts of real estate abroad but the average value of each sale was much lower. That’s when Bulgaria has become interesting to Russians. At our several first exhibitions, we didn’t even have Bulgarian property. There were really only people looking for property costing ?1M and more. However, Bulgaria came on the market being an ideal product for mid-class Russians because of the language, proximity etc. In Bulgaria we are speaking about property costing ?50,000–70,000. On the other hand, I must admit, that the Bulgarians worked exceedingly hard to target their products to the Russian market. This situation with Bulgaria reflects general situation on the Russian market as a whole. The size of the market was growing and it was growing not only upward, but also downward. The Russian middle class came out of nowhere in these 10 years. Today, when you look on the streets, you won’t find many Ladas. Now everyone here has more money and lives much better. And there’s one other thing. Every time winter comes people think: “Why do we live here?” A lot of people of my age looking for retirement ask themselves: “Where am I going to retire?” And say: “No, I don’t want to grow vegetables during summer. No, I don’t like shoveling snow five months a year. Therefore, I am not going to retire in Russia.” And here’s where Bulgaria comes as a natural choice. Today, however, we are seeing the decrease in Bulgaria because they’ve come to a point where the market cannot keep constantly increasing by 10-15% every year. It got to the saturation point. Although the market is not growing anymore, the number of people and companies from Bulgaria still increases.
— What are the other – new – most popular countries and properties among Russians?
— Turkey is certainly remaining popular, Spain, Montenegro too. A lot more people are now looking for the investment angle: buying a hotel or some other business. It has become more pronounced today. In the uncertainty of this crisis, buyers do not want to be the pawns in a political game. So if the West wants to attack Russia economically, these people try to protect themselves buying a business in, say, Germany or Austria. And this crisis is good for our industry because it helps us offer more to people.
— What plans do you have for your business for the next couple of years?
— I don’t think there is a development plan at the moment because we have to regrow what we lost. We had to cancel several exhibitions this year and consolidate the others into one. We are going to listen very carefully to the participants, our exhibitors, to what they want, to know what we can improve and how the market is improving. I do not expect any sudden changes and I think we need at least a year to get back to normal. And if everything is quiet, we could even go back to normal by autumn and maybe have the other exhibitions back. We are watching, looking at new ideas on the market that we can use, maybe thinking about diversifying, which is what every crisis makes you look at: about new projects apart from real estate sector.
— What would be your advice to an investor thinking about investing in Russia?
— After every crisis, Russia comes back much stronger. Investing in Russia is difficult. I had several investments in this country and none of them were successful – yet. If you are thinking about investing in Russia, make sure you have a good advice, good partners, good legal services. It’s a different world here and you will need people who really understand how everything works here. At the same time, there are opportunities here, because the sanctions make Russians wake up and say: “I don’t need French cheese; I can produce a good cheese here. Our products are not bad. We need to produce them more.” That’s where an investor can rally round.
Artyom Milovanov, Tranio.com