nvestors from Russia and CIS countries are returning to the foreign real estate market after a recession in 2014-2015. Market participants recorded a significant increase in the number of Russian-speaking clients in the last year. At the same time, buyers have changed, say realtors. Their clients no longer expect high profits from investments in overseas homes, hotels and shops - they expect at least to save their capital. Such conclusions follow from the survey of foreign real estate market participants conducted by Tranio (a broker).
As part of the study "Russian-speaking investors in foreign property abroad" Tranio conducted an online survey of 268 companies - partners of the foreign property market in more than 30 countries. Most of the respondents are from Western and Eastern Europe. The study also involved companies from the United States, Turkey, Thailand and other non-European countries. The median number of respondents per country is seven.
Who is the investor?
According to the results of the survey, in 2016 the audience of investors among Russians and Russian-speaking CIS citizens in real estate markets abroad significantly expanded. The share of respondents who answered that Russian investors make up one of the main categories of buyers increased more than 1.5 times - from 17% in 2015 to 27% in 2016. But the proportion of those who answered that Russian "clients are few or Absolutely not ", almost halved to 16% (from 29% in 2015).
"The reference to us in the commercial real estate segment of Germany over the past year has grown by about 25%," confirms Ilya Gordon, founder and managing director of Gordon Real Estate (specializing in German real estate). The growth of the number of applications from Russian investors by 10% was noted in Oracle Capital Group. "The interest of Russian investors in German real estate has increased significantly," says Anton Davidenko, Head of Customer Services at Oracle Capital Group. According to him, over the past six months the number of such requests has grown by 40%. "The main driver is the growth potential after the UK's withdrawal from the EU, as well as the possibility of attracting cheap financing. But, making a bet on Germany, our customers do not refuse to invest in the UK, but only redistribute their assets, "says Davidenko.
The main buyers of foreign real estate are entrepreneurs and business owners, the results of the Tranio survey say. Their share among clients from realtors is 81%. The experts interviewed by Vedomosti also agree with this. Russian businessmen mainly choose objects in Austria, the Czech Republic, France and Montenegro. The officials (18% of clients) and show business stars (4%) are turning to brokers of foreign real estate. All of them prefer to buy real estate in European countries.
Why a house abroad
Until 2013, Russian-speaking buyers bought abroad mainly housing to "live by themselves," something like "giving at the sea" in foreign resorts, says managing partner Tranio George Kachmazov. People did not view real estate as an investment, but simply spent money. The strategy changed in 2014 after the devaluation of the ruble. "We noticed that Russian speakers began to buy objects more often to generate income. Real estate has turned into a way to save capital. This trend in 2016 became even more distinct, "Kachmazov said.
Well-to-do Russians and citizens of the CIS began investing in foreign real estate to diversify their capital and protect it from the risks of their home countries. According to the Tranio study, it is "economic and political stability" that is the main reason for buying property abroad. It was noted by 42% of respondents. And compared to 2014, the share of those who called stability the main reason increased by 25%. Stability Russian investors are most often sought in Austria, Czech Republic, Germany, the United States and France. Ilya Gordon agrees: "Investments in Germany are connected both with the financial power of this state, and with the high purchasing power of its population, which passed after the crisis of 2008-2010. From the traditions of accumulation to active consumption. "
British real estate, although not included in the study in the list of countries that are attractive in terms of political stability, but, according to Anton Davidenko, it also remains a significant option for investment. "Even in times of the most terrible crises, the first ever English property is restored. Equivalent [her] alternative on the world map has not yet appeared, "says Davidenko.
Excites our fellow citizens and the level of tax charges on real estate abroad - 7% of the surveyed Tranio market participants indicated "low taxes" as the main motive for buying objects from Russians.
Also important motives for investments are the desire to earn on the growth of prices and obtain a residence permit (residence permit). These motives were noted by 39 and 34% of respondents, respectively. With the goal of earning Russian-speaking clients, they mostly choose facilities in the UK, Portugal and Thailand. But in Bulgaria, Greece and Latvia are traveling 100% for residence permit.
According to Yevgeny Tsikunov, general director of the company "Second House" (specializing in the design of residence permits and citizenship), for the sake of obtaining residence permits, Russian investors mostly buy property in countries such as Cyprus, Greece, Spain, Portugal and Latvia. "Interest in Latvia has plummeted in 2015, the number of transactions with real estate for residence permit at times differs from what was in 2013 and 2014. But interest in Portugal, on the contrary, is gradually beginning to grow. In Bulgaria, it was planned to reduce the cost of real estate for residence permit from 300 000 to 51 000 euros. The Parliament of Bulgaria even passed the law in the first reading, but the final decision on this issue was never adopted, "Tsikunov said. With regard to the budget for the purchase of real estate in order to obtain residence permit, Tsikunov notes that about half of the clients make their choice within the minimum threshold of the cost required for residence permits (in Europe, for investment programs, it starts from 250,000 euros). In the segment of commercial real estate, budgets are usually higher by several times. "Just because finding a good commercial property, for example, for 500 000 euros in major cities in Portugal or Spain to get a residence permit is very difficult," - said Tsikunov.
How many Russians are leaving abroad?
Yevgeny Tsikunov, General Director of Second House, said: "To answer this question, we will open the statistics of Eurostat, which reflects the number of citizens of Russia who have received a residence permit for the first time in Europe: 2013 - 73,170 people, 2014 - 73,821 People, in 2015 - 73 528 people. From the data it follows that the number of Russians receiving residence permits in Europe has not changed in recent years. At the same time, it always seems to us that the number of Russians planning to leave is constantly growing. Getting a residence permit and moving to Europe is not a quick thing, this project can not be implemented in a matter of days. According to our practice, all people who are interested in living abroad can be divided into three categories. The first group plans to move now or sometime afterwards and begins to collect information.
The second group already chooses the country, picks up real estate, enters a deal, begins to issue a residence permit. The third group moves abroad. And the transition from one group to another can take a lot of time, and maybe not at all. Eurostat allows us to accurately measure the second group of people, those who brought to the end the idea of obtaining a residence permit. But to count the third group is the biggest difficulty. Those who got a residence permit in Europe, can not go there like that. Why do Russians get a residence permit and a second citizenship abroad? In addition to the traditional reasons (visa-free travel, investments, a house on the sea, in the mountains, etc.), the trend of recent years has been the tax emigration, the investor's desire to become a non-resident resident of Russia. This is due to the obligation to report on controlled foreign companies and automatic information exchange, to which Russia will join from the beginning of 2018.
Buy and surrender
Most Russian-speaking investors are not yet ready to invest in complex development projects. Less than 10% of Russian-speaking clients choose this way of investing, say the surveyed realtors. The main investors in such projects are professional businessmen, says Sergei Sander, an expert on investment, business migration and real estate abroad.
Most of the buyers stop at a simple rental business - buying foreign apartments, houses, hotels and premises for shops. At the same time, apartments and houses are the most popular objects for investment (78% of respondents noted). For such real estate, the Russians go mainly to Bulgaria, Hungary, Greece, Portugal and Croatia.
At the same time, most of the Russian buyers of foreign housing are not ready to pay too much for it. Russian-speaking investors abroad choose first of all an "affordable option" for real estate - inexpensive houses and apartments in warm or economically favorable countries, says Sander. According to the survey, 50% of realtors say that citizens of Russia and CIS countries prefer to invest in the purchase of houses and apartments not more than 300 000 euros, while choosing objects in "low-cost" countries - Bulgaria, Latvia, Greece, Montenegro, Thailand, Turkey. "Real estate in the budget to 150 000-300 000 euros attracts much more buyers than the objects for 1-3 million euros or more," says Sander. Only 2% of the respondents said that Russian-speaking investors can spend more than 3 million euros on foreign housing. At the same time, countries where such housing is chosen are not called. But among the most expensive countries, Tranio experts refer to Great Britain, France and the United States.
The second most popular option for investment - hotels. It was indicated by 26% of the respondents. Hotel real estate is in demand mainly in Austria (82%) and Greece (60%). However, compared to 2015, the number of investors willing to invest in hotels has declined. "There are fewer non-professional investors who want to buy mini-hotels. Such customers are reoriented to the apartments. At the same time, we see an increase in the number of professionals interested in buying large and expensive hotels, "Kachmazov said. "Approximately every fifth or sixth request from investors from Russia in Germany concerns hotel real estate, however, the actual transactions are significantly less than, say, in the segment of retail food retailers," Gordon said.
Of those who are interested in commercial real estate, most often choose premises for supermarkets and mostly in Germany (33%) and Austria (18%), according to a Tranio study. According to Kachmazov, investors are attracted to them high profitability (6%) and a long lease term (15 years).
But interest in cafes and restaurants has halved - from 12% in 2015 to 6% in 2016. This was due to the growing professionalism of investors - there were fewer than those who expect high profitability, without planning at the same time to conduct business independently, Explains Kachmazov.
On commercial real estate, Russian buyers are willing to spend an average of 1 million to 3 million euros, said 43% of the study participants. Objects at this price are selected in countries with an average price level - Austria, Czech Republic, Germany, Italy, Spain. Other data leads Gordon. According to him, because of the growth rates for commercial real estate, the average value of the transaction also increased. For example, in Germany, he said, deals are made in the range from 4.8 million to 12 million euros. In the Tranio study, only 4% of respondents say that their clients are willing to spend more than 10 million euros on foreign commercial real estate.
How much you can earn
To earn a lot on investing in European real estate will not work - the yield from rent in liquid European countries is low. This is beginning to be realized by Russian-speaking investors, who adhere to previously exaggerated expectations of profitability. The proportion of realtors whose clients expect to receive more than 8% per annum from a house or apartment is reduced from 35% in 2013 to 20% in 2016. For commercial real estate, this figure is 55% and 36%, respectively.
"Qualitative liquid objects in the central locations of large cities bring an average of 3-5% per annum. Yield above 7% implies a peripheral location, low liquidity and increased risks, "Kachmazov said.
"Over the past two years, the expectations of investors from Russia have become much more realistic," Gordon said, noting that customers with inflated views on the profitability of real estate abroad "are almost gone." Sander also explains that more and more Russian customers are tempering their appetites for profitability amid the economic downturn in Russia and sanctions. "For development, they are ready to take a real yield of 10-15% per annum (instead of 20%), for commercial real estate - 4-6% per annum (instead of 7-10%)," says Sander.
And yet, according to the study, in most European countries, real estate buyers expect to get almost the maximum return on their investments - up to 8%. For example, in Germany, the range of 4-8% yielded 56% for housing and 70% for commercial properties. In commercial real estate in Germany (new buildings), the initial yield is 5.5-6% per annum, and the net profit is 4.2-4.5% per annum, Gordon says, noting that it is a question of the ratio of lease payments and the contract value of the object without taking into account Purchase and maintenance costs.
Expected return of more than 8% of surveyed realtors was particularly often noted in Thailand (60% of respondents in the segment of housing and 80% - in the segment of commercial real estate). This may be due to the fact that the profitability of real estate in this country as a whole is higher compared to the European one, as investors are counting on a risk premium, the study said. According to the Numbeo website, housing in Phuket brings an average of 5-6%, while in the popular EU markets this figure is 3-4%.
Where to get money
Russian-speaking investors began to appreciate the advantages of the European credit system more and more actively use credit as a tool for financing transactions. Compared to 2015, the share of realtors increased by 3%, indicating that their clients take out mortgages for the purchase of foreign real estate. "Wherever loans are made on good terms, most investors tend to use it," Kachmazov said. For example, many buyers who take out real estate loans in Austria, Germany and Spain. "Largely due to the fact that in Germany, non-residents are available mortgage at 1.5% per annum, this country has become one of the leaders in the inflow of investors from the CIS," said Georgy Kachmazov.
But in Hungary, Greece, Cyprus, Croatia, Montenegro and Thailand, Russian-speaking buyers almost impossible to get a mortgage. For example, in Hungary, most banks do not issue loans to citizens of countries that are not members of the European Union.
But in cases where our compatriots still take out a loan abroad, the share of borrowed funds on average is 40-60% of the value of the facility (52% of respondents).
The recent trend is "club deals", when investors unite in the implementation of the project. Such deals are increasingly being considered to reduce risks, says Davidenko. According to him, "these models are most effective when no more than three investors participate in the project".
According to realtors, the biggest difficulty that their clients face when entering the foreign real estate market is the selection of a suitable object. In the Tranio study, 41% of market participants agree with this. It is becoming increasingly difficult to find real estate for investment - because of the large number of investors in the market there are almost no good properties at reasonable prices and there is a fierce struggle for them, says Kachmazov.
In addition, adversely affected and withdrawal of licenses from a number of Russian banks in 2016. As a consequence, foreign banks have toughened the procedure for issuing loans to our fellow citizens, who also had difficulties with the transfer of money for the purchase. If in 2015, these difficulties, the Russian customers noted only 4% of realtors, then in 2016 this is spoken about by more than 20% of realtors. Great demands on borrowers were made by Great Britain. It is also difficult to obtain a loan in Cyprus and Thailand. Also Thailand leads in the category "It's hard to see the reliability of the seller" (44% of respondents) - the market of this country is less transparent compared to European and American.
"According to our forecasts, in 2017-2018. Russians will increasingly learn about collective investment (croweding) and real estate funds. Gradually will move in this direction. Often this is a more convenient format than an independent purchase and subsequent management of the project, "Kachmazov concludes.