US senators, seeking tougher sanctions against Russia, have decided to restrict Russians' access to the real estate market. In the new bill, they oblige companies insuring transactions with housing in the United States, to inform the Ministry of Finance about natives of Russia who are buying expensive apartments in the States. This will create additional complications for the members of the sanctions list.
For Russians, additional restrictions on the purchase of high-budget residential real estate in the US may be introduced. This is stated in the text of the bill on new sanctions against Russia, which was prepared by Republicans Lindsay Graham, Robert Menendez, Cory Gardner and Ben Cardin (see "Kommersant" on August 8). If the document is approved, the US Treasury will have 90 days to develop a document obliging insurance companies to provide officials with data on Russians and controlled companies buying high-budget residential property in the country. The document states that disclosure will be subject to data on the Russian beneficiaries of companies in the event that they control more than 25% of the legal entity. The authors of the bill do not specify which property will be considered elite. In their intention, the Ministry of Finance can set this bar independently.
Partner of the legal company "NAFKO-Consultants" Irina Mostovaya explains that when making transactions with residential real estate in the US, insurance companies traditionally play a significant role. According to her, the institute of title insurance is widely spread in the country: from the risks of loss of acquired property as a result of actions of third parties or previous events that may lead to its alienation. "If the acquired property was received by the previous owner in violation of the law, or if foreclosure can be made against it, the title insurance will allow the new owner to reimburse the losses," Mrs. Mostovaya explains. Therefore, she adds, insurers traditionally ask clients for a large amount of information.
According to the National Association of Realtors (NAR) of the United States, from April 2017 to March 2018, foreign investors have totaled $ 121 billion in residential real estate, which is 21% less compared to the previous same period. In their report, analysts say among the reasons for the decline in the growth of property values, the strengthening of the dollar and the growth of political tension. Russians are not among the most active buyers of housing in the US, noted in the NAR. There, the leaders in terms of deals are Chinese citizens ($ 30.4 billion), Canada ($ 10.5 billion), Great Britain ($ 7.3 billion), India ($ 7.2 billion) and Mexico ($ 4.2 billion). At the same time, according to NAR calculations, in 2017 in Miami, Russians accounted for 2% of transactions with housing, which actually corresponds to the same indicator of the last six years.
Consultant of the department of foreign real estate and private investment Knight Frank Ekaterina Nikitina said that the demand for high-budget real estate in the US remains stable. She calls New York and Los Angeles among the popular locations in addition to Miami. According to the expert, in Manhattan wealthy Russians buy apartments for $ 2-4 million, if it comes to the finished project, and from $ 1 million in the complexes under construction. According to Knight Frank, in Los Angeles among Russians are in demand as small apartments in the budget of $ 2-3 million, and villas in the budget of $ 15 million.
Managing Partner of Tranio George Kachmazov believes that now compared to 2013, interest in elite residential real estate in the US among Russians fell tenfold. "But the reason was not so much sanctions, Russians are less and less invested in expensive housing because of the high costs of its maintenance," he explains.
Irina Mostovaya suggests that the initiative of the Republicans will cause serious problems only for Russians included in the US sanctions list. "At the same time, the draft law does not have retroactive effect, that is, if the insurance contract is concluded before its entry into legal force, the insurer may refuse to provide the treasury with information about the insured", summarizes the partner of Herbert Smith Freehills Alexei Panich.