Russia’s lucrative residential offering
WITH luxury property developer Yoo launching two new developments in Moscow this year, buying a home in Russia’s booming financial hub looks a more tempting prospect. While the heady days that saw Moscow’s property prices rocket 110 per cent in value are behind us, the more mature market for homes in Moscow is still intriguing. But as with any post-communist market, just 20 years young, there are a few quirks that buyers should be aware of. Here’s our guide.
1.CASH ONLY
It sounds like something straight out of a James Bond novel, but Russians only do things in cash. Piles and piles of cash. Alexander Shatalov, the chief executive of InterMark Savills in Moscow, says there’s very little chance that you can use a mortgage to buy a Russian property: “If a British buyer needs a mortgage they will need to re-mortgage their home in the UK. Few Russian banks will accept mortgages from foreigners, and even if they found a bank that would, they wouldn’t like the rates and charges offered to them.”
2. PRO-RUSSIAN
Only 5 per cent of the property buyers in Moscow are foreign. This means if you’re going to sell your home in and cash in on the growth, you need to appeal to wealthy Russians. While Shatalov says these well-heeled folk are attracted to international design tastes, they are unlikely to ever buy a place without tip-top security credentials. Underground parking is a must. Also, low ceilings won’t be tolerated. This will be much higher than you’re used to: 3.3m is the ideal, that’s a full meter taller than the average 2.7m in period property in London.
3. TRACKING THE OIL PRICE
Real estate in Russia correlates with the oil price, making it a very volatile market. While there are other contributing factors (inflation, the price of the ruble and interest rates to name a few), Shatalov says the basic rule of thumb for the sector is that a $1 increase in the price of a barrel of oil leads to an average increase of $200 dollars per square metre on the price of Moscow’s luxury real estate.
4. OFF-PLAN PROFIT
The best way to make a property profit in Moscow is to buy off-plan. Shatalov says for the right investment, this method could score you a 35 per cent return on completion and re-sale. Brits tend to be a little reluctant to buy something they can’t see and touch, but in Russia this is the norm. More frightening still for the conservative among us, you have to part with your cash earlier on – not on completion like you do in the UK. But for 35 per cent profit, who’s complaining?
EX-PAT LIVES | JOHN WARREN, MOSCOW
John Warren has lived in Russia for the last 20 years; longer than he lived in the UK. He was shipped out there by the company that is now Glencore to trade commodities. He bought a property in the early days of Russian property privatisation, purchasing a grand Russian home from 18 workers given the home during the revolution. “It was a very complicated process. It required 18 individual transations entirely in cash,” says Warren. “Thankfully things aren’t as complicated as that now, but still the market isn’t without its oddities.” Warren gave up trading ten years ago to set up a sausage-making company on the outskirts of Moscow.