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Russians Investors Dominating European Real Estate Markets

News Posted On: 23 August 2012

The number of Russians buying holiday homes abroad has been increasing tremendously over recent years. A few years ago, just the wealthy Russians had the funds to buy houses outside the former Soviet Union, but today, a host of middle-class people are finding it appealing to secure sea-side homes abroad, even though there is every chance of incurring a debt.

Property abroad is considered as an investment by many buyers, and the drop in real estate prices due to the Euro zone’s financial crisis in countries such as Cyprus, Spain, Portugal and France has seen a large number of Russians invest in these markets, believing that rates will eventually rise.

Bulgaria’s Ministry of Justice reveals that almost 350,000 Russians already have houses in the country. Western Europe’s real estate investment chart shows that Russians are the fifth biggest investors by volumes. The financial crisis is responsible for this, as the Bulgarian, Croatian, Cypriot, Montenegrin, Turkish and Spanish real estate markets have seen a flurry of Russian investors. A large number of unfinished and unsold buildings still remain in these countries, and the problem lies not in purchasing real estate, but selling it quick if the owner requires instant money.

The impact of Russian influence on European markets

If the European crisis develops further, prices of properties are expected to keep falling, says the head of the PMIAC (Property Market Indices Analytical Center), Oleg Repchencko. If national currencies are reintroduced by individual EU countries, it could have a bad effect on foreign home owners as these currencies will depreciate against the US dollar and the Euro, albeit momentarily. He also said that prices of properties will decrease by half. Analysts say that the real estate market in France has the potential to drop another 20% by the end of 2013.

The Russians have made the most of the situation and purchased vacation properties in several countries. The number of Russian investors who were willing to shell out up to $25,000 to purchase foreign property has increased significantly.

However, the number of potential purchasers who were willing to spend $60,000 to $120,000 has reduced. IREF (International Real Estate Federation) experts report that the trend has been continuing since 2007, and signals the growth of Russian middle-class, with people from the country purchasing properties abroad for their own use, and not as an investment means.

Russians are known to be vulnerable to “deals” that are offered to them by sellers without the requisite license, according to Gennady Gudov, a real estate agency’s director. He also says that Russians often purchase houses in resort towns abroad out of emotional susceptibility when they go on an overseas vacation and see the beautiful white beaches before deciding to live there forever.

The low demand for property in Russia is down to a demanding investment policy and unreasonably high prices. Moreover, foreign investors do not consider the Russian real estate market because the resort towns in the country cannot compete with the service and level of comfort provided in other countries.

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