2016 in review: Russian investors increasingly opt for commercial properties as means of safeguarding their capital
Whereas previous years saw Russian property investors scrambling to scoop up vacation homes abroad, we witnessed a pronounced shift in 2016. Following the
Fewer transactions, larger budgets
Since 2014, Russian nationals have been buying fewer properties abroad. According to the Central Bank of Russia, in 2015 Russians spent less than half of what they spent in 2014 on foreign money transfers for purposes of purchasing foreign properties. In 2016, Russians were expected to spend about $800 million on such transfers, beating
Despite the Central
That said, fewer Russian buyers are closing sales abroad. According to Tranio.com analysts, Russian citizens closed about 30% fewer transactions in 2016 than in 2015.
Meanwhile, among our clients, Russian buyers’ average budgets are on the rise. Between January and November 2016, the average such purchasing budget increased from
Web statistics support our conclusion that Russian buyers are increasingly interested in expensive foreign properties. Our analysis of web data obtained from Russian search giant Yandex revealed a significant uptick in searches for properties traditionally considered to be incredibly expensive.
In some cases, this may be attributable to major political and economic developments.
For example, between January and November 2016, users searched for homes and flats in the United Kingdom 56% more frequently than during the first 11 months of 2015. This is likely attributable to a surge in Russian investors' interest in the UK property market following
During the first 11 months of 2016, Russian users searched for properties in the United States 37% more frequently than during the same period in 2015. In November 2016, Knight Frank reported a 35% increase in Russian requests for prime residential properties in Miami and New York as compared to 2015. The Knight Frank analysts associated this development with
As they flock to these
This is likely attributable to deteriorating relations between Turkey and Russia following
Dynamics of the popularity of Russian search queries by foreign property market, %
Source: Wordstat Yandex
Investments instead of holiday homes
We have witnessed a considerable decline since 2015 in Russian buyers’ interest in purchasing residential properties in seaside resorts. Instead, investors are eager to invest in commercial properties in cities across Central and Western Europe
Tranio.com conducted a survey at the end of 2016 among Russian real estate professionals, the results of which will be released in full at a later date. Preliminary results indicate a considerable uptick in the number and market dominance of commercial and residential property investors.
When asked if many of their Russian clients were purchasing foreign properties for investment purposes, 85% of respondents indicated that this was a perceptible trend. By comparison, that figure for 2015 was 71%.
The percentage of respondents who considered property investors to comprise one of the main categories of the market surged from 17% to 26%.
Russian investors have also exhibited a surge in demand for commercial rather than residential property. A survey we conducted in 2013 revealed that a mere 43% of respondents believed the number of Russian commercial property investors to be considerable. By our 2016 survey, that figure had soared to 78%.
How Russian investors will behave in 2017
The behaviour of Russian investors in 2017 will likely be shaped by the fact that the yield rates in the EU countries have been declining for several years now. For instance, if in 2009 a retail property in Europe yielded 6% per annum on average, in 2015 it yielded
In 2017, we expect the following trends to become increasingly prominent:
First, Russian nationals will put more capital into
Second, investors will continue to actively take out loans with European banks in order to create a leverage effect, thus adding
Elena Milishenkova and Yulia Kozhevnikova, Tranio.com