Russians are buying more real estate abroad! Here’s why

From 2013-16, the number of Russians buying international real estate tailed off before the trend reversed – for the last three years a healthy increase in cross-border investment has been registered. This upward trajectory rocketed in H1 2019, boasting a $96 million increase on the previous year. Tranio explains the situation in more detail.

After 2014, the number of transactions involving foreign property fell sharply – due to the sharp devaluation of the ruble in late 2014, the purchasing power of Russians declined. 

From 2016, international real estate started becoming a more attractive investment opportunity for Russians, who have been pumping more and more money into foregn property. This suggests that they have dwindling faith in their own country’s economic future. Russians’ buying power has recovered gradually since 2014 and in 2018 property investment overseas grew by 12% compared to the previous year.

In H1 2019, foreign property investment dynamics were also positive and growth can be expected at the annual rate (six months is enough to estimate the annual trend). In addition, the numbers from H1 2019 show an 18% increase on H1 2018.

The number of real estate transactions in the total volume of cross-border transfers by Russians in H1 2019 increased by $96 million against H1 2018, and by $115 million against H1 2017. However, the share of real estate transactions in the total volume of cross-border money transfers is in decline.

The situation is ambiguous: the number of property-related transfers in absolute terms has been growing since 2016, but its share in the total volume of cross-border money transfers by Russians has been decreasing. However, the statistics from the Central Bank of Russia may not reflect all foreign property transactions.

Since 2015, other cross-border transfers shares have been growing amid the decline in the share of transfers related to real estate transactions. The three types are:

The first type is personal fund transfers. These are transfers from personal accounts in authorised banks to personal accounts or the accounts of close relatives, opened at non-resident banks as well as re-transfers by residents and their close relatives, from non-resident bank accounts to resident bank accounts. The second type – e-money transfers – while the third one is "other transfers." Personal money and "other" transfers can also include investment transactions.

At the same time, the shares of three cross-border transfer types have declined since 2015. The first type is non-repayable transfers in the form of grants, donations, refunds, scholarships, retirement benefits, alimonies, inheritance disbursements, transfers by way of gifts, and others. The second is loan service transfers: attractions, repayments, and interest charges. The third type – transfers to pay for goods and services. The transfers mentioned do not include investment purposes.

Therefore, according to the Central Bank of Russia, no decline has been observed in the cross-border investment activity of Russians over the past four years. The share of transfers that may include investments is growing, so it can be assumed that a growth or redistribution of Russian foreign investment across different investment vehicle types has been taking place. The Central Bank of Russia does not specify what these other types of investment vehicles are besides real estate.

Author: Anton Chupriianov