Hi Everyone,

Russian analytical real estate site IRN published the following opinion recently. Here it's a short version of it in English for you. (Please keep in mind that the talk is only about Russian investors, not people buying international properties for their own use – for vacations, kids studying abroad and other personal and family goals...)

With the dancing back and forth dollar-to-ruble relation and the Russian currency getting cheaper and cheaper in the long run, the capital is fleeing the country. Where? One of the ways – Russian money turns into real estate properties in foreign countries whose owners are citizens of Russia. But the directions where the Russian money goes might be a bit different now.

As the Central Bank of Russia reports, from January to September 2014 $85 billion left the country, in October it was a record of $28 billion in one month only and for the year 2014 it's expected to be more than $128 billion (not officially confirmed yet). For the current year 2015, the amount will exceed $100 billion of the capital investment money to leave Russia.

Starting the beginning of 2015 Russians could not believe their eyes watching the free fall of the ruble. Many are "sitting on the fence", just trying to understand where it's all going and hoping for some stability at any level of dollar-to-ruble to be able to plan what to do.

According to the recent situation in Russian economy it's easy to predict the growing volume of investing in foreign properties. During the latest couple of months analytics have been already watching many new big Russian investors coming to the market of international real estate. The most important trend is that they buy more expensive properties. Now an average purchase is for $400,000 to $500,000 while a year ago it was approximately $200,000. The analytics say that in the year 2015 this trend will prevail.

The thing is that Russian investors in foreign real estate are business owners whose money is mostly in foreign currencies anyway, so the falling ruble is not very significant of a factor for them. The preferred foreign countries leaders for this group of Russian investors are established and stable economies with the liquid market of real estate as the UK, Austria and Switzerland.

What countries will lose Russian investors?

The most suffering will be those countries where Russians were a dominant group of buyers. The #1 loser is Latvia where the minimum investment for foreigners has increased to EU 250,000 and the parliamentary committee has decided to propose terminating of the program of issuing residency permits for property buyers which affects (or offends) many Russian buyers. Actually buying real estate in Latvia was sort of buying a permanent EU visa for Russians, but with the worsening conditions for that in Latvia, Russian investors will turn to other countries offering similar programs. So, the Latvian real estate market will be a victim of the Latvian own government actions.

The #2 country to lose Russian investors is Bulgaria, where the real estate market is probably one of the least liquid in Europe. Many Russians lost money in Bulgaria due to the lack of government control over real estate affairs. Offers prevail over demand for properties, the summer season is rather short and these are the reasons that Bulgarian market is not very attractive to Russian investors. Recent developments over the Ukrainian crisis make Russian investors go away from Bulgaria and this will be a negative factor for Bulgarian economy.

The #3 will be probably Spain, where overpriced by 25% to 30% properties are not too attractive for Russian investors. The decline in construction, deficit of affordable housing, lack of good property management companies and low profitability make Russian investors go to better and greener pastures. Of course, these reasons have nothing to do with Russian people buying Spanish properties for their family vacation needs.

Not for profits, but for safety

Experienced investors realized long ago that real estate investing is first of all a way of saving money, not just a way of getting some profit. On the background of the recent Russian currency volatility real estate investing once again is becoming the best way to save one's capital from a shaking economy. The most effective country is considered the Great Britain with the stability of the British pound and the economy that guaranties this country to be the best world's investment place of refuge, as the analytics of this report on rather big Russian investors say.

Once again – your local real estate market of Russian buyers can be not covered by this report especially if properties are mostly being purchased not for investment purposes, but for Russian buyers' personal use.

To your best business success,

Sincerely,