Russian-speaking buyers of income-producing properties: an analytical study Tranio (2016)
In early 2016 the company Tranio conducted an analytical study on Russian-speaking investors who invest in rental property abroad. This is the fifth major study of Tranio.
After the rouble devaluation in 2014-2015, the immigrants from Russia and other countries of the former Soviet Union have become roughly half as much to buy overseas property. However, the increased proportion of buyers that purchase real estate not for own stay and for investment purposes — primarily for rent.
In our research, we relied on the results of two online surveys. In the first survey involved 561 real estate Agency in 37 countries, and the second — 153 Russian buyer that recently bought or intend to buy income-generating property abroad.
First, we have considered the countries most popular among Russian investors. In this rating, the popularity of countries is evaluated based on the number of requests to “Yandex”, referring to the purchase of commercial real estate in 2015:
| Country | Share search requests, % |
|
|---|---|---|
| 1 | Germany | 22,1 |
| 2 | Spain | 06,5 |
| 3 | USA | 06,0 |
| 4 | Czech Republic | 04,9 |
| 5 | Italy | 04,8 |
| 6 | UK | 04,7 |
| 7 | France | 04,6 |
| 8 | Turkey | 04,3 |
| 9 | Latvia | 04,0 |
| 10 | Montenegro | 03,5 |
To the question: “how Many customers from Russia and other countries of the former Soviet Union acquire income property?” 54% of realtors said, “the Number of such clients is noticeable, but small compared to the number of buyers from other countries.” The most popular answer is most of the reviewed countries.
74% of respondents noted that the number of transactions with Russian buyers declined after the devaluation of the ruble in 2014-2015. However, a growing number of investors in rental property. In the previous survey conducted Tranio in 2013, 56% of realtors have noted that Russian buyers of commercial properties little or not at all, and in a poll of 2015 this was the opinion of only 27% of respondents. The share of those who believes that many Russian investors increased from 44% to 73%.
The share of Russian investors increased, especially in those countries where before our compatriots are mostly buying holiday homes for themselves (for example: Spain, Italy, France). In those countries that have traditionally been popular among investors (e.g. UK, Germany), their share remained at a high level:
| Country | The number of respondents noting a significant amount Russian investors, % |
|
|---|---|---|
| 2013 | 2015 | |
| The share of Russian investors has grown | ||
| Spain | 37 | 65 |
| Italy | 32 | 75 |
| France | 00 | 50 |
| The share of Russian investors remained at a high level | ||
| UK | 67 | 80 |
| Germany | 89 | 82 |
Among the Russian-speaking investors is dominated by successful entrepreneurs with an active business in Russia or other countries of the former USSR. They tend to invest in real estate, bringing not necessarily high but steady income in a safe currency. The main motives of investors are as follows:
- To diversify investments and protect them from domestic political and economic risks.
- Create a personal pension Fund.
- To pass the asset on an inheritance to children and ensure their financial well-being.
- To obtain a residence permit in a developed foreign country.
Typically, investors are buying residential or commercial properties for rental, and only a few are interested in projects of development or redevelopment. Most real estate agents (65 %) indicated that no more than 10 % of Russian investors to invest in such projects. According to George Kachmazov, managing partner of Tranio, “main returns to our investors brings an active business. And abroad they behave as rentiers: prefer simple rental income. They do not want and do not know how to do the projects added value in Europe, although over time their competence increases”.
The exception is Thailand, Montenegro and the Czech Republic, where 89, 75 and 63% of realtors indicated that over 10 % of our compatriots are engaged in real estate development or redevelopment.
“The Russians often buy rental property in the same place where she used to buy housing for themselves,— said Giorgi Kachmazov.— This is understandable: they know the features of the location and oriented to the local market. They usually spend time in your foreign home, and they want to control the income if he is nearby.”
The most popular investment objects are residential apartments and homes: 63 % of respondents noted that this type of property is among the three most popular. Stand out Bulgaria, Hungary and Portugal, where this answer was chosen 95, 89 and 86 %, respectively. On the contrary, in Germany, Italy and the UK, this is not the most popular response (37, 36 and 27%, respectively).
The second most popular option — hotels, chose it 34% of realtors. Hotels especially popular in Austria (78 %). The majority of respondents (62 % of those who indicated hotels) noted that Russian investors rather independently manage hotels than entrust them to the management company. However, in different countries there is a significant difference: for example, in Bulgaria and the UK all 100 % of respondents answered that investors use the services of management companies, as in Germany and Austria in this variant accounts for 71 % of the responses. On the contrary, in Italy and Turkey all of the respondents indicated that investors are to manage the hotels.
Another popular type of property — apartment houses (mentioned by 16% of respondents), especially in the Czech Republic, USA and Germany (57, 43 and 42 %, respectively).
On other types of investment properties are a small percentage of responses, although their popularity is noticeable in the individual countries:
| Type of property | Country (in brackets the number of respondents, %) |
|---|---|
| Street shops | United Kingdom (60) France (36), Austria (33) Latvia (33) |
| Cafes and restaurants | Spain (29) Portugal (29), UK (27) |
| Supermarkets | Germany (32) Spain (16), UK (7) |
| Office space | UK (33) |
| Housing for students | Austria (22), Greece (17) |
| Housing for seniors | Bulgaria (16) |
The average value of residential rental property is 200 thousand euros, commercial real estate of EUR 1.2 million, although budgets vary significantly depending on the country and type of property. A survey of buyers shows that deals worth an average of 1.7 times more expensive than the budget that buyers focused initially.
Between the client and closing the deal, on average it takes 4-5 months, although terms vary considerably in different countries:
| The average term of the transaction | Country |
|---|---|
| Up to 4 months | Thailand, Hungary, Latvia, Turkey, Greece, Montenegro, Bulgaria, Portugal, Czech Republic |
| About 5 months | Germany, Spain, Italy, USA |
| More than 6 months | France, Austria, UK |
Investors have high expectations of profitability. From a survey of realtors, it follows that from residential property, on average, expect a yield of 5.7 % per annum, from the commercial of 6.9 %. However, the customer survey shows that the real yield on residential properties is on average 4.3% and commercial is 5.6 %.
However, expectations of profitability of our compatriots over time, approaching the true parameters. The 2013 survey showed that homebuyers on average expected to yield 6-7 % per annum, and commercial — 8-9 %.
The question “how Many buyers take a loan to buy commercial property?” also demonstrates significantly different results in different countries. In France, the UK and Austria, the share of such buyers is particularly large (43, 50 and 57 %, respectively). On the other hand, in many countries (e.g. Thailand, Greece and Hungary) the Russian buyer it is almost impossible to get a mortgage, and it resulted in a large proportion of the answers “to These clients with little or no”.
In cases where Russian-speaking investors take the credit, the leverage ratio of project cost on average is 40-50% and almost does not vary in different countries.
If in 2013 only 10% of realtors noted that most of the buyers of commercial buildings makes a loan in 2015 such responses account for 27 %. According to George Kachmazov, the growing interest in mortgages is due to the fact that “on the one hand, after the crisis investors have become less of their own money. But, on the other hand, investors become more competent and better understands that a well-designed credit helps to optimize the taxation and increases the yield of the investment. In addition, now borrowed cheap money is also a plus in favor of mortgage”.
We found that the registration of the credit on average increases the transaction duration is 33 days, although in different countries in different ways: for example, in Spain, the transaction involving a loan closing on average 21 days longer, and in Austria — 48 days.
Funds for the purchase of real estate are most likely to come from Russia, as noted by 73% of realtors. However, other options are highlighted in the individual countries:
| The source of funds | The number of the respondents, % |
Remarkable country (in brackets the number of respondents, %) |
|---|---|---|
| Russia | 73 | Greece (100) Turkey (92), Montenegro (92) Bulgaria (91) |
| Offshoring | 28 | USA (67), UK (57) |
| European countries | 24 | Austria (67) |
| The countries of the former USSR, except Russia | 13 | Czech Republic (43) Turkey (31), Bulgaria (24) |
More than half of buyers (52 %) indicated that it was not going in future to sell the property, and plan to keep it and subsequently inherited. People who intend to sell the property, 55% expect to do so approximately 10 years after purchase, 35 % after 5 years and only 3% in 3 years.
Meanwhile, according to the 2013 survey, 40% of investors planning to sell its profitable residential real estate, was going to do it for 2-3 years. Thus, if the investor wanted to more speculative profit, but now they are more interested in capital preservation. Georgy Kachmazov notes that “this trend is closely tied to the fact that investors reduced requirements for yield in favor of risk reduction and reliability in the long term.”
Answering the question: “What are the main difficulties of working with Russian buyers nedvzhimosti?”, most real estate agents (52 %) noted the high expectations of profitability, and in the second place — the sluggishness (36 %). Distribution of answers to this question are shown in the table below:
| The difficulty of working with Russian buyers |
The number of the respondents, % |
Remarkable country (in brackets the number of respondents, %) |
|---|---|---|
| High expectations yield | 52 | United Kingdom (73) Germany (68) Austria (67) |
| The slowness, the delay of the transaction | 36 | Czech Republic (75), UK (73) |
| Unwillingness to follow the established procedures for the conduct of the transaction | 25 | Thailand (56) |
| Problems with proof of funds | 23 | Spain (43) |
| Incompetence in matters investment property |
22 | USA (57) |
| The language barrier | 06 | Greece (27) Turkey (17) |
Buyers point out that the biggest problem is to find a suitable object: this option indicated 64% of survey participants. The second place response: “to Structure the transaction to optimize the taxation” (18 %).
By George Kachmazov forecasts, in 2016 the number of Russian buyers of residential real estate will drop by another 20-30 %. While 30-40 % increase in the number of our compatriots, wishing to sell their homes abroad due to the high cost of content. However, 20-30% will increase the number of Russian buyers of income-producing properties.
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