An Overview of Russian Real Estate Purchases: 2022 Trends and 2023 Prospects.
The geopolitical landscape of 2022 sparked a significant increase in Russian interest for foreign real estate. Prian reports that the number of inquiries for buying international residential properties has surged 2.3 times in a year, with almost 80% of inquiries resulting in actual purchases. Check out our article to learn which properties Russians favored in 2022 and what industry experts anticipate for 2023.
What Caused This Trend? Factors, Including Geopolitics.
Geopolitical factors, world conflicts, and natural disasters have been impacting the real estate market and investment opportunities for over three years. However, 2022 saw a surge in demand for foreign real estate, with inquiries more than doubling. Demand varied throughout the year, with a moderate increase in January and February due to the pandemic winding down, but a significant spike in March and a second upsurge in mid-autumn due to geopolitical reasons.
According to Prian, almost 75% of Russian customers bought foreign properties with the intention of relocating in 2022, compared to 55% in 2021. Philip Berezin, Editor-in-Chief of Prian.ru, notes that people are increasingly buying homes abroad for permanent residence rather than vacation homes. The number of investment transactions for rental or resale purposes is also on the rise.
For wealthy Russians, the main goal of buying property abroad is obtaining permanent residency or citizenship. In 2022, the most popular immigrant programs were in Turkey and Cyprus, according to NF Group. Henley & Partners notes that while many citizenship or permanent residency programs were suspended for Russians, other countries received all of the remaining requests. These programs were available in Grenada, Turkey, Montenegro, Italy, Portugal, Cyprus, Serbia, Bulgaria, and the UAE.
Approximately 15% of affluent Russian buyers purchase foreign real estate as investments, with the UAE (Dubai and Abu Dhabi emirates) and Turkey (Istanbul) being the most popular locations. Another 7% consider residential property purchases for both living and investing, with the UAE being the most popular location in this category according to experts.
2022 Most Popular Targets
Russian interest was primarily focused on countries with open borders that allow for a longer stay, provided certain conditions are met. Turkey and the UAE were in highest demand, with some European countries showing upward trends.
Prian.ru analysts identify Turkey, the UAE, Georgia, Montenegro, Thailand, and Bulgaria among the most desirable countries. According to Irina Mosheva, a Russian partner of Savills, an international trading company, Indonesia is also gaining popularity. Furthermore, clients are increasingly considering investments in Oman and Qatar.
Turkey remains the undisputed leader, with over 40% of requests submitted for properties in this country. Turkish real estate has been the most popular among Prian users since 2020.
Demand has increased significantly for visa-free (including for Russia) countries such as the UAE (throughout the year), Thailand and Indonesia (mostly in autumn), and Israel. The number of requests has more than doubled in Georgia and Montenegro, with the UAE being the champion, experiencing a 4.5-fold increase in demand.
Although European countries were mostly losing ground, a decline in ranking did not necessarily mean a decrease in the number of requests, except for particular countries such as Germany, Czech Republic, and Latvia. The number of requests related to the USA has also decreased.
In contrast, there has been an increase in the number of requests for South European countries such as Spain, Italy, Portugal, and Greece. Cyprus has emerged as the leader due to its ongoing permanent residency program, with twice as many inquiries for residential property in 2022 as compared to 2021. According to Marina Shalaeva, Executive Partner of Parus Real Estate, 14% of all requests were for Cyprus, followed by 8% for Portugal, 6% for Greece, and 4% each for Malta, Spain, and Great Britain.
According to Prian.ru, the demand for real estate in Spain, Italy, Portugal, Greece, and Cyprus has increased by 15-20% within the year.
However, Mr. Berezin explains that European countries are less accessible for Russians due to difficulties in transferring funds and the unfavorable status of Russian passports. Nonetheless, those who possess a second passport or permanent residency in a European country do not have such issues.
Prian estimates that 70% of Russians were interested in options up to €100,000, while 20% looked for properties up to €300,000. Only 2.5% were interested in properties priced over €1,000,000.
Elena Marinicheva, an expert in the real estate industry, stated that the minimum budget for buying foreign real estate in 2022 was $100,000. For this amount, investors could find income-generating projects in Thailand, Turkey, and Georgia, which could also lead to permanent residency in those countries. However, in the UAE, the minimum threshold varies depending on the emirate, starting at $180,000 in Ras Al Khaimah and $205,000 in Dubai.
Predictions for 2023: Which Countries Will Attract Russians?
In 2023, Russians’ continued interest in purchasing real estate overseas remains high, with Turkey once again being the top choice for Russian buyers, according to Prian. The other four most popular countries among Russian buyers for real estate purchase are the UAE, Georgia, Montenegro, and Thailand, with Bulgaria following closely behind. This is mainly due to these countries’ programs for obtaining permanent residency.
For instance, buying property in Turkey is one of the ways to obtain a long-term residency permit, which can lead to citizenship. In the UAE, there is no permanent residency, but long-term visas are available for real estate investors, with visa validity dependent on the investment amount. In Georgia, investing at least $100,000 in real estate, whether in the primary or secondary market, can lead to permanent residency. Additionally, credit can be used to purchase one or multiple properties.
To obtain permanent residency in Montenegro, there is only one condition to meet, which is to have no encumbrances on the property, such as a mortgage or loan. A permanent residency permit is granted for one year and can be renewed, but it does not confer the right to work or settle in Montenegro.
In Cyprus, to acquire permanent residency (and the right to settle), one must purchase new construction property from a property developer, with a minimum price of 300,000 euros. Those who acquired resale property before May 7, 2013, may also qualify for a settled domicile.
Despite the current geopolitical situation, Russian interest in buying residential property in European countries remains high. PwC analysts have ranked the most attractive large European cities for investment prospects in 2023. Factors such as property prices and respective forecasts were considered. The top-ranked cities are:
- London, which remains the most attractive European city for investment in 2023, as it was in 2022.
- Paris, which has overtaken Berlin and taken the 2nd position in the ranking due to lower inflation rates and improved office market figures.
- Berlin, which has dropped to the 3rd position due to inflation rates and dependence on Russian energy supplies.
- Madrid, which has significantly improved its figures compared to the previous year, despite COVID-19 circumstances and intensified inward migration. The development of solar and wind power engineering in Spain also contributes to its investment attractiveness.
- Munich, which has maintained its position from 2021, but cannot surpass Berlin in attracting investments.
However, some European countries are currently deemed insecure for Russian investors, so caution is advised when buying real estate in those countries, according to International Investment experts.
Instead of a summary
The foreign real estate market has undergone significant conceptual changes for Russians this year, which continue to evolve. The current difficulties for Russians in purchasing property abroad are due to global changes in the investment landscape, restrictions on fund transfers, and sanctions. As a result, Russians are gravitating towards friendly nations like the UAE and Turkey for real estate investment.
Despite the popularity of these nations, many Russians still prefer to buy real estate in the EU, as they are Europe-oriented. However, it is essential to consider the geopolitical environment and purchasing limitations in some countries when promoting European real estate to high-income Russians.
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