Promising Trends in 2022: Types of Overseas Real Estate Preferred by Russian Investors

Official data from the Central Bank of the Russian Federation reveals a significant surge in Russian investments in foreign real estate. By the end of 2021, the volume of investments increased by an impressive 61% compared to the previous year, reaching a total of $1,352 million.

This upward trend is expected to continue in 2022; however, the landscape has shifted due to recent amendments introduced by the Russian government. A new Decree, effective as of March 1, 2022, imposes restrictions on monetary transactions involving foreign currency, real estate, securities, and other foreign assets for Russian residents. The Decree specifically prohibits the purchase of real estate in countries that have demonstrated “unfriendly actions” towards Russia, primarily those nations that have imposed economic sanctions or limited market access for Russian investors.

Nevertheless, the Decree still allows Russian citizens to invest in real estate overseas in regions that maintain a standard economic relationship with Russia. Consequently, new and promising areas have emerged for Russian investors in the real estate sector, including Turkey and the UAE, which have already witnessed growing interest over the past few years. Additionally, countries such as Georgia and Serbia have also become attractive destinations.

However, due to the aforementioned circumstances, markets in the USA, most European countries, Canada, and Australia have become inaccessible for Russian investors.

QB, a marketing agency, has conducted extensive research into these emerging real estate markets to identify the factors contributing to their appeal for Russian investors.

UAE and Dubai: Embracing the Vision of the Future

The United Arab Emirates (UAE) stands out as one of the most sought-after real estate markets today. Russian investors have promptly taken notice of this lucrative opportunity and have swiftly started acquiring both commercial and non-commercial properties in Dubai.

In fact, real estate in the UAE has become the most talked-about topic in Russia in 2022. Bloggers, in particular, refer to Dubai as the “City of the Future,” while YouTube is filled with thousands of video discussions centered around “Dubai Real Estate.”

Why is the UAE Real Estate Market Popular Among Russian Investors?

The UAE real estate market has garnered significant popularity among Russian investors seeking to purchase foreign properties. Several factors contribute to this trend:

1. Tax Benefits: Unlike many other countries, the UAE government does not impose annual property taxes, providing a financial advantage for investors. Additionally, when finalizing a purchase agreement, there are no additional fees to worry about, apart from the registration state fee.
2. Cost Savings: When considering all the associated costs, on average, investors save between 30% to 70% compared to acquiring commercial or non-commercial real estate in other regions. Furthermore, an enticing perk is the potential to obtain a UAE Residence Visa with a property purchase worth at least 272,000 USD.
3. Higher Rental Yields: The UAE offers a significantly higher rental yield, estimated at 5% to 8% of the total purchase price, surpassing rates found in many European countries. This is primarily due to the country’s growing population, as Dubai alone welcomes approximately 25 million visitors and new residents annually. The high demand for rental properties translates into attractive financial returns for investors.
4. Quality of Life: Russian citizens who own residential real estate in the UAE often highlight several advantages of living in the country, including safety, well-developed infrastructure, high-quality services for citizens and tourists, reasonable prices for necessities such as food and medical care, and the modern and pleasant atmosphere of the city with captivating views and clean streets.
5. Popular Residential Districts: In Dubai, the most sought-after residential districts include Dubai Marina, Business Bay, Jumeirah Village Circle, Mohammed Bin Rashid City, and Jumeirah Lake Towers. The continuous development of the city, aligned with the state’s plan for the real estate sector’s growth until 2040, is expected to introduce new popular districts in the coming years.

In summary, the demand for UAE real estate among Russian investors can be attributed to various factors. Some seek a change in residence, others aim to generate passive income through rentals, and some desire a personal retreat for relaxation. The UAE offers a wide range of options at favorable prices, making it an attractive destination for Russian investors.

Turkey: Business Development Prospects in Istanbul

Turkey stands out as another highly sought-after real estate market among Russian investors. The region experienced a significant surge in commercial transactions, with a remarkable 75% increase at the end of 2021 compared to the previous year (2020).

Experts from the Turkish Institute of Statistics have revealed that a new record was set as Russian investors purchased 5.4 thousand apartments and houses in the region. This places them in the 3rd position on the list of foreign buyers of residential properties in Turkey.

Of course, sunny regions like Antalya and Alanya in Turkey continue to be popular choices for real estate purchases among Russian investors. However, there has been a notable increase in interest from Russian entrepreneurs towards properties in Istanbul. This is primarily due to the city’s great business development prospects and the government’s support in this sector.

One significant advantage is that any foreigner who invests at least $250,000 in real estate gains the right to engage in entrepreneurial activities. They can establish a legal entity such as an LLC or JSC and officially register their company, with a registration period of up to 14 days. Furthermore, the government offers various benefits and supports domestic markets to foster investment growth in this area.

In addition to the promising business opportunities, it’s worth noting that Turkey is a top holiday destination for many Russian citizens. Owning their own real estate in the country provides them with greater comfort and affordability during their visits.

Moreover, the COVID-19 pandemic in 2020 significantly impacted work schedules, allowing many people to work remotely from anywhere in the world. In this context, Turkey’s visa-free regime has made it not only a place for relaxation in an “all-inclusive” manner but also an attractive region for potential emigration.

There are several other advantages that investors in Russia highlight when considering Turkish real estate:

• A simplified system for executing property transactions, enabling the conclusion of purchase and sale agreements within a few days.
• The opportunity to obtain a one-year residence permit, with the possibility of unlimited extensions, as well as the potential to obtain citizenship after residing in the country for at least 6 months per year for 5 years.
• Relatively low property taxes, amounting to 0.2% per year of the cadastral value of the property.
• An accelerated procedure for obtaining citizenship by making investments in other sectors of the economy.

Considering all of the above, it is evident that Turkey is a highly sought-after destination for Russian investors looking to purchase real estate. However, compared to the UAE, the prospects in Turkey lie more in small business opportunities within the region and favorable conditions for permanent residency, while real estate in the UAE offers the potential for additional earnings through property rentals.

Georgia: A Soulful Option and Beyond

Over the past four years, Georgia has witnessed a significant surge in demand for real estate, including among Russian investors. According to the Georgian government, Russians own 40% of the foreign real estate in the country. It is highly likely that the demand for real estate in Georgia will continue to grow throughout 2022 as interest in the region continues to rise. Official data from the State Register of Georgia at the Ministry of Justice indicates that Russians have acquired 15,133 real estate items in Georgia since 2016, as commented by experts from the Government Migration Agency.

Which types of real estate assets do Russians acquire in Georgia?

Russian citizens show significant interest in regions such as Tbilisi, Borjomi, Kakheti, and Adjara when purchasing real estate in Georgia. This preference is quite understandable, as many Russians choose to change their permanent residence to Georgia due to the country’s more comfortable conditions, including its resorts and climate.

Notably, Batumi has witnessed rapid infrastructure development, with modern residential estates appearing along the coast. These buildings boast designs and service levels comparable to those found in the UAE, attracting not only Russian investors but also Europeans.

In addition to comfortable apartments and luxury properties, Russians often invest in “secondary” real estate in Georgia. The reasons behind this trend are relatively lower prices compared to newly constructed properties.

It’s worth highlighting the purchase of land plots, as some Russian investors view this trend as promising for their own business. The reason is quite evident: Georgia benefits from the Deep and Comprehensive Free Trade Area Agreement, which allows for working and exporting goods to European markets without additional duties.

Furthermore, like the UAE and Turkey, Georgia offers foreign investors straightforward real estate registration procedures, without the need for income certificates or excessive bureaucracy. Moreover, investors have the added advantage of obtaining a residence permit, with the potential for citizenship if they further invest in the country’s economic sector, accelerating the citizenship acquisition process.

Due to these favorable conditions, Russian citizens have become not only tourists but also permanent residents of Georgia. Despite not experiencing the fastest pace of real estate sector development, Georgia remained unaffected by border closures and the 2020 pandemic. Russians still consider Georgia as one of the most attractive countries for emigration.

“Sustainable” Serbia

Among the European countries, Serbia stands out as one that has not imposed restrictions on Russian citizens in the economic sector. It is worth noting that Russian investors do not show as much active interest in purchasing real estate in this region compared to other mentioned countries. However, considering the new legislation in Russia, as mentioned earlier, and the unstable economic relations with other European countries, real estate in Serbia holds promising prospects of gaining popularity among Russian investors in 2022.

Main Reasons to Invest in Serbian Real Estate

Serbia offers several compelling reasons for Russian investors to consider acquiring real estate in the country. Firstly, the region boasts economic stability, which provides its citizens with favorable salary levels, business development opportunities, and prospects for growth. These economic prospects also extend to foreign investors who purchase real estate in Serbia, as the government grants residence permits for both commercial and residential property owners, including their families.

The simplified registration system and additional benefits are the second reason that entices investors to choose Serbian real estate. Owners can register their stay, even with a tourist visa, and apply for a 12-month residence permit if they own residential property. The registration process takes approximately three weeks, and the permit can be extended for the same duration, granting access to medical insurance and, after five years of continuous stay, the possibility of obtaining permanent residency and citizenship.

Furthermore, foreign investors can obtain a residence permit by leasing a land plot with a long-term agreement of up to 30 years, as land purchases are not permitted under current legislation. This option allows investors to explore business opportunities in Serbia, taking advantage of the Deep and Comprehensive Free Trade Area Agreement and the absence of additional duties when exporting to European markets.

Another significant reason for Russians to invest in Serbian real estate is the friendly relationship between Russia and Serbia, which grants reciprocal rights to citizens of both countries. According to Serbian law, the sale of real estate to foreigners follows the principle of reciprocity. Therefore, if Serbian citizens have the freedom to purchase real estate in Russia, Russians can do the same in Serbia. This agreement remains intact despite global political situations and amendments to Russian legislation.

In terms of demand, the pandemic has shifted investor attention from urban areas to real estate outside major cities. Detached houses in the autonomous province of Vojvodina, with its lower prices compared to urban offers, have gained popularity among investors. This trend persists due to both the “isolation” factor and the affordability of real estate in these areas.

However, it is important to note one significant disadvantage associated with the Serbian real estate market: the rise in prices observed in recent years. According to Deloitte experts, Serbia surpassed all European countries in this regard in 2021, with the highest prices recorded in Belgrade’s districts of Stari Grad and Savski Venac. The average purchase amount for real estate in a new building with an area of 56 sq.m reached 2.5 thousand euros. Although the pricing policy for 2022 remains uncertain, it is expected that real estate values will continue to increase.

Despite this factor, Serbia remains a promising region for Russian investors in 2022. The country offers stability, business opportunities, and fast residence permit acquisition through the mutual union between Russia and Serbia. Additionally, Serbian real estate transactions comply with the current legislation of the Russian Federation concerning foreign currency transactions.

About Russian Investors

Contrary to common belief, interest in foreign real estate is not limited to investors from Moscow. According to Tranio, a Russian broker, regional investors’ share in overseas property purchases has significantly increased. In 2021, applications from Moscow and the Moscow region represented only 43% of Tranio’s clients, with a notable number of investors from St. Petersburg, Krasnoyarsk, Krasnodar Krai, Rostov region, Kaliningrad region, and Perm Krai also seeking foreign real estate opportunities.

Furthermore, in 2021, the median budget for applications to purchase foreign real estate in the Krasnoyarsk and Krasnodar territories reached 300 thousand euros, surpassing the Moscow region’s median budget of 297 thousand euros.

According to Tranio’s research, the most popular countries among Russian citizens for acquiring real estate in 2021 were Spain and Greece, renowned for their resort regions, along with Montenegro and Germany. In addition to these countries, Russian investors also showed interest in purchasing real estate in France, Italy, and Turkey. However, the number of applications for real estate purchases in the United States significantly declined compared to 2020, with residents of Nizhny Novgorod showing the most interest in this market.

Key Conclusions

Firstly, 2022 has witnessed significant shifts in the real estate investment sector for Russian citizens in foreign markets. While the demand for foreign real estate among Russians continues to grow, their preferences have shifted in a different direction compared to previous years when the USA, European countries, Canada, and Australia were more popular choices.

The United Arab Emirates (UAE) and Turkey are emerging as the most promising countries for real estate investment due to simplified transactions, reasonable prices, and business development opportunities. Additionally, Georgia and Serbia have gained relevance in light of new political and economic realities.

Secondly, the profile of Russian buyers has changed, with regional investors taking a more prominent role.

Considering these factors, it is crucial to tailor marketing strategies when targeting the Russian market for real estate sales. QB Agency specialists are prepared to develop a marketing strategy that enables you to outperform competitors and attract a maximum number of Russian buyers interested in purchasing real estate.