Published on 11 October 2005 at 03:16 pm
Filed under: Europe:- Russia Property Guides » Russia: A Guide for Real Estate Investors
As Russia is the largest country in the world one might assume that it has the broadest range of real estate investment opportunities available for a purchaser, but the country is very distinctly divided between poverty and opulence, opportunity and risk.
The majority of opportunities currently exist in Moscow and St. Petersburg but as the country develops its market economy and expands its trading base, so more towns and cities receive the financial attention and infrastructure investment they deserve, and new micro emerging property markets appear.
Russia is a complex country to categorise and generalise especially from a real estate investment point of view, but it’s fair to say that the majority of possibility for capital appreciation and rental income come from the cities and major towns in Western Russia.
Since 1991 Russia has struggled to build a democratic political system, a competitive market economy and to progress economically on the world stage. Russia is a country of over 140 million people, some of whom live in extreme poverty some of whom enjoy extreme wealth. It is not a country you can oversimplify but it is one that for the past six consecutive years has managed to post positive growth figures and one working hard to build significant trading bases with Europe in the West and China in the East.
Western Russia is closest to Europe; it is the most populated area of Russia, the area of the country where the majority of wealth is generated and the geographic location offering investors the greatest choice of property with potential for investment growth and rental yield.
Both Moscow and St. Petersburg have Western style real estate economies where the demand for rental accommodation is high because employment opportunities in the cities are more substantial than elsewhere. Furthermore the local residents and workers in these cities are gaining in personal wealth from higher salaries etc., and their purchasing power is increasing accordingly meaning that there is a growing local base for resale demand which is of equal interest to a property investor who wishes to one day cash in his assets.
Moscow and St. Petersburg have that essential extra ingredient that makes them highly attractive from a long term investment point of view as well, and that is ‘international appeal’. Tourists, those seeking an exciting and unusual second home location and international professionals and executives all demand accommodation and property in these two cities and will continue to do so as Russia develops as a business hub and attractive tourist destination and Moscow and St. Petersburg remain the two most important business cities in Russia.
Both cities have already seen massive underlying price increases and are expensive; but the creation of buy to let financing in Moscow has allowed more investors access to real estate in the city and those who buy now have the potential for long term strong rental demand and steady price increases as well as an increase in the numbers of local Russians who will demand property for sale.
In terms of more emerging and therefore cheaper options in Russia these exist along the Black Sea Coast (pictured) where resort towns attract increasingly wealthy middle class Russians in the summer for example. Alternatively any of the larger towns close to the European borders will give an investor the opportunity to purchase cheaper units with long term development prospects coming from Russia’s commitment to expand its trading bloc further into Europe.
Russia is a land of opportunity, but it is also a land where a cautious approach to investing should be applied. Opportunities exist to make fantastic gains from the real estate sector but an investor should make an effort to understand the property market on a town by town basis in order to tap into prospects rather than excessive risk.
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