Rise of the russian 'real estate tsars'

An influx of Russian investors is having a major impact on the global prime market…

According to Knight Frank’s Prime International Residential Index (PIRI), prices for global prime properties rose by 11% in 2007. The highest price growth achieved was in Antigua (40%), followed by St Jean Cap Ferrat, France (39%) and then St Petersburg, Russia (38%)

Liam Bailey, Head of Residential Research at Knight Frank and author of the 2008 Annual Wealth Report, comments: “Findings from our Wealth Report show that the rich are still getting richer. Over the medium and long term, super prime and prime markets will outperform as wealth accumulates around the world. However outside of these markets there are plenty of opportunities for investment in other locations.

“Top locations for price growth were a mix of second home locations and key prime cities.  Antigua (40%) and St Jean Cap Ferrat (39%) topped the league table followed by St Petersburg (38%) and Moscow (35%).  These last two slowed markedly from last year when they achieved 95% and 75% growth respectively: a result of lack of stock in this category in major Russian cities as a result of the growth in private wealth.

Rising Russian affluence

Mr Bailey continued: “Rising affluence generates another market: second homes and holiday homes. A growing number of newly prosperous professionals in Moscow and other east European cities want second homes. Affordability constraints mean they are looking to buy in locations such as Bulgaria rather than more established markets like France. Buyers of developments on the Black Sea Coast of Bulgaria have been 70% Russian, 20% Polish and only 10% northern European.

Dan Johnson, Managing Director of TheMoveChannel.com, added: “There has been a lot of movement in the overseas property industry in the last 12 months towards targeting Russian buyers. Both Homes Overseas and the OPP are producing new publications aimed at this market, and the emergence of rapidly growing upper middle class is the main reason why.

“The billionaire oligarchs may grab the headlines, but there is a much bigger sector of society that is cash rich and aspirational - two key factors in stimulating demand for new housing. Expect this trend to be repeated in other major former Soviet cities during the next 12 to 18 months.