Record turnover for Russian property market

2012-01-13

The Russian property market is blossoming. Never before has it turned over more than it did in 2011. Foreign buyers are back in the market and growth is primarily being driven by faith in the consumer market in the country picking up speed in the years to come.

In 2011, Russian property turned over USD 7.5bn according to the Moscow Times. That’s a hike of 29% compared with the previous top-performing year, 2008, when the figure was USD 5.8bn.

”2011 has been a really strong year for the Russian property market. It has reached and surpassed the pre-crisis levels from 2008,” says Biljana Pehrsson, head of East Capital’s property investments.

When the financial crisis struck, several international investors completely abandoned the Russian property market. The figures now show that they have returned. Approximately 40% of the transactions in 2011 were made by international buyers.

”It’s the larger, more experienced buyers that have chosen to re-enter the market. They have been carefully tracking the market the whole time, and in 2011 decided it was time to buy again, with yields on Russian properties looking good,” continues Biljana.


Moscow International Business Center.

Another trend is that investors are choosing to buy into established properties with good liquidity.

”Over 80% of the transactions are now in income-generating properties. Before the crisis, more of the properties were merely in the project phase. So investors tend to be a little more careful today.”

There are also more investments being made in retail properties than before the crisis.
”Russia constitutes an enormous consumer market, and can only grow in the years to come. There is a large shortage of retail properties in the country. The latest official figure for Moscow for example, was 270 sqm per 1,000 inhabitants. Stockholm has more than twice that level, and Tallinn actually has over 1,000 sqm per 1,000 inhabitants.”

Although the situation on the Russian property market looks good, there are obvious risks from a short-term perspective. The main risk is the ongoing debt crisis, which is likely to affect growth in 2012. But the domestic political situation in Russia is also casting some shadows over growth.

”I think we will see a slowdown in the first and second quarters, partly due to the financial problems in the world and partly because of the political tensions in Russia,” concludes Biljana Pehrsson.

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