Real Estate

Russian Residential Property Offers High Returns

A Portuguese developer is advertising townhouses and villas for sale starting at GBP 307,000 ($ 581,700) – “On the doorstep of Portugal’s investment hotspot, in the heart of the romantic countryside, just 35 minutes from Cosmopolitan Lisbon.” The clincher is in the headline – “unbelievable with a guaranteed return of GBP 18,500 p.a.” The small print reveals that a guaranteed rental income of 5% for the first three years and 6% for the first two years on townhouses, while your property is managed and maintained by the developer.

When I showed this advertisement from a leading British daily newspaper around to Moscow real estate developers, they had trouble controlling their laughter.

“We have a starting price of $400,000 for a self contained cottage on its own land in some of our village developments outside Moscow, and can guarantee a 10% return from rental income,” said Nicholas Kulman of Stroy Arsenal, a leading developer of residential villages. So we offer less capital outlay and a higher return,” he said.

“The Moscow housing boom has generated interest of many British private investors. Approaches through UK solicitors have been made for a number of years now, but it is difficult to estimate how much property has been acquired,” says Geoffrey Cox, Chairman of Astera Real Estate in Moscow and St. Petersburg.

Ekaterina Thain, the head of the residential department at Knight Frank’s Moscow office, says, “Today in Moscow, investments in property, due to their high rate of return and minimal risks with big market capacity, are viewed as one of the most reliable investments. Also investments in property generate a stable income in the longterm prospective without substantial extra costs. They are especially attractive due to the fact that property is a real asset and has a high degree of reliability. The average yield rate varies from 30 to 40 %, and for some of the most successful projects in the most liquid urban districts this rate may reach even 50-80 %.

“The most attractive areas in terms of investments will always be elite quarters in the historical city center, which to a greater degree feature rising prices. When you buy a flat you should first of all take into account the house location and the level of the area’s elite status, because even in the event of a crisis in the whole property market, the prime areas will suffer to a lesser degree ... The best way to generate maximum profit from investments into residential property is to buy a flat in the elite area of a capital city,” she sums up.

A Moscow investment banker is not so optimistic, “the property value growth in Moscow cannot continue for long – all markets have cycles, and no one should believe that returns are ‘guaranteed’.”

Another leading realtor, Intermark, provides a full cycle of services related to residential real estate. “We can assist a foreigner in selecting a property to buy, make professional and certified evaluation of a property’s cost and investment potential,” says Julia Ovchinnikova, their marketing director.

“We will help find tenants –we specialize in working with international corporations and have an extensive client base, mostly top tier employees of multinational and Russian companies,” she points out.

Intermark has created, what for Russia, is a unique leasing market service. Termed Total Tenancy Assistance, the service was created for corporate tenants and landlords who need assistance in managing their property and relations with tenants. This includes a call center to facilitate communications between tenants and landlords, finding appropriate repair vendors, making small urgent repairs, rendering comfort services and managing rent payments under a Power of Attorney.