No vacancies for foreigners?
The Russian real estate market is one of the best performing in the world. Foreign capital is lining up billions of dollars to invest in it. But there’s a problem – it has to compete with the billions in local capital generated by oil sales. Julian Evans reports.
THE RUSSIAN ECONOMY is booming. Thanks in large part to record oil prices, GDP is forecast to grow by 7% this year. Average wages grew by 20% last year, and an average of 12% over each of the past five years. And despite volatility in October and November, the stock market is still up around 40% since May. Unsurprisingly, the real estate market has been doing very well too.
Moscow apartment prices, for example, are growing at an annual 30%. Investors say you can double your money if you build elite cottage communities from scratch in the Moscow region. In the office sector, Russia has one of the lowest vacancy rates for class A offices in Europe. That’s partly because, “you can count the number of class A offices in Moscow on one hand,” says Terry Olin, general manager of Eastern Property Holdings, a western-managed Russian real estate investor. So, demand for Class A offices is high, and projects are returning anything from 10% to 25% in rent.
Shopping centres are among the most profitable areas. Russians are happily spending all the petrodollars trickling down to them in newly built malls and entertainment centres.