Correspondents have to communicate mainly with home sellers. However, during foreign trips, many of them kindly provide the opportunity to meet with their clients from among compatriots. They also share their own conclusions and long-term observations about which social groups, where, and what kind of real estate abroad they buy. So we tried to structure the accumulated information, which we now offer to our readers.
So, what is the portrait of the average buyer of foreign real estate? Home sellers are not very fond of answering this question, just as they do not like the question about the average price on the market: "It's as much an abstraction as the average temperature in a hospital." Especially if we are talking not about some regional or even national market, but about abroad in general.
However, one main feature of domestic demand can be singled out. According to experts, in most popular markets it is sharply polarized. Financial contrasts are the main thing that distinguishes us from other foreign buyers, who most demand the golden mean, a compromise between price and quality. Among compatriots, on the one hand, the best is in greatest demand (and price, as they say, is no object), and investments can amount to several million. On the other hand, the budget segment is in demand, but – an important note – not in general, but in areas that are a priori attractive to our citizens. For each specific market, this bar is different (in some countries this is a niche up to €100 thousand, in others housing up to €200 thousand is considered cheap, etc.)
How many are there?
The second characteristic that interests everyone is the number of Russian-speaking buyers. Although specific figures sometimes appear in the press (in particular, for Bulgaria, the Czech Republic or Cyprus), it is mainly about the number of permanently residing immigrants from the former USSR according to immigration services. Not all home buyers seek to obtain a residence permit, and not all residence permit holders own housing. Often these are weakly intersecting sets. In some Western European countries, the volume of investment of "Russian" money is attempted to be estimated by internal affairs bodies, but this statistics are difficult to access and get into the media only on extremely high-profile occasions.
Often in discussions on the topic of quantity, not absolute numbers appear, but the relative share of our compatriots in the total flow of foreign buyers. This information is more reliable. Depending on the direction and – more importantly – on the price segment, this share can range from 1% (when we are lumped into the general column "and others") to 80% of transactions (for example, in a local area – on Cap d'Antibes in France). At the same time, it must be understood that even relative figures are expert opinions based on statistics of individual agencies and developers, and therefore may not reflect the overall picture, and sometimes give rise to false myths about "mass buyouts". Recall at least the absurd information that the most popular destination for Russian buyers is the UK (by volume of investment – maybe, but not by number of transactions). Or the misconception, common even among professionals, about a 70% share of Russians in Dubai. Despite the fact that in the statistics of the largest state construction corporations of the emirate, Russians together with Ukrainians, Kazakhs, Africans and representatives of several continental European countries are combined into a 15% column "other".
In any case, as noted by "Real Estate Digest", we can only speak about approximate calculations, since far from always "white" money is used for payment, and often the purchase is registered to a foreign legal entity. It is difficult to trace who the buyer is. In addition, acquisitions are made both through domestic and local agencies, as well as firms from third countries (for example, buying a villa in Italy or the UAE through a British broker), so it is difficult to collect reliable statistics together.
Who and why?
We should note in advance that, when discussing the buyer, we are not touching upon large investments in housing and hotel construction abroad. We only note that behind some multi-million dollar, mind-boggling projects (including those advertised at exhibitions) are the money of investors from Russia and the CIS countries. Sometimes such residential complexes are not even announced in our country, since they are intended for sale to Europeans (for example, in this way the money of some companies works in France, the Benelux countries). In Turkey, co-owners of many hotels operating under well-known brands are our wealthy compatriots.
However, there is another kind of corporate purchases. These are properties that in former times would have been called "departmental": hotels, villas, apartments intended for company employees' recreation, corporate events, and possibly partial commercial use the rest of the time. Many sellers of exclusive villas, chalets, small castles in Italy, Germany, France often look for just such a client. For example, not so long ago, intermediaries were looking for a buyer for the castle of Prince of Oldenburg in Finland.
Individual buyers can be divided into two approximate groups. First, there are private investors who put money in for the purpose of saving and earning income from resale or rental. On the other hand, there are people who can be called "buyer-consumers" — those who actually intend to use the property (i.e., purchasing a so-called second home). This group represents the entire social spectrum, and it is on its representatives, their goals and demands, that we will focus in more detail. In general, the following motives for purchase can be identified.
1) Housing for seasonal recreation, a foreign dacha. Mostly in demand is property at resorts – seaside, mountain, climatic.
2) A place for a family to live most of the year. For reasons of safety, health, better climate – in short, to improve the quality of life in every sense.
3) Short-term investment. In some cases, people purposefully seek opportunities to increase their funds, focusing on high-yield markets. In others, they come to this decision spontaneously, under the pressure of the market situation. For example, many of those who bought an apartment under construction in Montenegro a couple of years ago for $15,000 could not resist the temptation in 2005-2006 (price growth – almost 100% per year), so they decided to sell the long-awaited apartment and start the process anew.
4) Long-term investment. Purchases with a view to renting out the property. Motivation – to move funds out of the country, protecting them from inflation, and to secure a stable rent.
5) Acquiring real estate as a way to facilitate entry into the country. With a document of ownership, in most European countries one can count on a multiple-entry visa, including a Schengen visa. This can be an additional motive. Emigration itself is no longer as important a factor as in the 1990s, since in most of the most attractive countries for living, owning property is not a sufficient condition for obtaining a residence permit. Although it does facilitate the process.
6) Housing for living during business trips. Mainly, apartments in large European cities are purchased for these purposes.
7) A motive such as preparing a place to live in retirement is beginning to play an increasingly significant role. There are quite wealthy people of pre-retirement age who are working out a scenario for a happy old age somewhere in a warm region, with grandchildren visiting for holidays. Sometimes people simply sell their housing in a big city and buy an almost identical apartment by the sea. The legislation of many countries is more loyal to retired property owners – upon reaching a certain age and having means of subsistence, obtaining a residence permit is often easier.
8) An apartment for children sent to study abroad. Often – for children from a first marriage who are not very "convenient" for the parent at home, and in the future should remain living abroad.
Evolution of demand
Compared to the mid-to-late 1990s, when the active and fairly mass acquaintance of compatriots with foreign markets only began, the consumer behavior of our fellow citizens has changed quite significantly. Now they do not invest money anywhere just to get it out and "save" it, but invest taking into account possible benefits, costs, and market development prospects. Situations where people purchased, say, a villa in Cyprus and sold it 10 years later without ever having used the house are now rarer.
More and more people with legalized funds are turning to realtors. More clients are appearing from the regions, although buyers from the capital still predominate.
Cash payment (100% of the purchase price without the help of financial instruments) is still considered a distinctive feature of "Russian" demand. Nevertheless, compatriots have become more willing to use mortgage opportunities where available. Many realize that, having cash for one apartment, it is more profitable to split that money for a down payment on two similar properties. Live in one, rent out the other, and use the rental income to cover payments to the bank.
Citizens have become more cosmopolitan and are increasingly less inclined to live near compatriots. Although there are still "Russian" villages and "Russian" residential complexes on the market (the most striking example is the Sosnovka settlement in the Dominican Republic), today's buyer is educated, speaks several languages, and prefers a homogeneous social, rather than national, environment. Many initially voice this requirement to the realtor, and choose recreational housing in places where mainly citizens of Western countries live.
A couple more irrational points can be added to the portrait. So, at resorts, our fellow citizens literally fetishize proximity to the sea. Housing that is in demand among Europeans, located 5-10 km from the coastline – even if it is high-quality, with a view, and attractive in terms of price – is very difficult to sell in the countries of the former Soviet Union. The requirement "to be within walking distance of the sea" is put forward even by buyers with limited budgets.
The second point is a kind of "herd instinct." When choosing the country for investment, the popularity of the destination among compatriots is very important (even if the client does not want to see them as neighbors). Apparently, the buyer feels more at ease knowing that he is not a pioneer and is thus to some extent insured against risk. For image properties, of course, current tourist fashion plays a role. The example of iconic figures – which in our country are not "stars" but "authorities": major businessmen, officials, and personal acquaintances – is also important. Therefore, promoting some new, exotic destination requires either fairly large financial investments in advertising on the part of the seller, or the ability to make contact with representatives of the elite and create significant precedents for others.