Buying real estate at a health resort also requires an 'examination' of the property for acquisition
Having gained the opportunity to travel around the world, our fellow citizens mostly choose warm seas. "Today, the basic attitudes have changed: it has become prestigious to lead an active lifestyle, rather than leisurely strolling through parks 'at the waters,'" says Denis Evseev, managing partner of Kingsland. "Now it's fashionable to be healthy. And to be treated is the lot of the sick."
Nevertheless, the situation at different balneological resorts looks different. Some are in decline and only recall their former glory in sweet dreams, while others are still very prestigious and expensive.
Russia: Safety is Required First
The most famous in Russia is the Caucasian Mineral Waters, which include Pyatigorsk, Yessentuki, Zheleznovodsk, Kislovodsk and Mineralnye Vody. "The first information about them dates back to the reign of Peter I," says Elizaveta Orlova, project manager of the strategic consulting department at Knight Frank. "And active development began in the 19th century." In the Soviet period, the resorts were nationalized, and from 1935 their general reconstruction was carried out. A large number of new sanatoriums and boarding houses were built, resulting in the number of vacationers there reaching a fantastic figure of 1 million per year by the mid-1980s.
In the 1990s, the tourist flow decreased by more than 10 times. One can, of course, blame the general difficulties of that period: funding cuts, wear and tear of the sanatorium-resort base, etc. But there were other reasons. First, as mentioned above, borders opened, and citizens gained the opportunity to choose between vacations at home and abroad. And second, attitudes towards the word 'Caucasus' changed: previously, one immediately recalled the poems of Pushkin and Lermontov, as well as the heroes of Georgian films dressed in burkas and papakhas. Today, it evokes evil Wahhabis and shahids. For some reason, one does not want to relax in such an environment.
Today, the CMS region has a nominally huge base – about 160 sanatorium-resort facilities. However, this economy is in a neglected state. Bringing the resorts to a decent condition requires huge funds, as well as establishing basic order in the region. Both are doubtful in the foreseeable future.
Europe: From Karlovy Vary to Baden-Baden
Most balneological resorts are located in Eastern European countries. The first in this row is undoubtedly Karlovy Vary, a city in western Czech Republic. "This resort is known not only for its rich offering of medical treatments but also for its beautiful architecture and many historical monuments," notes Stanislav Zingel, president of the International Real Estate Agency Gordon Rock.
"In Karlovy Vary, 12 healing springs come to the surface," says Elizaveta Orlova (Knight Frank). "The water from them is used mainly for drinking cures. In addition, medical institutions widely use physical therapy, various types of massage, electro- and light therapy, heat therapy (including mud baths and applications). For measured walks, there is a terapin course – over 100 km of paths that pass through the most picturesque places."
Hungary is unusually rich in hot healing springs. "This country is called the thermal pantry of Europe," says Denis Evseev (Kingsland). "There are more than 1,000 hot springs here, and the diverse composition of the water successfully helps in treating many complex diseases. It is believed that it is in Hungary that the most professional balneologist doctors in the world are trained." Also, according to the expert, there are many thermal springs in Slovakia and Slovenia.
The potential of Bulgaria is enormous, although not yet well known to us. "Balneological centers are located in the cities of Sunny Beach, Pomorie, Burgas, Albena, Golden Sands, Saints Constantine and Helena," says Ekaterina Alexandrova, PR manager of Invest Development. "They are equipped with modern medical equipment, treatment is carried out according to programs under the control and supervision of highly qualified doctors. The mild sea climate, clean air, natural park, and mineral springs create favorable conditions for combining recreation with therapeutic, restorative, and preventive procedures."
As for other regions (besides Eastern Europe), the most famous among us are the balneological resorts of Germany (Baden-Baden, Wiesbaden), France (Vichy), Switzerland (Leukerbad), Austria (Bad Blumau, Bad Gastein). These names are associated with elite recreation and medical services – incidentally, not only water therapy, but a very wide range.
Real Estate: The Most Ordinary
There is no special 'balneological' real estate – consultants assured in unison. The properties sold in the above-mentioned (and other) places are the most ordinary studios, apartments, and detached houses. And the price level for them basically corresponds to the average for the country. That is, the presence of a balneological resort nearby is not a pricing factor. For example, in Bulgarian Pomorie, prices for apartments are 700 euros per sq. m – the same as in other places in the country where there is no mineral water.
Hardly the only exception is the already mentioned Karlovy Vary: property prices there are noticeably higher than the Czech average and almost reach the level of Prague. "Apartments in the resort area, near the springs, in old renovated buildings are more expensive and prestigious," notes Stanislav Zingel (Gordon Rock). "Prices for them start from 3,000 euros per sq. m. There are offers for 1.8–2,000 euros, but such apartments, as a rule, require significant investment in repairs. The historical part of the city is practically closed to new construction, so new houses are built mainly in areas remote from the resort zone. Nevertheless, apartment prices are quite high – from 2,500 euros per sq. m."
The "secret" of Karlovy Vary is simple: this city is not just a balneological resort, but also a well-known and popular holiday destination. Having an apartment here is prestigious, but this no longer has a direct connection to the mineral springs themselves. The same is true of the mentioned German cities: they have bet on medicine. Renowned clinics, where people come from all over the world for treatment, could have been built in places without any springs.
Commercial use: not the best idea
Can you earn income from real estate at a balneological resort? To put it simply, buy an apartment there and rent it out? All our consultants showed rare unanimity – you should not do this. Differences were observed only in the degree of delicacy of wording.
"Not a single balneological resort currently has investment appeal," categorically states Igor Indriksons, Director of the Foreign Investments Department at IntermarkSavills. "Profitability in such places is falling year after year, because the popularity of such procedures has seriously declined, also because for at least 20 years, balneology has been displaced by the spa industry... To say that there is no demand for housing there at all would be incorrect, but it is falling every year, and the younger generation has no desire to vacation in such places at all." Real estate at balneological resorts can only be purchased for personal use, but in no case as an investment, concludes Igor Indriksons.
"At these resorts, unlike seaside ones, there is no pronounced seasonality of demand," believes Ekaterina Teyn, Partner, Director of the Residential Real Estate Department at Chesterton. "But it must be understood that the average rental rate is lower than at the sea. The maximum yield is 6-7% per year – excluding taxes and the cost of maintaining and managing the property. Therefore, from an investment perspective, real estate in emerging markets (Moscow, Montenegro, Abu Dhabi) or in traditionally sought-after places such as London, Monaco, or the Côte d'Azur is much more promising. There, in addition to rental income, the value of the property itself is also growing dynamically."
"The idea of buying housing for rent is not the best. Treatment implies a certain regimen, and patients are unlikely to walk from their apartments to procedures," says Denis Evseev (Kingsland). "And selling such property later will be difficult." "There are almost no clients interested in buying real estate solely because of balneology," echoes Ekaterina Alexandrova (Invest Development). "Most prefer to combine in a sea – balneology or mountains – balneology pattern."
So the only place where renting real estate will bring a reasonable 6% (after taxes) is Karlovy Vary. But this, as we have already said, is not exactly a balneological resort, but a phenomenon of a different order.
Vladimir ABGAFOROV.
Metrinfo.Ru