Words: Ashley Rigg
Published: 18th May 2010
Russian buyers: Tackling the misconceptions
Long before fractional came along, the Russian market was hailed as the saviour of the overseas property industry. The image of the Russian oligarch, distrustful of banks, paying cash in a brown paper for developments is a strong one. But what is the reality?
I caught up with Kim Waddoup, a man who’s lived in Moscow since 1992 and worked in the overseas property industry since 2003, to find out whether the myth is true.
Ashley Rigg: Hi Kim, let’s start off by addressing the brown paper bag stereotype. To what extent is this correct?
Kim Waddoup: Like any stereotype there is a grain of truth in it but the reality is far different. What is true is that Russian’s tend not to trust banks and mortgages have never been part of the culture. In fact less than 6% of Russians have mortgages, preferring to borrow from friends and family rather than banks.
Ashley Rigg: So most of them are cash buyers?
Kim Waddoup: Yes, in the sense they don’t need mortgages but staged payments from developers are very popular. Having said that, things are beginning to change. Some Russians are starting to look at the possibility of using the low interest rates to buy larger or multiple units but this is in an early stage.
Ashley Rigg: Implicit in the stereotype is that Russians are quite spontaneous. They turn up, like what they see and bosh you’ve made a sale. Is this true?
Kim Waddoup: Yes and no! In many situations they take their time, they like to meet developers or agents several times before trusting them, however once they travel; they generally decide immediately and want all details to be completed quickly.
Ashley Rigg: So work hard at establishing trust and then be prepared to act quickly?
Kim Waddoup: Precisely and don’t’ be fooled into thinking you can pull the wool over their eyes either. Russians have become very astute business people. We have seen situations where developers have increased prices for the Russian market, clients have found out and there have been very serious problems!
Ashley Rigg: Who actually buys overseas property in Russia? Is it dominated by a small number of rich oligarchs?
Kim Waddoup: There are some extremely wealthy Russians around. They have bought extensively and live well. Anyone lucky enough to work with any of these oligarchs has made a lot of money.
However, the most interesting change over the past 15 years has been the development of the Middle Class. Before it was extreme wealth or poverty, virtually nothing in between. Now the middle class is driving the economy. These are mostly first time buyers with budgets up to €.250, 000 - their main destinations are Bulgaria, Turkey, Spain, Egypt and Montenegro.
Ashley Rigg: Many of our clients are keen to work with Russian agents. How big is this market and how is it best to approach it?
Kim Waddoup: Whilst there are many thousands of registered Russian real estate agents, most concentrate only on domestic property. However with the economic slowdown more have started to look at overseas property as an additional source of income.
In the past the number of Russian agents selling overseas property was very low, maybe less than 100 companies. However in the last 18 months we have seen more agents come into the market and there are probably now between 650-850 active agents.
Due to the lack of professional overseas property agents, many developers and overseas agents created their own offices or representation offices in Russia. These probably represent approx 50% of this figure.
Ashley Rigg: What’s the best way to acquire agent partners?
Kim Waddoup: As with anything, preparation is key. If you are serious about Russia, you need to invest in Russian brochures, have contracts in Russian and of course, employ Russian speaking staff.
Visiting Russian property shows is often a good place to start if you are new to the market. Email promotions can work to acquire leads but following up with face-to-face meetings in Russia is important.
Ashley Rigg: There has been discussion in the industry about targeting the Russians with fractional property. What are your views on this?
Kim Waddoup: Timeshare entered Russia just as the market opened and many Russians suffered badly. The market has a very bad name and even under the Fractional label it is treated very suspiciously. Most Russians prefer to own their own property and many don’t want to rent, therefore Fractional ownership does not suit the market. As we see with Bulgaria, Turkey and Egypt, the prices are within the Russians cash budgets and all our agents are happy to sell units rather than factions of units.
Ashley Rigg: Kim, thanks for time today, it was very insightful.
Kim Waddoup: My pleasure, any time.
About AiGroup
Back in 2003 AiGroup created Russia’s first overseas property show, the Moscow International Property Shows, which are now held twice a year, each attracting more than 6500 visitors. They also organise the St. Petersburg International Property Shows, the specialised Bulgarian Property Salon and the new Moscow Golf & Luxury Property Show.
AiGroup publish International Residence Magazine and own the leading Russian portal
www.1-property.ru.
To contact Kim, please
email him.
Source: Global edge
User Comments
Thank you, Ashley and Kim, very insightful as always!
Olga Kellen,
www.English-and-Russian.com
Very useful article! Hoping to establish long-terms relationship with Russian REs soon in order to enlarge property market from Italy!
Waiting for new articles on Russia!
Thansk and best regards.
Maryia Rylkova,
Fondamenta Nuove Immobilare
with direct flights to Punta Cana Dominicna Republic, we expect an increase in sales to russians.
Alex Rood,
Punta Perla ,Dominican Republic
that was realyy usefull.
thanks
faruk,
golftalyarealstate
An interesting interview; good to see Egypt figures high on the 'buy list' for Russian clients. Certainly the whole of Hurghada is geared to the Russian market but mostly at the low end.
The people we see come with the cash, want to spend 20,000$ and are very demanding!
Bring on the oligarchs! We have the right properties but Hurghada seems to attract the wrong end of the market.
Peter Mitry,
Egypt Real