Global Edge Russian Summit 2011


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A speech presented at the Global Edge Russian Summit informing property developers and agents on the specific situations on the Russian overseas property market.

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Global Edge Russian Summit 2011

  1. 1. The Russian Overseas Property Market Presented by Kim Waddoup CEO, aiGroup, Russia
  2. 2. The Russian Overseas Property Market <ul><li>This presentation will explore the general market to help you to form an appreciation of the desires and requirements of Russian investors and their current buying habits. </li></ul><ul><li>We will look at the countries that are most popular for Russian buyers and explain why. </li></ul><ul><li>We will explore the Russian market place, how to promote/market your company and how to deal with initial enquiries. </li></ul><ul><li>The conclusion will offer some specific recommendations, including what does a Russian client look for, how to reach them, gain their trust and complete the sale. </li></ul>
  3. 3. Brief history of current Russia <ul><li>1991 the end of communism rule and first free election for a democratically elected President, Boris Yeltsin </li></ul><ul><li>91-98 troublesome years for an emerging country/economy </li></ul><ul><li>1998 August economic crisis </li></ul><ul><li>2000-2008 The Putin Years </li></ul><ul><li>2008-the present The Medvedev/Putin tandem </li></ul><ul><li>The future……… </li></ul>
  4. 4. Current economy & predictions <ul><li>Russian economics – heading for higher growth </li></ul><ul><li>(Morgan Stanley Report July 2011) </li></ul><ul><li>Growth in Russia is poised to accelerate to 5% in 2011 and 5.5% in 2012 </li></ul><ul><li>Retails sales and industrial production continues to increase </li></ul><ul><li>Wages disposable income & consumption are increasing </li></ul><ul><li>Inflation under control and falling(max 8%) </li></ul><ul><li>Unemployment is falling (6.1%) </li></ul>
  5. 5. ‘ Local Business Politics’ <ul><li>The business environment in Russian remains erratic. For many businesses high capital gains are relatively easily achievable, however corruption and, hardly legal pressures can be brought on to companies operating in Russia. </li></ul><ul><li>Many businesses rely on off-shore alternatives ensuring security for profits and capital gains. </li></ul>
  6. 6. How the overseas property market in Russia has developed : <ul><li>In 2003 aiGroup created the first specialised Moscow International Property Show </li></ul><ul><ul><li>Visitors 186! </li></ul></ul><ul><ul><li>26 participating companies </li></ul></ul><ul><ul><li>Estimated sales – in excess of $.100 million (1 agents alone sold in excess of $.20 million </li></ul></ul><ul><li>Since then, there has been a gradual change in the market as the middle class emerged. We now organise 8 specialised events per year in Moscow and St. Petersburg. </li></ul><ul><ul><li>Average number of participants 200+ </li></ul></ul><ul><ul><li>Average number of visitors 7,000+ </li></ul></ul><ul><ul><li>Estimated sales from Russia now estimated in excess of $.12 billion </li></ul></ul>
  7. 7. Current market segments <ul><li>For many reasons, reliable statistics are impossible to obtain. We therefore create statistics from detailed research of web searches. These are not facts, but a good indication:- </li></ul><ul><li>Purchases in excess of $.10 million 3% </li></ul><ul><li>Purchases between $.3 – 10 million 4% </li></ul><ul><li>Purchases between $.1-3 million 9% </li></ul><ul><li>Purchases from $.500,000 to $.1. million 19% </li></ul><ul><li>Purchases under $.500,000 65% </li></ul>
  8. 8. Who are your Russian clients? The rising Russian middle class <ul><li>The Russian middle class is increasing very fast especially in the major cities. This sector represents vast potential for overseas property. </li></ul><ul><ul><li>The majority own their own apartments </li></ul></ul><ul><ul><li>Low monthly running costs(water, gas, heating, electricity) </li></ul></ul><ul><ul><li>Salaries are rising creating more disposable income </li></ul></ul><ul><ul><li>Minimal household debt </li></ul></ul><ul><ul><li>General income tax at 13% on declared(!) incomes </li></ul></ul><ul><ul><li>Less than 8% have mortgages to repay </li></ul></ul>
  9. 9. What investments are Russians generally looking for? <ul><li>In a recent survey we asked Russian investors what their main reasons were for investing in property: </li></ul><ul><li>As a safe investment 55% </li></ul><ul><li>Buying for own enjoyment 30% </li></ul><ul><li>Buying to let/rent (create income) 15% </li></ul>
  10. 10. Where do Russians buy and why <ul><li>Statistics provided by 1-property based on searches for International Property for July-September 2011 the most popular requests are: </li></ul><ul><li>Bulgaria 17% Easy destination, language, similar mentality </li></ul><ul><li>Spain 14% Sun, prices, lifestyle </li></ul><ul><li>Turkey 11% No visa, traditional holiday destination </li></ul><ul><li>Montenegro 10% popular destination </li></ul><ul><li>Italy 6% primarily Calabria(price) </li></ul><ul><li>Czech Republic 5% Mostly buy to let </li></ul><ul><li>Cyprus 5% traditionally popular </li></ul><ul><li>Germany 4% Mostly buy to let </li></ul><ul><li>Greece 4% bargain seekers </li></ul><ul><li>France 3% also a traditional market </li></ul><ul><li>Others 21% </li></ul>
  11. 11. Where do Russians buy <ul><li>Statistics from Yandex, Russia’s largest search engine, based on searches for Property abroad May-August 2011:- </li></ul>Request May2011 June2011 July 2011 August 20 1 1 Total % Increase in 2011, % property in Bulgaria 42035 41914 40413 42057 166419 32 37,1 property in Spain 17215 16769 17933 18420 70337 14 23,0 property in Montenegro 11229 11561 12074 11978 46842 9 20,9 property in Cyprus 7773 7455 7460 14224 36912 7 56,5 property in Turkey 8493 7471 8725 8676 33365 7 30,5 property in Italy 7505 7142 7718 7660 30025 6 38,6 property in Germany 6657 6485 6796 7601 27539 5 52,5 property in Greece 4728 6173 5472 4997 21370 4 29,7 property in Finland 4218 4079 4832 5564 18693 4 30,3 property in USA 4097 4004 4503 5941 18545 4 48,8 property in Croatia 3651 3978 4597 4296 16522 3 25,4 property in France 3576 3921 4267 3892 15656 3 34,2 property in Israel 1735 1581 1627 1648 6591 1 6,1 property in Dubai 858 1030 937 931 3756 1 50,8
  12. 12. How to sell to Russian overseas property buyers? <ul><li>Remember that Russia is still a ‘ developing ’ country. </li></ul><ul><li>It is not regulated and has few of the structures that are associated with established markets. </li></ul><ul><li>Traditional thinking and systems may not work here! </li></ul><ul><li>Be prepared to re-think the way that you work and become more flexible. </li></ul><ul><li>(Just remember that a Red Signal on a Moscow street does not guarantee that all drivers will actually stop!) </li></ul>
  13. 13. Russian Overseas Property Agents <ul><li>The number of agents specialising in overseas property is slowly growing. </li></ul><ul><li>There is a elite sector of well established companies that have generally been operating for more than 10 years in the up-market sector. </li></ul><ul><li>The majority are smaller companies, they are generally under-funded and are eager to make quick sales. However the level of professionalism, whilst now improving, is not high. </li></ul><ul><li>Many foreign developers have established their own offices or have representatives that only promote the developments of the parent company . </li></ul>
  14. 14. Target Agents or Consumers? <ul><li>Moscow International Property Shows (April & November) </li></ul><ul><li>Moscow International Investment Shows (March & October) </li></ul><ul><li>St. Petersburg International Property Shows (March & October) </li></ul><ul><li>Bulgarian Home Exhibition (February) </li></ul><ul><li>The Moscow Golf & Luxury Property Show (April) </li></ul><ul><li>International Residence Magazine – 2 issues/year, 35,000 copies </li></ul><ul><li>www .1- portal 5,000+ targeted visitors per day </li></ul>With the agent infrastructure currently limited, many International developers and agents have preferred to primarily target the consumer through the range of specialised property shows, magazines and portals that are available:
  15. 15. Once you have attracted a potential Russian client, what do they expect/require from you? <ul><ul><li>Answers to a LOT of questions </li></ul></ul><ul><ul><li>Efficient and professional advice </li></ul></ul><ul><ul><li>Availability of Russian speaking staff </li></ul></ul><ul><ul><li>The possibility of a Russian speaking lawyer </li></ul></ul><ul><ul><li>All prices on the table, no hidden extras </li></ul></ul><ul><li>To successfully close sales to Russian clients, you must first gain their trust and respect! </li></ul>
  16. 16. Specific recommendations for Developers or Agents looking to sell in Russia <ul><li>If you are looking at the Russian market, you should consider a longer term view, Rome was also not built in a day! </li></ul><ul><li>Consider marketing actions to establish brand/name recognition prior to attending Property Exhibitions </li></ul><ul><li>Research and learn to compete with other countries popular on the Russian market </li></ul><ul><li>Re-evaluate the current situation, what are the USPs for your destination </li></ul><ul><li>Quality, price, lifestyle, investment potential… </li></ul>
  17. 17. Thank you for your attention! <ul><li>Kim Waddoup </li></ul><ul><li>CEO, aiGroup, Russia </li></ul>This presentation can be viewed at