Page 30 - bne_Magazine_May_2018_print

30 I Special report bne May 2018
Russian spending on international real estate, $ million
many, Spain, the UK and the US,” says George Kachmazov, Tranio’s managing partner.
As for property types, the most popular category is still apartments, which can be rented, whereas wealthier Russians are looking for commercial properties such as shopping malls and hotels, where the investment has a ticket size of $1mn-$5mn.
“From our experience, 90% of inves- tors buy property to lease it, while the other 10% consider more complex value added projects. The main motive is secu- rity: everybody wants to maintain their capital, guarantee a comfortable retire- ment for themselves and subsequently pass the property on to their children,” adds Kachmazov.
Source: Central Bank of the Russian Federation
Latvia and the US, according to CBR data. In keeping with the trends from recent years, foreign currency deposit rates continue to decline.
“So Russian nationals are looking more actively for reliable alternatives for
BRICKS & MORTAR:
capital maintenance and accumulation. We believe that the volume of capital outflow from Russia for property trans- actions will continue to rise in 2018, largely through investment purchases. The main investment flow will be aimed at the traditional market leaders: Ger-
Separating noise from reality in Russia’s real estate sector
Tim Millard of JLL in Moscow
It is like 2014 all over again...
I have written three draft opinions in recent days – only for them to be over- taken by events. In the deluge of news and volatility I have but one message:
DON’T PANIC
I believe markets have overshot and will correct. We are already seeing the Rus- sian stock market rise as investors see a buying opportunity. With so much noise it is worth remembering a few facts (with a nod to Macro-Advisory and Chris Weafer for some of the stats):
• Russia has adapted to previous sanc- tions and is now expert at doing so
• There is political stability and the President is genuinely popular
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• Russia has the biggest population in Europe and has the highest per capita spending power and house- hold wealth amongst developing nations
• We have the sixth lowest level of national debt and sixth highest financial reserves in the world
• Russia is the biggest supplier of extracted materials including oil and gas (although less aluminum than a week ago!)
• Russia benefits from a higher oil price with the budget based on $41 per barrel
• With the current oil price there will be a healthy budget surplus
Tim Millard, Regional Director, Head of Advisory Group, JLL
• More uncertainty is likely to drive the oil price higher, which would benefit the Russian economy
• Inflation is historically low and sustainable
• Despite recent ructions in the Forex market interest rates are likely
to continue to fall later this year, making debt more affordable
• GDP growth is accelerating, although it may now be under pressure for 2018.
For the real estate market the risks are less immediate. The occupational markets are now largely ruble denominated so ruble volatility
is less of a problem.