How to make money on foreign real estate

Investments in the UAE or Turkey will bring 5-10% profitability, and for wealthy citizens – up to 50% per year

In 2022, Russians actively bought real estate in the UAE and Turkey both for relocation and for investment, three international luxury real estate agencies – Kalinka, Tranio and NF Group told Vedomosti.

According to official data from the Institute of Statistics of Turkey (TUIK), Russians bought 16,432 residential properties last year (+203% by 2021). In Dubai, the total number of real estate transactions in 2022 amounted to 97,252, according to the data of the Land Department (Dubai Land Department). The share of purchases by Russians from the total number of transactions in Turkey and the UAE was in 2022. 24% and about 25-30%, respectively, Ekaterina Rumyantseva, the founder of Kalinka Holding, told Vedomosti. The trend continued in 2023, at least in Turkey: the share of Russians in purchases of residential real estate by foreigners in January 2023 was 37%, according to TUIK data. Russians bought 1,157 residential properties – three times more than in January 2022.

According to the international real estate broker Tranio, by the end of 2022, Turkey (23.9%) and the UAE (10.8%) were among the top five countries with the largest number of qualified applications (from clients with confirmed capital) of Russians for the purchase of foreign real estate. Georgia (8.9%), Spain (8%) and Greece (7.5%) are also in the lead. The top five, according to the elite real estate agency NF Group, are Turkey (30%), the UAE (26%), Cyprus (14%), Portugal (7%) and Greece (5%). Brokers do not give absolute data.

Live and invest

An analysis of 2,000 requests to NF Group Research over 12 months showed that 61% of potential buyers plan to purchase housing abroad to obtain a residence permit (residence permit) or citizenship. Another 17% are planning to purchase real estate for living. Only 15% acquire it for the purpose of investment, 7% – for living and investment.

Tranio clients, when choosing, more often consider buying real estate as a way to move freely between countries, says Mikhail Bulanov, executive director of Tranio, for this you need to get a residence permit or a passport for investment. It is important for investors that the country has a "calm" compliance and the ability to pay with cryptocurrency, he continues, the transit of money has become more complicated, Russians have become more likely to buy real estate in Dubai and Turkey, which provide more comfortable conditions. According to him, in 2022 investors from Russia have increased the need for confidentiality of information about beneficiaries, and Dubai has a closed register of owners – this causes additional interest among owners of large capital.

Among the advantages of buying real estate in the UAE, Rumyantseva calls the high profitability of projects, convenient installment and mortgage schemes and generally favorable conditions for life and business. Among them is a low tax rate, 5% VAT (value-added tax), no taxes on dividends and income of individuals.

Another motive for investors is the rise in real estate prices. According to the results of 2022 in Dubai, the price is 1 sq. m. the price of apartments on the primary market increased by 18% over the year and amounted to $ 5,600, says Rumyantseva. The cost of villas increased by 41% to $3,400 per 1 sq. m. The average in Turkey is 1 sq. m. m at the end of the year costs about $ 3500-4000, she notes. Over the year, nominal housing prices increased by 185% (due to high inflation), or 58% adjusted for inflation.

Growth will continue due to the excitement from Russian buyers, investors fleeing from the impending crisis in Europe, and the expected wave of buyers from China, according to the managing partner of Parus Real Estate (part of NF Group) Marina Shalaeva.

Entry threshold

Wealthy Russians buy real estate in the Emirates. According to Kalinka, the average budget for buying by Russians in Dubai in 2022 was 2.5 million dirhams ($680,000). The purchase range is from 500,000 ($140,000) for budget studios to 20 million dirhams ($5.45 million) for apartments in elite complexes. In Turkey, the check is lower. Among the real estate objects in the country, the most popular are those with a budget of up to $1 million (up to 80-85% of all requests), says Anna Larina, project manager of the Department of Foreign Real estate at NF Group. This amount allows you to get Turkish citizenship and facilities in the best locations, she explains.

The minimum capital to enter foreign real estate markets in 2023 is from $100,000–$150,000, says Bulanov, in such a budget, options are available in the retail market. In Dubai, the minimum capital for investing in real estate in developed areas with good infrastructure starts from $ 300,000, in residential areas near the main business centers – from $500,000, for Palm Jumeirah Island (the most popular location of the UAE among multimillionaires), the threshold starts from $700,000, says Tranio Commercial director Elena Milishenkova.

Due to installments, customers can have less capital, says Maria Shurshalina, founder of Shurshalina Real Estate. But more profitability is provided by liquid objects, the minimum entry into which is $ 250,000 – 300,000. Hainets (fortune from $1 million to $5 million) prefer to enter the market with a capital of $ 300,000-350,000, and ultra-hainets (fortune over $30 million) consider objects worth both $ 1 million and $20 million. Ultrahainets can, in cooperation with developers, buy plots and launch construction projects in Dubai, Bulanov adds, the volume of investments in such a project can be $ 30-50 million.

A popular asset

Apartments are the most understandable investment format, so they are always in the first place in popularity, Bulanov notes, now most investors buy them at the construction stage in order to "park" capital for 3-5 years in a situation of uncertainty in the global capital market. In addition, housing in new buildings is growing quite steadily in price after completion of construction.

Russian investors are more likely to choose apartments in new buildings, Milishenkova notes, such objects are in great demand among both end buyers and tenants of housing, and a high-quality object in a sought-after location allows you to make money on the resale of an apartment. The expert expects this trend to continue and that part of the demand in 2023 may move towards ready-made apartments for short-term or long-term rent.

Where the yield is higher

Dubai rental real estate now provides the highest profitability for investors – on average 5-10% per annum in various formats and price segments, Milishenkova notes. The profitability of long–term rental averages 4-8% per annum, short-term rentals in liquid areas - up to 8-12%, and the profitability of objects for resale brings from 20-80%, notes Shurshalina. According to her, ultrahainets with an investment of $1 million to $20 million can count on the highest profitability.

In Istanbul, this figure is about 4-6% for new buildings and premium service apartments, Milishenkova adds: the Istanbul market is not inferior to major European cities - Berlin or Athens, where investors can count on a rental yield of 4-5% per year. Real estate in popular resorts in Thailand also has good indicators, where apartments and individual rooms can give a rental yield of about 6% per annum.

Recommendations to investors

The main principle is to "lay eggs in different baskets," says Bulanov: in some jurisdictions, to solve issues with freedom of movement at the expense of a residence permit or passport for investors, in others – issues with stable passive rental income. More experienced investors can invest some of the money in locations where you can play for a higher income with a higher risk, the expert advises.

In Dubai, Milishenkova recommends paying attention not only to residential real estate, but also to commercial – premises for street retail and restaurants in popular locations that will be in demand among entrepreneurs. After the pandemic, the HoReCa segment in the Emirate is actively growing, explains Milishenkova, and there are not so many offers on the market – street retail premises in a budget of $ 780,000 can bring a yield of 5.75-7.35% per annum.

According to Milishenkova, real estate in Athens, which is growing in price, can also be a profitable object for investment: in four years, housing prices in Attica have increased by 32%, but are still 20-25% cheaper than the peak values of 2007. Now you can buy real estate relatively inexpensively, and the projected profitability from renting an apartment in Athens for a long–term lease is 4-4.5%, she summarizes.