Квадрум: Russians are coming

Investing money in foreign real estate is a favorite way for our compatriots to increase their assets. Buying liquid real estate allows not only to preserve savings, but also to make a profit. Profitable areas are in high demand and therefore quickly sold at prices often exceeding the initial ones.

Buying liquid real estate allows not only to preserve savings, but also to make a profit. Profitable areas are in high demand and therefore quickly sold at prices often exceeding the initial ones.

Russians have been actively buying foreign real estate in recent years, but in most cases it was about housing for themselves, which does not always generate income.

Igor Indriksons, investment manager in real estate, points out that the markets where Russians like to buy property and the markets for liquid real estate are often completely different: "The love of Russian citizens who buy foreign real estate is often based on emotions. But vacation and investment are not the same thing, and such investors may be surprised after some time that not only do they not make the profit they expected, but they may even incur losses that are not so easy to cover."

Ekaterina Demidova, CEO of DEM GROUP GmbH, adds: "Russian buyers have been very interested in countries such as Turkey, Bulgaria and Spain for several years - mainly because of the good climate and proximity to the sea. However, recently people have realized that it is difficult to call such a purchase an investment: "a house by the sea" requires significant expenses for maintenance, and it can only be used for a few months a year. Faced with this, some decided to sell such property, and here they were in for a second surprise - it is unrealistic to make money on this sale, it is even difficult to simply recover the invested money."

However, there are still attractive places for investors.

Lucrative Opportunity

Liquidity is primarily determined by stable and high demand. It is thanks to this that prices for such real estate are rising, and it is easy to sell or rent it out.

As such a "profitable" place, leading expert Julia Kozhevnikova from Tranio.ru names major cities in Germany: "In Berlin, in the vicinity of Kurfürstendamm, there are sometimes four buyers for one apartment, and the property is sold within two or three hours after the ad is published."

So, liquidity implies profit. Dmitry Letov, Development Director of the RD Group holding, is convinced that assets should be bought in stable and prestigious markets in Europe and America, where the owner can truly diversify their portfolio and reduce risks. Anar Murtuzayev, Managing Partner and Founder of Rossmils Group, points out that these should be safe countries with overall market stability, where property rights are legally protected and cheap mortgage products are available. Igor Indriksons adds that the countries should have a positive GDP dynamics, in addition, attention should be paid to the level of public debt and unemployment, as well as taxation. For example, in Germany, after paying all taxes, the stated profitability of 6-7% will decrease to 3-4%.

Experts consider the United Kingdom, Germany, Austria, France, Switzerland, and the United States to be investment-attractive countries. In addition to all the listed indicators, these countries have state control over real estate market development, which helps avoid an inflated "bubble" and prevent sudden price drops or rapid increases in housing prices.

Some experts also add the markets of the United Arab Emirates and Australia to these liquidity leaders. According to Tranio.ru data, prices in the Australian cities of Sydney and Melbourne increased by 7% in the first quarter of 2015 compared to the first quarter of 2014. Only Manhattan with 9%, San Francisco with 14%, and Berlin with 12% showed higher growth. Natalia Nikitchuk, Director of the International Real Estate Department at Kalinka Group, believes that the list of popular destinations will be expanded to include the UAE, specifically Dubai. This city is interesting as a major financial center, trading and business center with free zones, offshore zones, and the absence of many tax burdens.

When talking about the liquidity of real estate in a particular country, it is important to remember that not every populated area in these countries is attractive for investment. There are places everywhere that are not in demand. The most striking example is the United States, where no one will doubt the liquidity of Manhattan, but there is also Detroit, a city where homes are being sold for almost a dollar. And against the backdrop of the crisis situation in the Spanish real estate market, real estate in Barcelona looks attractive, with experts noting an increase in demand and prices.

It is also important to consider that not every residential property is in demand. There are always houses built in unfavorable locations with poor characteristics that wait for buyers for years. In addition, commercial real estate abroad is usually more profitable than residential property. For example, in Europe, the yield of such properties ranges from 7-12% compared to 4-5% for residential property.

All of the listed markets imply low-risk investments. However, as Dmitry Letov notes, if an investor wants to generate income but is willing to accept high risks, Nigeria is currently very interesting.

Oh, prices, prices

Markets of liquid real estate are distinguished by a fairly high price per square meter, especially in income-generating projects.

The most affordable income-generating properties can be found in Germany, where there are options for every budget. Ekaterina Demidova explains that profits can be made from apartments in nursing homes or student dormitories with a total cost of 20,000 euros, as well as more expensive offers priced at over 1 million euros, such as premises for supermarkets for ALDI, REWE, NETTO, etc. According to Igor Indriksons, the average cost of a one-bedroom apartment with an area of 35 square meters in the United Kingdom is approximately 120,000 pounds sterling, in France - 135,000 euros, in Germany - 105,000 euros, in Switzerland - 280,000 euros, and in Austria - 123,000 euros. Experts predict price increases in the near future in each of these countries: 7-8% annual growth in the United Kingdom, 2-3% in France, 2-5% in Germany, 4-5% in Switzerland, and 2.5% in Austria.

Undoubtedly, this is a moderate income, but it is virtually without any risks and does not require any other efforts.