x Abu Dhabi, UAEFriday 28 July 2017

Homing in on Russia's new rich

Russians have made up 7 per cent of net property sales this year in Dubai and are the third-largest buyer group.

Dubai developers are taking their project management skills to Russia.
Dubai developers are taking their project management skills to Russia.

As the regional property market slows and buyers turn away from the resale market, more than 50 UAE-based brokers and developers are in Moscow for the International Property Show in the hope of drumming up business. Among those showing off their portfolios to Russian investors in the show that opened yesterday and ends tomorrow will be Damac Properties, Azizi Investments and Dynasty Zarooni. And history says they have good reason to be hopeful.

According to data from www.reidin.com, a property information service, Russians have made up 7 per cent of net property sales this year in Dubai and are the third-largest buyer group after Pakistanis and Indians. Agents and developers even talk of Russian client levels of about 25 per cent and more in some projects. But how solid this market of 200 million people is amid the global credit squeeze is another question. "In the past 30 to 45 days a lot of [this market] has slowed down due to the economic crisis, but the money is still there," said Steve Nosrat, the marketing director at the Dubai-based multinational developer Azizi Investments.

Yuri Krazhan, the sales manager of Rustar Real Estate, a Dubai-based agent specialising in Russian investors, agreed, saying: "The market is quiet, even among Russian-speaking buyers. We still have end-users but no investors. And when we do have investors they are small ones with a budget up to Dh1 million (US$272,000)." The Russian buyers' profile also is changing, as are the types of property they are seeking. "Before, you would see all different kinds of investors," said Irina Ivanova, a market adviser at Russia's IMEX Real Estate in Dubai - the only branch of the company outside Russia. "Now, there are clearly two."

Ms Ivanova said the first group typically did not have big amounts of money to spend, maybe $300,000, and were mostly end-users looking for non-expensive properties especially on the sea, as this kind of property is more easily sold. They tend to focus on properties in Ajman, or units with some views in Ras al Khaimah. The other segment is wealthier investors. "They are taking their money back from the banks in Russia because they are a little scared and are looking for investments," Ms Ivanova said. "What remains? Mainly property. They don't want to invest it in Russia because they think off-plan projects might stop there. But here in the UAE there is still hope that even the off-plan projects will go on."

Compared with six months ago, when the typical Russian investor was buying into expensive and exclusive projects, budgets have tightened. "I think people with big money have also big problems right now because of the financial crisis," Mr Krazhan said. "Those with smaller amounts just pull it out of the bank to invest it somewhere. To keep it in cash is dangerous." If there is a slowing of Russian interest in property it could hit the local market hard.

"The share of Russians buying at Omniyat projects to be 50 per cent to 60 per cent, and depending on the project, it could go up to 80 per cent for the more expensive units," a sales agent of the Dubai-based developer said. Several firms including Rustar Real Estate, Imex, Group Seven, Al Fajer, Dacha Real Estate, Creative Concept and Stars Dome have set up in the UAE in the past four years specifically to serve Russian-speaking clients. Stars Dome recently brought five islands in The World to market. And almost every agent has hired Russian-speaking staff to serve the lucrative base of foreign investors from that region.

In Russia, as in former Soviet countries such as Ukraine, the switch to a market economy generated large fortunes almost overnight, and some of this money has been spent in Dubai. The introduction of freehold rights for foreigners in 2002 was the key trigger for the investments. Four years ago, when Serghey Tokarev launched the Russian Emirates glossy fashion magazine, he was "literally stormed by real estate agencies begging for advertising... We couldn't accept all of them as our fashion advertisers started complaining". Two years later, he launched a specialist property magazine.

Like many other buyers though, Russian investors have tended to be cautious about buying off-plan. "They are looking to invest mainly in completed properties or properties near completion," Mr Krazhan said, adding that the most popular developments recently have been Dubai Marina and Jumeirah Lake Towers. While the property developers are pushing hard to stir the market, investors and speculators are keeping a low profile. "We can keep the money in the national banks of Dubai. I am not planning any purchases in the next weeks. I am just watching and waiting," said Alex Kulikov, a Russian investor who has bought several floors in Jumeirah Lake Towers from Al Fajer Property. "Many investors are becoming nervous because they were planning to resell after a few weeks and don't have the money for the next payment. The best I can do is to wait because nobody knows what is going to happen with prices."

So what can exhibitors expect when they get to Moscow? "The organisers of the Moscow show announced the exhibition one year ago, long before the crisis," Mr Tokarev said. "Many participants are hoping to make some deals and all of them are now trying to find a way to make them. One has cancelled all the Dubai projects as prices are no longer growing, and will show only Ajman projects - some companies will show Abu Dhabi projects."

Dawood al Shezawi, the managing director of Strategic Marketing and Exhibitions, the Emirati organiser of the show, said: "This is our first Russian edition, with around 110 exhibitors in total. Russians used to invest heavily in this area but people are looking now at the promotions and are being selective. The profiles of visitors we are targeting are higher institutions, organisations, developers and government institutions."

Delegates remain optimistic. "We have quite a few prominent Russian investors who have interest in our properties. They are a key target group of investors and we want to continue opening up more dialogue with them," said Mr Nosrat. "There is still a lot of money in that region and they are just looking for the right opportunity. We will be introducing our new projects during the show, including one in Palm Jebel Ali."

As a potential buyer, Mr Kukilov is taking a wait-and-see attitude to the exercise, but remains positive about the market in the long term. "Dubai remains very attractive and they have offered many opportunities of good investment," he said. "Dubai is really a good place... To my mind any purchases are good ones. It is just better to wait before selling. Somebody offered to buy, but I prefer to wait. I think I will earn money later on."

As for signatures on contracts, the exhibition organisers remain realistic. "Our aim is not only selling, it is also networking," Mr Shezawi said. ngillet@thenational.ae