Russian interest in Southeast European real estate wanes

By bne IntelliNews September 16, 2014

Clare Nuttall in Bucharest -


Southeast Europe’s Black Sea and Adriatic resorts have been among the top destinations for Russian buyers of second homes and investment properties for the last decade, but the worsening of relations between Russia and Europe has cut Russian interest for onetime hotspots such as Bulgaria and Montenegro. 

While statistics for this year are not yet in, estate agents and property consultants in the two countries report a fall in purchases by Russians, though it is still early says to say how much of an impact this will have on property values, especially since buyers from some Western European countries are filling some of the gaps left in these markets. However, the sheer volume of Russian investment - as of March 2013 an estimated 350,000 Russians owned property in Bulgaria alone - means that some fallout is inevitable. 

Both Bulgaria and Montenegro have received a dramatic inflow of Russians - tourists, investors and property buyers - since the mid-2000s. Russian property website Prian reported in December 2013 that Bulgaria has consistently been the most popular country for property searches. “Every fifth visitor to our real estate portal was interested in this country. The reasons Russians love it are clear and simple - reasonable prices, warm climate, similar culture. No one can shift the Balkan “star” from its podium,” says a report published on the site. 

For similar reasons Montenegro is also among the most popular destinations. While British and Irish buyers were among the first to start snapping up property along the Adriatic coast in Croatia and Montenegro, from the start of the global financial crisis in 2008 west Europeans started to be replaced by Russians. Since then the inflow of Russian buyers to Montenegro’s coastal resorts has been so large, it earned the country the title “Moscow on sea”. 

But conditions are changing. Both Bulgaria and Montenegro were participants - somewhat reluctantly - in the European sanctions imposed against Russia over the annexation of the Crimea. Other factors such as the ruble’s weakening against the euro have made properties in the region less attractive for Russian buyers, raising fears that the current slowing in demand could be just the start of a larger outflow. Milovan Novakovic, general manager of Colliers International in Pogorica, likens Russian buyers to a swarm of bees. “They alight suddenly in huge numbers, but can disappear just as quickly overnight.” 

In Bulgaria there are already signs of a drop in demand, with some Russians also putting their Bulgarian properties on the market. Bulgarian newspaper Trud and television channel  NovaTV each estimate a fall of up to a third in Russian purchases at coastal resorts this year, although there has been less impact on the real estate markets in major cities. 

Asen Bianov, owner of Varna-based Accent Invest, reports “a major drop in interest and purchases by Russian clients”, which he attributes partly to the fall in the ruble against the euro. “Now Russian buyers can afford less for their money. Furthermore, there are many questions asked by the Russian government when they transfer their money abroad,” he says. 

Jacqueline Torrance, manager of Appletree Properties, a British estate agency focussed on Bulgaria, describes 2014 as an “unsettled year” for the international property market in Bulgaria, with the drop in Russian interest at least partially offset by an increase in enquiries from Belgium, France, Italy and Scandinavia. In Italy in particular, domestic economic problems coupled with high property prices have encouraged Italians to look to lower cost markets like Bulgaria. 

However, the worsening of the Ukraine crisis has also made  the former eastern bloc look risky to western buyers. “Buyers from the UK and other west-European countries have become very hesitant. Those of us who live in Bulgaria understand that the situation here is very different to that in the Ukraine, but people who live elsewhere in the world do not,” she says. 

Overall, she says, it is too early to evaluate the damage to Bulgaria’s property market. “Certainly, those agencies that deal entirely with Russian buyers are going to find it more difficult to survive. But the fact that Russians are eager to sell their properties could create new opportunities for Europeans to purchase high-end real estate at low prices.” 

A fall in Bulgarian property prices could also attract new buyers from the east. Accent’s Bianov notes higher interest from Ukrainian buyers, while in an interview with Bulgarian newspaper Standart News, the head of the Green Life agency reported interest from as far away as Kazakhstan and Mongolia. 

Montenegro has also had a drop in demand from Russians since 2013, although - as in Bulgaria - the shortfall has been made up by west Europeans, which are now entering the market in larger numbers than at any time since 2008. Andrea Marston, head of marketing at Montenegro Prospects, attributes this to “better economies at home, together with prices that have been relatively static for years, infrastructure improvements, and press coverage of luxury resorts in Montenegro”. 

While Russians have been the biggest spenders and most high-profile investors in Montenegro, west Europeans have continued quietly buying up more modest properties along the Adriatic. According to Marston, the typical buyer is more likely to be a British or Irish couple looking for a two-bedroom holiday home, rather than a Russian oligarch. 

A slight fall in Russian purchases could actually be a good thing for the market since its image as a “mini Moscow” has put off some buyers, in the same way that the British colonisation of the Costa del Sol deterred other nationalities. Even Montengro’s Prime Minister Milo Djukanovic has attempted to dispel the stereotype. “One of prejudices that’s alive and well is the prejudice ... that Montenegro is Moscow on the Sea. That’s not true,” Djukanovic told the Brussels Forum on transatlantic cooperation in March. 

Marston does, however, point out that “If the number of Russian buyers continues to fall, it will impact the market because I don’t think there will be a big upswing from western Europe.” 

However, according to Colliers’ Novakovic, the exception is at the high end of the market, which remains as attractive as ever to Russian buyers. Russians still account for the largest share of purchases at the luxury Porto Montenegro development, for example, where some 40-50% of buyers so far are Russian. “Perhaps we just need more good projects to attract the Russians,” he says. 

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