Russian investors flock into German real estate

Russian investors flock into German real estate
Schloss Sanssouci, Berlin, Germany
By bne IntelliNews January 22, 2018

Wealthy Russians are ploughing money into the German real estate sector, mostly picking housing and commercial projects in the range of €1-7mn, Vedomosti daily said on January 19 citing the survey by Tranio real estate broker.

Cyprus used to be the foreign haven of choice for keeping money safe outside of Russia. However, a banking crisis on the island in 2012-13 put the willies up depositors, who have been looking for an alternative safer haven since.

The details that emerged from the Russian claimants in the aftermath of the Cypriot banking crisis highlighted that it was no so much oligarchs that were hiding money in Russia’s favourite offshore haven as middle class and upper middle class depositors. The ticket size of the rising German investment suggests it is this same group of people that are still looking for a place to park their savings.

Despite the sanctions Russians in 2017 Tranio received about 1,600 buying bids in Germany in 2017, 1.5-fold higher than in 2016 and 3.3-fold more than in 2015.

However, the image of Russian investor is also changing. The image of the lush and extravagant spender is now pinned on Arab, Iranian, and Chinese wealthy, while Russians often finance the deals by affordable loans and use own funds as collateral.

Both Russian and German brokers in the survey point to a strong increasing trend of wealthy Russian investors, linked to outflow from the post-Brexit UK and the stable non-volatile German property price environment.

These investors follow an emerging trend of Germany becoming a new safe heaven for capital. A study by the PricewaterhouseCoopers cited by Vedomosti placed Berlin, Munich, and Frankfurt in the top 5 most attractive real estate investment destinations in Europe. 

According to Tranio Russian investors are most active in Berlin, with 63% of the surveyed brokers seeing as the top priority for bids from Russia. Housing in Berlin remains about 20% cheaper than the average of German seven largest cities. Munich follows with 35%, attracting investors by high purchasing power and low unemployment among the population.

An average deal from a Russian client is estimated at €1-3mn in the survey. However, it might pay to have Russian speaking staff on the payroll if one wants to attract bigger deals: 45% of Russian speaking agents in Germany said €3-7mn bids were as frequent versus only 27% by German brokers.

However, local brokers still control the most lucrative market segments as 27% of German brokers surveyed believe Russians invest in luxury segments of €7-20mn, while only 10% of Russian brokers see deals in this category.

About 70% of the respondents said Russians transfer funds for deals from Russia, as well as from Switzerland (33%), and UK (27%). Investors that are working in English and work in the more pricey segments are more likely to keep their money in the UK, US, or Dubai.