After turning London into Moscow-on-the-Thames, the focus is now on Bulgarian resorts and properties
According to Internet jokesters, the Russians have invaded every corner of the world three times in human history: during the two World Wars and at the present time – purchasing real estate on every continent. After they bought up large chunks of London and the best properties in various European resorts, ads like this started appearing alongside the wisecracks: “Ideal opportunity on one of the only Greek islands welcoming Russian investments. A stone luxury villa complex in picturesque hills with a panoramic view of Zakynthos.
The asking price of only 2.5 million euros includes three small, fully furnished villas.
”This ad proves that the rule “If Russians turn up, owners can add a zero to property prices” still applies, because the actual market value of the villa complex is far less than the advertised price. It also shows that Russians are not very welcome neighbours. Among real estate agents, the “new Russians” have a reputation for arrogance. The truth is, however, that they are not any more difficult or demanding than the nouveaux riche of any nationality – which still doesn't mean they are easy customers.
Yes, the Russian buying style can be hard to keep up with. Everywhere they go they expect the perfect property shopping party. Wealthy Russians demand the best hotels, casinos, restaurants and entertainment, and it is up to the overworked brokers to provide them. Despite their reputation, Russians need only say they are going to the UK to buy real estate and they immediately get a visa – even now, when the UK is tightening its visa regime, wary of mass immigration.
Need a passport, comrade?
Britons aren't the only ones showering flush Russian investors with visas; the Bulgarians have gone a step further, offering their former Soviet allies not only visas, but also passports – if they cough up the cash, of course. In 2004 Russia's political relations with Bulgaria started to warm after a frosty period. That same year, like their great-grandfathers who more than a century earlier entreated the Russians to march into Bulgaria to chase out the Ottomans, a number of Bulgarian real estate companies attempted to provoke a Russian property invasion.
A PR campaign of pseudo-news reports advertised the fact that Bulgarian law allows foreigners who invest $250,000 to automatically obtain permanent residency, making them eligible to later apply for Bulgarian – and EU – citizenship. The goal was to entice Russians into buying property in Bulgaria with the vague promise of easier access to Europe – not such a big incentive at a time when European nations were lining up to give rich Russians visas.
Little wonder, then, that the Bulgarian PR blitz fell flat; from 2004 to 2006 Russian buyers were not active players on the Bulgarian property market. In the middle of 2006, however, Russian investors with a keen eye for new and developing markets started to buy up properties in Bulgarian summer and ski resorts, unloading capital as if the Bolsheviks were in hot pursuit. What finally put Bulgaria on their investment map was not a manipulative PR campaign but active Bulgarian participation in Russian real estate expos, which showed that Bulgaria could offer the top-notch properties Russian buyers demanded.
Learn to tell the small fry from the high rollers
Russian investors come in two basic types. The first purchases expensive, fully furnished properties in luxurious resorts for prestige, rather than hefty returns. The second type is a true entrepreneur on the prowl for high-potential new markets. These buyers invest huge sums not only in real estate, but in any sector of economy that promises astronomical pay-offs. For a variety of reasons, the Bulgarian property market attracted mainly the first type.
But this doesn't mean Bulgaria has missed out on Russia's new venture capital spree; high-rolling Russians have invested huge amounts of money in Bulgaria, but primarily outside of the real estate market.
So how can you spot a typical “small-time” Russian investor? Look for a 40-something family man nostalgic for the Bulgarian resorts of his Soviet childhood. While he may not be filthy rich by Russian standards, he can still afford to drop 500,000 euros without thinking twice. His demands are relatively simple: seaside property must be “first line,” right next to the beach. Russians prefer the northern Black Sea coast, thanks to sentimental memories of “the good old days”.
If he's looking for a winter vacation spot, it should be next to a ski run. In both cases, Russians buy primarily in the most popular and flashy locales and do not quibble for long about the cost. Compared to Moscow prices of 5,000 – 8,000 euros per sq m, the modest rate of 1,500 – 2,000 euros in Bulgarian resorts seems laughable.
A Russian real estate invasion?
Last year, real estate agents proclaimed Russians “the new Brits of the Bulgarian property market”. And indeed, Russians were the second most active buyers after the English. But such a comparison may be misleading, as there are rather striking differences between them. Over the last two years Britons have been purchasing more rural properties and relocating to Bulgarian villages year round to save money, since living costs are far lower than in Britain.
As a result, there are whole villages as far as 10 to 40 km inland from the Black Sea inhabited mainly by retired UK citizens. Russians, on the other hand, go to Bulgaria to spend money and hence buy holiday homes in upscale resorts. When Britons purchase such properties, they do so primarily to sell them later for profit. Russians, however, buy apartments in holiday complexes strictly for personal use.
Both Russians and Britons do have something in common when it comes to their shopping style: more than 50 percent invest with no clear idea of what they will do with the property in the future. They invest in Bulgaria simply because they've heard it was fashionable and profitable. Despite centuries of political and cultural relations with Russia, Bulgarians find their new neighbours from both countries equally exotic and greet them with hospitality as well as curiosity.
The UK rush on Bulgarian property has slowed during the last few months. However, it is still too early to say whether Russians really will become the new leaders on the property market because Bulgaria is facing strong competition for Russian roubles.
In 2007, 15 percent of all Russians purchasing holiday homes did so in Montenegro, while only seven percent bought in Bulgaria. But Bulgarian real estate agents have not given up their campaign to turn the Black Sea coast into the Russian Riviera West. If things go their way, in a few years Varnagrad and Moscow-on-the-Maritsa might not be laughing matters.
Adding insult to injury?
A billboard in central Sofia advertising a company trying to sell property to Russians puts it plainly: “We have come to stay!”