Real Estate in Russia
We've compiled a brief summary of real estate in Russia. Included are the most pertinent FAQs you should know, the pros and cons about investing in Russia, and finally a small directory of Russian real estate websites to facilitate your search.
- Can foreigners legally purchase property in Russia?
- Yes, foreign citizens have the right to buy property in Russia and are treated to the same property ownership rights as Russian citizens.
- How much are property taxes, and what additional monthly or annual expenses should you expect to pay?
- The owner usually pays a small annual tax on his property, the equivalent of roughly $100 to $200 (see currency converter)
- Monthly utility payments for a medium size apartment currently run between $50 and $100. (CityRealityRussia.com)
- What tax rate do you pay if you rent out your property?
- If you live in Russia for 182 days or more, you will be considered a resident of the Russian Federation and will be taxed on your rental income at a rate of 13% of this income. This is considered your personal income tax.
- If you live in Russia for less than 183 days, you will be required to pay a non residential tax on income generated in Russia of 30% of your rental income. (CityRealityRussia.com)
- What tax rate do you pay when you decide to sell your property?
- If you own your apartment for a period over 5 years, you will not be required to pay any tax on the sale price.
- If you have owned for a period of less than 5 years and you are not considered a Russian resident, you will have to pay 30% of the sale price minus a deduction of 1 million rubles or 30% of the capital gain (current sale price minus original purchase price). To be considered a resident of Russia, you must be physically located in Russia for more than 182 days per year.
- If you have owned for a period of less than 5 years and you are a Russian resident you will have to pay 13% of the purchase price minus 2 million rubles. (CityRealityRussia.com)
There are many solid argument for investing in foreign real estate markets like Russia
- First is the fact that Russia should see long term economic growth greater than that of mature "western" economies.
- Second, Russia has a much less developed credit market than in the west. This means that as Russia closes the gap and there is more competition amongst lenders, rates should come down and more Russians will have access to capital for home ownership. This of course should result in a continued increase in demand for real estate for many years.
Be careful, because there are downsides as well.
- Russia doesn't exactly have an A+ score for property rights. Just ask oil majors like Shell and BP who have had problems with the Russian government.
- Real Estate in Russia has been heated for some time. This is just the time to use the most caution, as most markets, real estate or otherwise, tend to overshoot (and undershoot) their true value.
- Russia largely has a resource based economy, which means the peaks and valleys of the country's real estate market are that much more exaggerated. Just ask someone from northern Canada who has seen numerous cycles in resources and the economy. (Although at the top, most people have the mindset that "this time will be different"). Maybe this time will be different with the help of growth from developing countries like China and India. Then again, maybe numerous factors in the west, from demographics to mismanaged fiscal and monetary policies will drive the world into a long and hard recession. This will be adverse for resources and consequently, to real estate prices in Russia.
- Finally, the Russian population is declining at a very quick rate. This can't be good for long term real estate prices unless Russians start having more babies or Russia opens its doors to immigration like in North America. Don't hold your breath for either to happen.
Does the risk / reward ratio balance off in your favor? Still want to invest in Russian real estate? Now you have to explore the different investment options. What type of property, and even more importantly, where in Russia to invest?
The following is a list of useful websites that may help in your search.
- City Reality: a leading provider of Russian vacation apartments, serviced apartments, long term rentals and real estate services throughout Russia
- IntermarkSavills: Russian property services from rental agency to international investment consultancy
- Arendator.ru: Commercial real estate in Moscow and St. Petersburg