"Russia's elite are passionate about luxury," says Lew Geffen, chairman of Lew Geffen Sotheby's International Realty. "They have long been known as Europe's biggest investors in holiday homes, but after the recent economic crisis in Cyprus, one of their most popular destinations, they are now moving out of Europe and starting to follow the sun to other countries to escape the Moscow winter, which is on average as cold as -13 degrees C."
"Russians are not new to investing in Africa, with Egypt long being a favourite destination," says Geffen. "However, with an unstable political climate in Egypt, they have started looking for new destinations with stable economies and political environments to invest in."
Nadezhda Kot of Sotheby's International Realty Moscow says, "We are actively marketing South African properties to our clients and Cape Town in particular ticks all the boxes our clients are looking for in terms of climate, lifestyle and natural beauty, but are still value driven. The current weakness of the rand has certainly attracted attention in Moscow."
Geffen believes urban Russians are unlikely to be deterred by the distance from South Africa because of the month-long year-end holidays enjoyed by most upper-middle-class Russians. It is common for big business in Moscow to shut down mid-December, and the first two weeks of the new year are declared as public holidays owing to the differing dates for Christmas and New Year celebrated by the Russian Orthodox Church.
At around 70%, Russians have some of the highest levels of disposable income levels in the world, according to the most recent research by economist Martin Schorsch. Throughout the Eurozone crisis, wages continued to rise in Russia, where unemployment currently stands at a 20-year low and income taxes are low, too. The average Russian currently has very little debt, including mortgage debt. When the Soviet Union collapsed Russian citizens were gifted their homes outright by the state.
According to the United Nations World Tourism Organisation, Russians spent an estimated US$43 billion (R427 billion) on international tourism in 2012. This places them among the world's top five in terms of holiday spending. China, which spent an estimated US$102 billion (R1000 billion) last year, tops the list.
Lew Geffen Sotheby's International Realty sold one of Cape Town's most lavish properties, a six-storey castle on the outskirts of Hout Bay, to a Russian businessman for R23 million in 2012.
The number of foreign buyers investing in South Africa, particularly in Cape Town, is on the increase. The FNB Property Barometer - Emigration and Foreign Buying released in January 2013 said that in 2012 the average foreign buying estimate in South Africa was 3.8% of total buying, which was up from 2011's estimated three percent.
Geffen estimates that this number is far higher along the Atlantic Seaboard, where foreign investors are attracted to prime property along the coastline. "Roughly one-third of investors in top tier properties in exclusive areas like Clifton, Camps Bay and Llandudno are from the UK, Europe and, increasingly, Russia," he says. "As uncertainty in the European market continues, more Russians will look to South Africa to escape dreary winters and for attractive bricks and mortar investments."
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