The Russian overseas Property MarketPresented by

Kim WaddoupCEO, aiGroup, Russia

http://www.aigroup.ru

The Russian overseas Property Market

This presentation will explore the general market to help you to form an appreciation of the desires and requirements of Russian investors and their current buying habits.

We will look at the countries that are most popular for Russian buyers and explain why.

We will explore the Russian market place, how to promote/market your company and how to deal with initial enquiries.

The conclusion will offer some specific recommendations, including what does a Russian client look for, how to reach them, gain their trust and complete the sale.

Brief history of current Russia

1991 the end of communism rule and first free election for a democratically elected President, Boris Yeltsin

91-98 troublesome years for an emerging country/economy

1998 August economic crisis

2000-2008 The Putin Years 2008-the present The

Medvedev/Putin tandem

Current economy & Current economy & predictionspredictions

Russian economics – heading for higher Russian economics – heading for higher growthgrowth

(Morgan Stanley Report July 2011)(Morgan Stanley Report July 2011) Growth in Russia is poised to accelerate to Growth in Russia is poised to accelerate to

5% in 2011 and 5.5% in 20125% in 2011 and 5.5% in 2012 Retails sales and industrial production Retails sales and industrial production

continues to increasecontinues to increase Wages disposable income & consumption Wages disposable income & consumption

are increasingare increasing Inflation under control and falling(max 8%)Inflation under control and falling(max 8%) Unemployment is falling (6.1%)Unemployment is falling (6.1%)

‘‘Local Business Politics’Local Business Politics’

• The business environment in Russian The business environment in Russian remains erratic. For many businesses remains erratic. For many businesses high capital gains are relatively easily high capital gains are relatively easily achievable, however corruption and achievable, however corruption and hardly legal pressures can be brought hardly legal pressures can be brought on to companies operating in Russia.on to companies operating in Russia.

• Many businesses rely on off-shore Many businesses rely on off-shore alternatives ensuring security for alternatives ensuring security for profits and capital gains.profits and capital gains.

Where do Russians buy and why

Statistics provided by 1-property based on searches for International Property for June-August 2011 the most popular requests are:

Bulgaria 17% Easy destination, language, similar mentality

Spain 14% Sun, prices, lifestyle Turkey 11% No visa, traditional holiday

destination Montenegro 10% popular destination Italy 6% primarily Calabria(price) Czech Republic 5% Mostly buy to let Cyprus 5% traditionally popular Germany 4% Mostly buy to let Greece 4% bargain seekers France 3% also a traditional market Others 21%

Where do Russians buyWhere do Russians buyStatistics from Yandex, Russia’s largest search engine based on

searches for Property abroad May-August 2011:-

Request

May 2011

June 2011

July 2011

August 2011 Total %

Increase in 2011, %

property in Bulgaria 42035 41914 40413 42057 166419 32 37,1

property in Spain 17215 16769 17933 18420 70337 14 23,0

property in Montenegro 11229 11561 12074 11978 46842 9 20,9

property in Cyprus 7773 7455 7460 14224 36912 7 56,5

property in Turkey 8493 7471 8725 8676 33365 7 30,5

property in Italy 7505 7142 7718 7660 30025 6 38,6

property in Germany 6657 6485 6796 7601 27539 5 52,5

property in Greece 4728 6173 5472 4997 21370 4 29,7

property in Finland 4218 4079 4832 5564 18693 4 30,3

property in USA 4097 4004 4503 5941 18545 4 48,8

property in Croatia 3651 3978 4597 4296 16522 3 25,4

property in France 3576 3921 4267 3892 15656 3 34,2

property in Israel 1735 1581 1627 1648 6591 1 6,1

property in Dubai 858 1030 937 931 3756 1 50,8

Who are your Russian clients/ the rising Who are your Russian clients/ the rising Russian middle classRussian middle class

The Russian middle class is increasing very fast especially in The Russian middle class is increasing very fast especially in the major cities. This sector represents vast potential for the major cities. This sector represents vast potential for

overseas property.overseas property.

The majority own their own apartmentsThe majority own their own apartments Low monthly running costs(water, gas, heating, Low monthly running costs(water, gas, heating,

electricity)electricity) Salaries are rising creating more disposable Salaries are rising creating more disposable

incomeincome Minimal household debtMinimal household debt General income tax at 13% on declared(!) General income tax at 13% on declared(!)

incomesincomes Less than 8% have mortgages to repayLess than 8% have mortgages to repay

What investments are Russians What investments are Russians generally looking for?generally looking for?

In a recent survey we asked In a recent survey we asked Russian investors what their Russian investors what their

main reasons were for investing main reasons were for investing in property:in property:

As a safe investment 55%As a safe investment 55% Buying for own enjoyment 30%Buying for own enjoyment 30% Buying to let/rent (create Buying to let/rent (create

income) 15%income) 15%

How to promote/market in Russia Create and finance your

own full time office in Russia

Utilise the Russian print media

Internet advertising Participate in existing

Property Shows Create your own

seminars/presentations

The Russian overseas property media The Russian overseas property media

landscapelandscape Russians still love to read magazines! There are several specialized Russians still love to read magazines! There are several specialized

publications but with a lack of an independent reporting publications but with a lack of an independent reporting organisation, transparency is virtually non-existent. Most organisation, transparency is virtually non-existent. Most

publications are free of charge but can also be purchased from publications are free of charge but can also be purchased from specialized kiosks.specialized kiosks.

Currently the leading publications are:-Currently the leading publications are:-

Exclusively International:Exclusively International:► International Residence 2 x 35,000 copies 176 pages €.1,495International Residence 2 x 35,000 copies 176 pages €.1,495► Your property overseas(St. Pete) 10x 7,500 copies 88 pages Your property overseas(St. Pete) 10x 7,500 copies 88 pages

€.1,450€.1,450► Vedomisti Supplement (closed)Vedomisti Supplement (closed)

► Homes Overseas (closed)Homes Overseas (closed)

Domestic & InternationalDomestic & International► Homes Collection 6x 31,000 copies 112 pages €.900Homes Collection 6x 31,000 copies 112 pages €.900

► Digest of Russian and Foreign RE 10x 30,000 copies 88 pages Digest of Russian and Foreign RE 10x 30,000 copies 88 pages €.3,500€.3,500

► Salon Nedvizhimosti 12x 30,000 copies 192 pages €.3,250Salon Nedvizhimosti 12x 30,000 copies 192 pages €.3,250► Vid namore 6x 10,000 copies 100 pages €.1,000Vid namore 6x 10,000 copies 100 pages €.1,000

► Nedviahimostbezgranic 10x 10,000 copies 30 pages €.1,000Nedviahimostbezgranic 10x 10,000 copies 30 pages €.1,000

- Rates are based on 1 full page display advertisement.- Rates are based on 1 full page display advertisement.

Internet penetration and portalsInternet penetration in Russia continues to grow fast. At the end of 2010 there were 59,700,000

users, 42.8% of the population. The increase from 2009-2010 was in excess of 31%!

The main Internet property portals in The main Internet property portals in Russia.Russia.

Again there are many claims on the volume of visitors and the number of objects listed, Again there are many claims on the volume of visitors and the number of objects listed, but little transparency, as a result it is hard to define which is the largest/most but little transparency, as a result it is hard to define which is the largest/most

effective.effective.

EstEst OffersOffers Visitors/dayVisitors/day Only Int.Only Int. CostCost

Prian.ruPrian.ru 20062006 15,00015,000 10,00010,000 INTINT 3 months 3 months €.220(30)€.220(30)

1-property.ru1-property.ru 20042004 3,0003,000 5,0005,000 INTINT 3 months 3 months €.50€.50

Zagrandom.ru Zagrandom.ru 20042004 2,0002,000 4,8004,800 Dom/INT Dom/INT 3 months 3 months €.75€.75

HomesOverseas.rHomesOverseas.ru u

20112011 10,00010,000 1,8001,800 INTINT 3 months 3 months €.10€.10

Zarubezhnaya.ruZarubezhnaya.ru 20082008 12,00012,000 No infoNo info Dom/INT Dom/INT 3 months 3 months €.150€.150

Justreal.ruJustreal.ru 20072007 6,2006,200 No infoNo info INTINT 3 months 3 months €.75€.75

Realty.dmir.ruRealty.dmir.ru

20112011 15,00015,000 15,00015,000 Dom/INT Dom/INT FreeFree

Bsn.ruBsn.ru 19991999 ?? 8,0008,000 INTINT €€65 month65 month

JJC.ruJJC.ru 20102010 2,0002,000 1,0001,000 INTINT €€.80 per .80 per monthmonth

Irr.ruIrr.ru 20052005 2,0002,000 2,0002,000 INTINT €€.10 month.10 month

Exhibitions in RussiaExhibitions in RussiaRussia now has quite a comprehensive number of exhibitions. Moscow is most prevalent Russia now has quite a comprehensive number of exhibitions. Moscow is most prevalent

with a growing number of events now in St. Petersburg. Whilst they might exist no with a growing number of events now in St. Petersburg. Whilst they might exist no successful events are recorded in other cities.successful events are recorded in other cities.

MoscowMoscow DomExpoDomExpo2x 200 participants 16,000 visitorsNoV€.350 m2 Dom/INT Since 19992x 200 participants 16,000 visitorsNoV€.350 m2 Dom/INT Since 1999 Moscow International Property Show Moscow International Property Show 2x 202 participants 7,655 visitors VER €.450 m2 INT since 20032x 202 participants 7,655 visitors VER €.450 m2 INT since 2003 Second HomeSecond Home2x 130 participants 14,000 visitors NoV €.300 m2 Dom/INT Since 20042x 130 participants 14,000 visitors NoV €.300 m2 Dom/INT Since 2004 Property Worldwide Property Worldwide 2x 133 participants 3,000 visitors NoV€.350 m2 Dom/INT Since 20082x 133 participants 3,000 visitors NoV€.350 m2 Dom/INT Since 2008 Moscow International Investment ShowMoscow International Investment Show2x 182 participants 6,440 visitors VER €.450m2 INT Since 20072x 182 participants 6,440 visitors VER €.450m2 INT Since 2007 InterHomeInterHome2x2x?? 97 participants 10,000 visitors NoV €.??m2 INT Since 2007 97 participants 10,000 visitors NoV €.??m2 INT Since 2007 Golf & Luxury Property ShowGolf & Luxury Property Show1x 107 participants, 4,617 visitors VER €.450 m2 INT Since 20101x 107 participants, 4,617 visitors VER €.450 m2 INT Since 2010

St. PetersburgSt. Petersburg Yarmarkt Expo Yarmarkt Expo 2x 100 participants 7,000 visitors NoV €.290 m2 Dom/Int Since 20062x 100 participants 7,000 visitors NoV €.290 m2 Dom/Int Since 2006 St. Petersburg International Property ShowSt. Petersburg International Property Show2x 150 participants 7,000 visitors VER €.350 m2 INT Since 20082x 150 participants 7,000 visitors VER €.350 m2 INT Since 2008 ProEstateProEstate1x 1,200 participants(!) 2,500 visitors NoV €.280 m2 Dom/Int Since 20071x 1,200 participants(!) 2,500 visitors NoV €.280 m2 Dom/Int Since 2007 InfoRealInfoReal1x 50 participants 6,000 visitors NoV €.256 m2 Dom/Int Since 20091x 50 participants 6,000 visitors NoV €.256 m2 Dom/Int Since 2009 BSN ExpoBSN Expo2x 120 participants 15,000 visitors(!)NoV €.250 m2 Int Since 20112x 120 participants 15,000 visitors(!)NoV €.250 m2 Int Since 2011 NoV = non verifiedNoV = non verified VER = VerifiedVER = Verified

Once you have attracted a potential Once you have attracted a potential Russian client, what do they Russian client, what do they

expect/require from you?expect/require from you?

o Answers to a LOT of questionsAnswers to a LOT of questionso Efficient and professional adviseEfficient and professional advise

o Availability of Russian speaking staffAvailability of Russian speaking staffo The possibility of a Russian speaking lawyerThe possibility of a Russian speaking lawyero All prices on the table, no hidden extrasAll prices on the table, no hidden extras

To successfully close sales to Russian clients, you must first gain To successfully close sales to Russian clients, you must first gain their trust and respect!their trust and respect!

Specific recommendations for Developers or Agents looking

to sell in Russia

If you are looking at the Russian market, you should consider a longer term view, Rome was also not built in a day!

Consider marketing actions to establish brand/name recognition prior to attending Property Exhibitions

Research and learn to compete with other countries popular on the Russian market

Re-evaluate the current situation, what are the USPs for your destination

Quality, price, lifestyle, investment potential…

Upcoming Shows

18-19 November 2011 MOSCOW INTERNATIONAL PROPERTY SHOW www.internationalproperty.ru

20-21 April 2012 MOSCOW GOLF & LUXURY PROPERTY SHOW www.luxurypropertyshow.ru

28-29 October 2011 ST. PETERSBURG INTERNATIONAL PROPERTY SHOW www.spb.propertyshow.ru

10-11 February 2012 BULGARIAN HOME EXHIBITION, MOSCOW www.bgshow.ru

9-10 March 2012 MOSCOW INTERNATIONAL INVESTMENT SHOW www.investshow.ru

16-17 марта 2012 Выставка Загородная Недвижимость DOMSHOW www.domshow.ru

Upcoming Shows

1 February 2012 INTERNATIONAL RESIDENCE MAGAZINE www.internationalresidence.ru

19 March 2012 MOSCOW INTERNATIONAL MICE FORUM www.MICEforum.ru

20-21 April 2012 MOSCOW GOLF SHOW www.moscowgolfshow.ru

Upcoming Shows

Thank you for your attention!

Kim Waddoup

CEO, aiGroup, Russia

Contact Us

Russia, Moscow, 3rd Frunzenskaya, 5, build. 1, office 1 Tel: +7 495 926 9695 E-Mail: moscow@aigroup.ru http://www.aigroup.ru/