Russians are becoming more likely to use mortgages to buy overseas property despite the affect of the financial crisis on the credit industry, according to a number of agents and brokers in the country.
“We see a good growing interest in overseas real estate from Russian buyers,” said Alexey Pavlov of Russian international mortgage broker Lowell Finance. “After a quiet summer and fall… people have begun to change their attitude towards consumption and investment, in particular towards the mortgage.
“There is a certain type of person who had not previously thought to buy real estate on credit – the choice has always been in favour of money. Now [people are saying]: ‘I could use the most effective and efficient funds,’ or ‘getting a real estate loan, I get the opportunity to put in a higher quality offer.’”
The growing acceptance of mortgages is due to Russian’s changing attitude towards borrowing money, said Irina Kryuchkova, CEO of agent Clever Realty. “Russians are slowly accepting the concept of mortgages,” she said. “In the past some have thought that buying on credit was something only poor people did, but now many people are realising that it’s just a mechanism provided by the banks.”
Pavlov admits that this old way of thinking can still be found among certain high net worth individuals, and the majority of transactions he deals with are in the €350,000 to €800,000 range. “But now on the market is new wave of rational clients,” he said. “Now for the middle class and wealthy buyers, mortgages are an easy tool to purchase their holiday homes. People are also looking for investment involving mortgage financing, but these clients are fewer.”
The financial crisis makes it difficult to quantify how many Russian buyers have accepted this view. Lowell Finance’s transaction levels dropped 20% in the first half of this year and foreign banks are still offering fewer loans to Russian citizens.
However, lower interest rates abroad are now helping to make overseas mortgages more attractive and transactions rose in the third quarter. “We can now offer loan rates ranging from 2.75% in Spain, 3.25% fixed rate in France, and 6% fixed rate in the US and Cyprus,” said Pavlov. “This is incomparable with the current mortgage rates in Russia which start at 11%.”