LONDON ? ?The real estate market in the United States may still be slumping, but its high end is enjoying a remarkable updraft, propelled by money flowing in from all corners of the globe, including from developing countries like Brazil, China and India,? writes our colleague Alexei Barrionuevo in his latest real estate piece. ?But no group is consistently writing bigger checks than the Russians.
?Over the past four years, Russians and other citizens of the former Soviet Union have signed contracts to buy more than $1 billion worth of residential real estate in the United States, according to estimates from lawyers and brokers.?
Alexei reports about Dmitry Rybolovlev, who made billions from potash fertilizer, Igor Krutoy, a composer, and Andrei Vavilov, a former deputy finance minister, among others.
Tsunamis of cash from extremely well-off Russians, as well as billions from Gulf oilmen and their families, have had a tangible impact on the real estate market in London, probably more than in any other city in the world.
The influx over the past years and decades helped to send the average price of a home in the central London borough of Kensington and Chelsea over ?2 million, or more than $3 million, for the first time ? while Britain is battling austerity, a downturn and falling wages and benefits.
While foreign money has poured into London, rich Brits have made a net migration. And even though West Europeans (increasingly those from Greece and the south) are the largest foreign buyers overall in London, the biggest buyers by far in the chic districts of central London ? Kensington and Chelsea but also Mayfair, Knightsbridge, Notting Hill, etc. ? are East European.
?In central London, the biggest investors have been from Eastern Europe, including oligarchs, with 15 percent of the market and an average purchase price of ?6.2m,? wrote The Telegraph last summer, quoting a Savills real estate firm report on 2007 to 2011 sales. ?Middle East and North African buyers account for 14 percent and spend ?4m. The average spend of British buyers is ?1.5m.?
The average Brit can?t afford to live in London, least of all the plush provinces of the city. Hour-long commutes, or more, from the hinterlands to work in the capital are not uncommon.
Will New Yorkers suffer the same fate, with even the plutocrats and the 1 percent unable to afford the Big Apple? (Though it is hard to imagine a Manhattan where few Americans live, and that such a situation would not prompt a 1776-style revolution.)
But money from foreign mega-millionaires and billionaires may have less impact on the Manhattan real estate market than it has had on prices in central London.
Alexei?s article notes that ultrawealthy Russians are spreading money liberally in real estate markets in New York City, Miami, Los Angeles, Palm Beach, etc. That geographic diversity means less concentration on any one market.
London is a different story. There are simply fewer choices in England for a magnate to buy real estate. Where ya gonna go? Manchester?
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