As Russian Real Estate Money Floods in, Could New York Go the Way of London?

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.

Russia's Etalon sees long real estate market recovery

MOSCOW, March 19 (Reuters) - Russian housebuilder Etalon said on Monday the country's real estate market was still some way off pre-crisis levels and would continue to grow at least into 2013, prompting it to seek several new projects.

The company, which builds houses mainly in Moscow and St. Petersburg, said it contracted 270,000 square metres of property across both cities in 2011, compared to an adjusted 440,000 square metres for St. Petersburg alone in 2008.

"2012 is off to a strong start and we believe that the recovery will develop further, supporting our cash collections and new contract sales. We have every reason to look towards 2012 and 2013 with confidence," Etalon president Viacheslav Zarenkov said in a statement.

His comments came after Etalon posted 2011 net income up 64 percent to $253 million, on the back of a 16 percent growth in revenue to $774 million.

Moscow Commercial Real Estate Rebounding

The size of investments in the domestic real estate market grew 128 percent last year to reach almost 2.2 billion euros ($3.1 billion), as economic stabilization after the crisis encouraged foreign and local investors, a survey said Monday.

Although the overall transaction volume remained low compared with the pre-crisis level, Russia outperformed other countries in Central and Eastern Europe and mainstream investors are expected to return to the market in the future, CB Richard Ellis said in the report.

Russia saw a total of 27 deals last year, compared with 22 in 2009, with an average transaction volume accounting for 80 million euros, almost twice as much as in 2009.

According to the report, the stabilizing of the domestic economy, which grew 4 percent last year, resulted in increasing investors' confidence.

"The results of 2010 showed a significant increase in the investors' confidence of the stability of Russia's real estate market," said Christopher Peters, head of research at CBRE.

Blackstone eyes Moscow Real Estate

Plain-vanilla leveraged buyout deals in the United States are "pricey," Blackstone's chief operating officer Tony James told analysts on a conference call. He is instead searching for opportunities in energy, emerging markets and in providing growth capital to small companies.

Blackstone's international push saw it expand into Istanbul and establish a "small beachhead out of Moscow" during the first quarter, James said. Blackstone has one person operating in Russia, he said.

"We've been flirting with Russia for three years," said James. "I don't know how many times I've sat through traffic in Moscow to try to figure the place out."

James said the country is "a bit inscrutable ... but we're open-minded about opportunities there".

Still, James said it was important to be "very careful" in the country despite Russia benefiting right now from high energy prices.

"It is a market that is capital-constrained," James said. "Done right, it has potential to have some interesting returns, but we all have the obvious questions about the transparency."