Real Estate

Russians Prop Up the Luxury Housing Market


Roustam Tariko, billionaire owner of Russian Standard Bank and Russian Standard Vodka, bought a $25.5 million estate on Star Island in Miami Beach in April—the priciest purchase in the city since 2006. Tariko’s neighbor? Vladislav Doronin, chairman of Moscow-based real estate developer Capital Group, who paid $16 million in 2009 for the Star Island home previously owned by Shaquille O’Neal. “In Russia, it’s a status thing now,” says Jorge Uribe, a real estate agent with One Sotheby’s International Realty in Coral Gables, Fla. “If you’re wealthy and you say you have a place in Miami, it’s like saying back in the old days, ‘I own a place in Ibiza or Monaco.’ It’s a cocktail conversation thing.”

Russians and other overseas shoppers are buying some of the priciest homes in America as the broader housing market slumps and a weak dollar makes U.S. property more of a bargain, according to real estate brokers who handle luxury properties. International buyers purchased an estimated $82 billion worth of U.S. homes in the 12 months ended on Mar. 31, a 24 percent increase from the previous 12 months, the National Association of Realtors reported in May. Jed Smith, managing director of quantitative research for the association, says the number of overseas buyers for multimillion-dollar homes is increasing, helped by the rise of emerging markets such as Russia, Brazil, China, and India.

Another factor is the weakening U.S. currency: Among emerging-market currencies, the Russian ruble increased 9.4 percent against the dollar in the 12 months through July, while the Brazilian real advanced 13 percent and the Chinese yuan gained 5.2 percent, according to data compiled by Bloomberg.

For Russians, interest in luxury properties may be as much about making a statement as snaring a bargain, says Edward A. Mermelstein, a real estate attorney at Rheem Bell & Mermelstein, which has offices in New York and Moscow. “Those trophies, they’re buying them to make a splash,” he says. “They’ll definitely gravitate to a property that’s higher profile as much as to a property with a long-term investment potential.”

Yuri Milner, founder of Moscow-based DST Global, which invests in Internet companies including Facebook, Twitter, and Groupon, paid $100 million for a 25,500-square-foot mansion in Los Altos Hills, Calif., according to property records. That price is the highest for a U.S. single-family home this year. A spokesman for Milner declined to comment on the purchase. In Southern California, about 75 percent of the people looking at “super luxury homes” for $20 million or more are from countries such as China, Indonesia, Korea, and Russia, says Sally Forster Jones, a Beverly Hills broker.

In Manhattan, Russian composer Igor Krutoy and his wife, Olga, paid $48 million for a 6,000-sq.-ft. apartment at the Plaza Hotel in March—a record price for a Manhattan condo. The deal came six months after the couple completed the purchase of a $12.85 million home in the Hamptons on Long Island. Krutoy bought the Manhattan property because he was seeking a home in the city, rather than looking to take advantage of a bargain, says Ilya Bykov, principal at Protax Services, a New York-based firm that provides legal, tax, and property management services for international clients. Bykov represented Krutoy in his search, negotiation, and closing for the Plaza condo and helped provide legal representation for the Hamptons home. Russian buyers, he says, “have the money, and they always want the best in everything.”

The bottom line: Wealthy Russians and other foreign buyers spent an estimated $82 billion on U.S. homes in the 12 months through Mar. 31.

Gittelsohn is a reporter for Bloomberg News in Los Angeles.
Carmiel is a reporter for Bloomberg News.

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