The war in Ukraine is about to complete a week of conflict. The sanctions imposed by the EU on Russian capital will have an impact on the Spanish real estate sector: on investment in housing, but also on construction costs.
Despite the fact that the weight in the purchase of houses by Russians and Ukrainians is small in Spain , below 4% of the total of foreigners, with figures from recent years of notaries and registrars, our country continues to be the preferred destination of the Russian middle class to have a second vacation home , according to data from the Russian real estate portal Prian that the Institute of Foreign Trade (ICEX) collects in a report.
The conflict between Russia and Ukraine continues to evolve with no sign of peace negotiations coming to a successful conclusion, at least in the short term. The effects on the world economy are already evident, with instability in the stock markets and an increase in the prices of oil and gas, and other raw materials.
Spain is one of the countries least exposed to invasion in Eastern Europe, according to the Vice President of the Government Nadia Calviño , and has affirmed that the mechanisms are being prepared so that the more than possible rise in the price of gas and fuel do not affect the pocket of the Spaniards.
For the Spanish housing sector, the impact may be more towards a rise in the price of raw materials than a blow to investment in residential, since the weight of Russian buyers in Spain has been around 2% at 4% of total purchases made by foreigners in recent years, while Ukrainians move in the average of 1%, according to data from the General Council of Notaries and the College of Property Registrars.
To give an example, at the end of 2022, 10.8% of the almost 565,000 housing transactions registered in Spain were carried out by foreign citizens, close to 61,000 sales. Of these, just over 1,300 houses were bought by Russians, while just over 730 were bought by Ukrainians, according to advanced quarterly data from the Real Estate Registry Statistics . The impact of the coronavirus pandemic, with the confinement measures and restrictions on mobility, have made it difficult for foreign investors to enter in the last two years.
One of the options that attracts Russians to buy houses in Spain is the possibility of obtaining a residence permit, the so-called Golden Visa , for making a real estate investment equal to or greater than 500,000 euros.
Investor visas are regulated in Law 14/2013, of September 27, on support for entrepreneurs and their internationalization, now dependent on the Ministry of Labor, Migration and Social Security . There are various types of visas depending on the type of investment, ranging from the residence permit for a capital investor, investment in real estate or for a business investor.
Since its entry into force, Russian citizens represent around 24% of the permits granted and occupy second place after citizens of Chinese nationality, with the data collected in the report prepared at the end of 2020 by the Institute of Commerce Foreign (ICEX) .
If in 2020, 74 investor visas were issued to Russian nationals, a year marked by the coronavirus pandemic, in 2021 they increased to 157 Russian citizens. So far in 2022, in January six visas had already been granted for the acquisition of real estate of more than 500,000 euros by foreigners of Russian nationality, according to Ministry sources, before the outbreak of the armed conflict in Ukraine.
The escalation of tension between Russia and Ukraine has led the US, the United Kingdom and the European Union to impose harsh sanctions on the Executive and the environment of Vladimir Putin. After the Russian Federation recognized as independent entities the areas not controlled by the Ukrainian Government, in the provinces of Donetsk and Luhansk, and the subsequent decision to send Russian troops to these areas, the European Council decided last Wednesday, February 23, 2022, apply an additional package of restrictive measures that include:
- Specific sanctions against the 351 members of the Russian State Duma and 27 other people
- Restrictions on economic relations with areas not controlled by the Ukrainian government in Donetsk and Luhansk oblasts;
- Restrictions on Russia’s access to EU financial and capital markets and services.
The profile of the Russian buyer in Spain: where they buy
Since 2014, with the annexation of the Crimean peninsula and Sevastopol to Russia and the armed conflict in the Donetsk and Luhansk provinces, Europe has been imposing a series of economic sanctions on Russian citizens. This has been reflected in the Spanish residential market with a drop in operations by Russians, especially non-residents, from the maximum reached just that year (more than 4,670 sales) according to data from notaries, being the first nationality extracommunity that year.
Since then, sales have been falling and have been overtaken by Morocco and China as the main countries outside the EU to invest in Spain. The greatest interest of Russian citizens in housing in Spain has been for tourism and vacation purposes as a second residence .
According to data from both Spanish organizations, until the outbreak of the pandemic, the main market for Russians was the Valencian Community, with almost 50% of its market share. It was followed by Catalonia (21%), Andalusia (13%), the Canary Islands and Madrid, below 10%. More in depth, Alicante, Barcelona and Valencia accounted for six out of 10 sales made by Russians in 2019.
With pre-pandemic data, the ICEX report confirms that the economic sanctions on Russia since 2015 have reduced the weight of large operations, those above 100 m2. The average price of a home purchased by Russian citizens in Spain is around 1,700 euros/m2.
According to the study prepared by the Economic and Commercial Office of Spain in Moscow, the Russian information portal Azbuka Spain , carried out a study to find out what the profile of the Russian buyer is in various countries. For Spain, the average profile of the buyer “is a man between 35 and 45 years old, married and with children, who works as a manager or has a medium-high salary in Russia.”
The Russian portal adds that “many of the buyers have spent their holidays in Spain and wish to acquire a second holiday home looking for sun and sand. Others move to Spain for business or to start a new life attracted by the excellent quality of life and the good value for money of education for their children. During the purchase process, most Russian buyers are guided by recommendations from family and friends who have been in Spain, rather than by advertising”, they specify.
On the other hand, the Russian real estate portal Prian confirmed that before the outbreak of the pandemic, Spain was the first destination preferred by Russian middle-class buyers, ahead of Bulgaria, Turkey, Germany or Italy. The UK, and specifically London, has remained the preferred destination for luxury real estate purchases among the Russian elite for years.
Local real estate agencies dominate the marketing of homes from Russia to Spain. In collaboration with local Spanish agencies, they offer the service mainly to clients from Moscow and Saint Petersburg. The language barrier is very relevant when carrying out any operation with Russian citizens.
Real estate portals such as Tranio, Prian or Gdeetodom offer thousands of housing offers in Spain, especially Alicante, and its influence towards the Murcian coast, Almería and Valencia.
The purchase of houses abroad by the Russian middle class depends a lot on the evolution of the Russian ruble against the euro and the political-economic relations with the European Union, highlights ICEX. “Wages have stabilized, but the purchasing power of the Russian middle class has been affected by inflation and rising product prices. The ruble has suffered a strong devaluation since 2020 as a result of the COVID-19 crisis and, consequently, buying a home in countries like Spain has become increasingly difficult”, the report specifies.
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.