Russian Buyers Eye Prime Central London, Again, as Home Prices Fall, Ruble Up

Russians accounted for nearly one in five super-prime home sales in the third quarter of 2018

Beckie Strum,  Mansion Global, The Wall Street Journal

Image from article: A view of posh Belgravia, a prime neighborhood for wealthy Russians living in London

Russian home buyers in London—formerly a cornerstone of the city’s ultra-luxury sales—have renewed activity this year, partly bolstered by an improved exchange rate.

In the third quarter of 2018, nearly one in five London home deals over £10 million (US$12.762 million) sold to a Russian national, including residents of the U.K. and overseas buyers, according to data that real estate firm Knight Frank prepared for Mansion Global. It’s a striking rise in the proportion of Russian buyers, given they accounted for just 6% of £10 million-plus sales during the same three months in 2016.

Russian activity in the super-prime London market dropped off significantly in 2016 amid a perfect storm of political and economic shifts: the U.K. raised property purchase tax on secondary and vacation homes; Russia, in the throes of a financial crisis, clamped down on government officials buying property abroad; and then, of course, Brexit.

"The volume of Russian buyers changed dramatically," said Jonathan Hewlett, head of London residential at Savills. "Some of it is down to government restrictions, some people have been unable to move money out the Russian economy."

Add to that the sharp crash in the value of Russian currency, which hit its depths in early 2016. By that time, buyers with rubles to burn found their money had its weakest purchasing power in the U.K. in at least a decade, with one ruble equivalent to only 0.009 British pound, according to historical exchange rates.

In the fourth quarters of 2016 and 2017, no Russian buyers purchased in the super-prime London market—homes of £10 million or more—according to the data from Knight Frank.

So what’s changed in 2018?

The recent uptick in Russian activity highlights the economic scenario of a slightly stronger ruble—which today is 30% higher than its lowest point in 2016—and opportunistic buyers taking advantage of a depressed London housing market, said Katya Zenkovich, a partner at Knight Frank.

As of Friday, one ruble was equal to to 0.012 British pound.

While the number of Russians active in the market is still subdued compared to the early 2010s, those who are transacting have made big purchases.

"Technically it’s been the best year for me in the value of sales," said Ms. Zenkovich, who deals specifically with Russian clients. "We reached our sales target in six months."

Recent research from brokerage Hamptons International also highlighted an uptick in Russian nationals buying homes in London and attributed it to the improved exchange rate.

In the first half of 2018, a home cost an average 19% less for a ruble buyer than it did two years ago on the currency exchange alone, according to the report.

"A £1 million home in H1 2016 now effectively costs a Russian buyer £812,230—a £187,770 discount," according to the brokerage. The research team at Hamptons International also found the proportion of home sales in prime central London to Russians, at all price points, rose 2% in the first half of 2018 compared to a year ago.

Lilia Sheffler-Sennowa is one such Russian expatriate hunting for a new home in London this year. She and her family bought a newly renovated four-story house in the city around 2014, and now they hope to move to a luxury apartment with fewer stairs, more building amenities and better infrastructure, she said.

"We would like to sell this house and buy a new lateral apartment," said Ms. Sheffler-Sennowa, creative and managing producer for Russian Roulette Magazine, which caters to wealthy Russian speakers living or visiting London.

"When it’s such a serious matter like buying a new home, there are always a few reasons," she said. In her case, those include price negotiability in the London market these days, the ruble’s better buying power and their personal desire to move.

Many Russian buyers in the U.K., Ms. Sheffler-Sennowa included, move there for work and to educate their children at London's top schools.

During her search, she toured a barely lived-in, 200-square-meter penthouse in posh Belgravia that a Russian family bought for their child to live in while attending school.

"He never stayed there. It’s fully renovated with the best materials, and maybe the guy lived there one night," said Ms. Sheffler-Sennowa, who’s still house hunting.

"Of course the situation in the market with Brexit is a little unpredictable," she said. "But if you’re committed to living in London and building a home here, it’s a good time."