Property Speculation in Russia

[Steveboy]

https://www.xe.com/currencyconverter/convert/?Amount=1&From=GBP&To=RUB

The reason is said to be a reduced demand for oil by China due to factories being closed due to the virus: https://www.theguardian.com/business/2020/mar/08/oil-price-to-plunge-as-much-as-20-as-saudis-vow-to-step-up-production

Not for four years has it been at this rate: https://www.xe.com/currencycharts/?from=GBP&to=RUB&view=5Y

97/£1 at the moment. I'd call that a buy level really. Certainly if it tops 100/£1. I'm thinking of dropping some cash into Roubles. I see an easy 10-15% to be had short term like last time.

Anyone any thoughts?

Go buy a couple of apartments! You can buy several 1 year before completion.. saving yourself 30/40% in any case, by the time the Rouble makes a come back your laughing..

You could jump on a plane the weekend do the deals and head back owning a few places..

Pretty easy really a fair few Brits are already doing this..

[Steveboy]

Steve, that's a great idea as long as you can safely assume that the residential market in Russia remains buoyant and right now? I doubt it!

I can't say about any where else in Russia but St Petersburg yeah I would say it is still buoyant and will continue to be so its a big Uni city for a start Russians send their kids here from all over Russia they all need accommodation.. plus many other things..

I was out on the weekend with several Brits who own and buy up property all the time here lots of properties and not cheap stuff, it is an easy way to make money if you have the cash, maybe Im wrong but I don't think so our new place has already gone up a fair amount in 6 months .. all the apartments on our floor are already sold and many of the building companies work till midnight 6 days a week ..

I don't really care anyway as far as Im concerned there is always a recession or sale or some problem in some part of the world.. just have to do what you have to do..

[AvHdB]

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Steve, that's a great idea as long as you can safely assume that the residential market in Russia remains buoyant and right now? I doubt it!

Steve, that's a great idea as long as you can safely assume that the residential market in Russia remains buoyant and right now? I doubt it!

I can't say about any where else in Russia but St Petersburg yeah I would say it is still buoyant and will continue to be so its a big Uni city for a start Russians send their kids here from all over Russia they all need accommodation.. plus many other things..

I was out on the weekend with several Brits who own and buy up property all the time here lots of properties and not cheap stuff, it is an easy way to make money if you have the cash, maybe Im wrong but I don't think so our new place has already gone up a fair amount in 6 months .. all the apartments on our floor are already sold and many of the building companies work till midnight 6 days a week ..

I don't really care anyway as far as Im concerned there is always a recession or sale or some problem in some part of the world.. just have to do what you have to do..

Curiousity has the better of me. Why do you doubt it Andrew? My guess high-end real estate around the globe is going to take a hit in price. But it might be a very good time to buy into mid-level real estate in an established University city such as St. Petersburg, Boston, Amsterdam or perhaps even Kiev.

[Steveboy]

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Steve, that's a great idea as long as you can safely assume that the residential market in Russia remains buoyant and right now? I doubt it!

Steve, that's a great idea as long as you can safely assume that the residential market in Russia remains buoyant and right now? I doubt it!

I can't say about any where else in Russia but St Petersburg yeah I would say it is still buoyant and will continue to be so its a big Uni city for a start Russians send their kids here from all over Russia they all need accommodation.. plus many other things..

I was out on the weekend with several Brits who own and buy up property all the time here lots of properties and not cheap stuff, it is an easy way to make money if you have the cash, maybe Im wrong but I don't think so our new place has already gone up a fair amount in 6 months .. all the apartments on our floor are already sold and many of the building companies work till midnight 6 days a week ..

I don't really care anyway as far as Im concerned there is always a recession or sale or some problem in some part of the world.. just have to do what you have to do..

Curiousity has the better of me. Why do you doubt it Andrew? My guess high-end real estate around the globe is going to take a hit in price. But it might be a very good time to buy into mid-level real estate in an established University city such as St. Petersburg, Boston, Amsterdam or perhaps even Kiev.

It has never been a better time to buy high end housing in Russia.. one of my friends has about 4 million $ worth of property in Pitter and just purchased a 250 sq meter business class apartment in Sochi ... buy buy buy if you can!!

[andrewfi]

Avhdb, investing is about using your money to make more money. Even better to use other people's money to make you more money.

Real Estate is very illiquid.

So, if we expect prices to fall in RE there's two main  options for investment, as opposed to buying to live in.

1) you buy in a falling market and wait for prices to exceed what you paid.

2) you hold on to your money (invest in more liquid opportunities) until you see that the market has bottomed and buy when prices signal the bottom has passed. Then you wait for prices to rise until you choose to take your profit.

The latter case is much better because buying into a falling market (option 1) ties up your capital and your investment value will fall as the market falls. With option 2, you get a better return, and much faster, because you are buying into the rising market. In the meantime, you can benefit from the other, more liquid but likely lower return options - such as leaving cash on deposit.

Sorry, but this stuff just seems to be self-evident.

Oh, I mentioned liquidity above. Real Estate in a falling market is almost totally illiquid. The time when real estate is at its most liquid is in a rising market. So buying in expectation of falling prices is a fool's errand. What would you do if you needed the money for something else? Not only will you find it hard to sell but you'll have to sell at a lower price than you paid - that's just stupid.

Nobody ever went broke taking a small profit so the sensible move is to wait for prices to finish falling, buy into the rising market and, if you need to sell, once legal and administrative costs are covered by appreciation, you can sell quickly at a profit.

There's one exception to this: if you can buy and then rent out at a price that reliably exceeds your hurdle rate of return. However, that's even less liquid and so carries its own risks, risks that you're very unlikely to be able to price and charge for.

[AvHdB]

Avhdb, investing is about using your money to make more money. Even better to use other people's money to make you more money.

Real Estate is very illiquid.

So, if we expect prices to fall in RE there's two main  options for investment, as opposed to buying to live in.

1) you buy in a falling market and wait for prices to exceed what you paid.

2) you hold on to your money (invest in more liquid opportunities) until you see that the market has bottomed and buy when prices signal the bottom has passed. Then you wait for prices to rise until you choose to take your profit.

The latter case is much better because buying into a falling market (option 1) ties up your capital and your investment value will fall as the market falls. With option 2, you get a better return, and much faster, because you are buying into the rising market. In the meantime, you can benefit from the other, more liquid but likely lower return options - such as leaving cash on deposit.

Sorry, but this stuff just seems to be self-evident.

Oh, I mentioned liquidity above. Real Estate in a falling market is almost totally illiquid. The time when real estate is at its most liquid is in a rising market. So buying in expectation of falling prices is a fool's errand. What would you do if you needed the money for something else? Not only will you find it hard to sell but you'll have to sell at a lower price than you paid - that's just stupid.

Nobody ever went broke taking a small profit so the sensible move is to wait for prices to finish falling, buy into the rising market and, if you need to sell, once legal and administrative costs are covered by appreciation you can sell quickly at a profit.

Andrew, I asked hopefully a simple question about a rather specific market.

Why not just answer one question? Really I hope it is not that challenging.

[andrewfi]

Avhdb. My post answers your question. You wanted to know why I thought investing in Russian Real Estate as the market moves into a downcycle was not a good idea.

One thing, I take it as a given that real estate is going to take a hit, as you clearly do. The reasons, on a macroeconomic level are pretty obvious.
1) Coronavirus is expected to reduce global gdp by at least 1% this year. That's a lot less energy used and a lot less profit made by enterprises globally. Less free money equals uncertainty which adds up to delayed purchasing and thus lower demand and, in turn lower prices for real estate.
2) The Russian state budget is predicated on an average price for oil over the year of about $50 per barrel. The price last time I looked had hit about $27 per barrel. If the price war continues, as I am sure the Russian government expects, then there will be a hit on Russian spending plans, including transfer payments and stimulus spending. That equals less money in people's pockets the rest follows the course of point 1, above.

You got a knowledge based reply. That the reply is of general application supports the underlying validity of my response.

Only a fool would invest in an asset at a higher price today than it will be a little while later. Doing so merely reduces the potential profit when the market moves into an inevitable upward phase.

[Steveboy]

Avhdb. My post answers your question. You wanted to know why I thought investing in Russian Real Estate as the market moves into a downcycle was not a good idea.

You got a knowledge based reply. That the reply is of general application supports the underlying validity of my response.

Only a fool would invest in an asset at a higher price today than it will be a little while later. Doing so merely reduces the potential profit when the market moves into an inevitable upward phase.

Russian property is not going down in a down cycle in St Petersburg.. I can't speak about any where else it is going up all the time.. last time the rouble crashed it made no difference to property prices then and it will not this time.. prices are going up and much is sold many months before completion..

If you have $ to buy property this month will probably be the best time ever .. same thing happened some time back ..no harm will come just sitting on it..

And what ever the case you never loose buying bricks and mortar even if it just sits there. We got two small studios been empty and need fitting out for two years .. costs nothing in monthly bills like $30 each.. I don't think it would be possible in the UK by the time the rates and christ knows what else comes through the letterbox..