The ongoing Ukraine conflict has reverberated in the US real estate market with serious consequences. Evidence suggests that wealthy Russians who have a big stake in the luxury real estate market in Miami, New York and elsewhere in the US are pulling out of their commitment to invest in these places.
Wealthy Russians purchase most of the premium priced condominiums in the US. For example, the billionaire Dmitriy Rybolovlev paid a record-breaking $88 million for a condominium in the US for his daughter. Russians have long used US real estate as a shelter for their cash.
Russians like Dmitriy represent a large chunk of the opulent real estate market. The US has levied sanctions on these affluent Russians in a bid to de-escalate the crises in the Ukraine. This has sparked a furious backlash from these wealthy Russians who are cancelling their huge investments in the US real estate market.
A real estate agent with a client who is a member of the Russian parliament said that he received an email from his client cancelling the $25-$52 million purchase order for various properties in the US. The client said, “I am sorry. I’m pulling out.”
Chinese and Russians are the most active investors in real estate in New York. These foreigners have a 40% stake in the existing real estate properties in the Big Apple and purchase around 50% of the new construction.
While the recent US sanctions are against wealthy and influential members of the Russian state Duma; most Russians feel that it is an attack on their integrity. Moscow is ripe with anti-American propaganda right now and most Russians full of jingoist fervor are now turning away from investing in the real estate market.
So how will the frosty relationship with Russia and Washington change the real estate scenario? A real estate expert advocates that if these sanctions remain transitory local investors will probably fill the void created by the freeze in purchase of US real estate properties.
However, if these sanctions continue for a long time, it might have grave consequences in the US real estate market. The prices of real estate properties in the US will see a sharp decline with great repercussions on other industries similar to those felt during the 2008 real estate fiasco.
Although the current scenario has not reached a “crises” level, the strained US/Russia relationship is showing signs of escalating further that will impact the lives of not only ordinary Americans but also those countries whose economies depend on the stability of American financial and real estate market.
Source: www.finance.yahoo.com
