New wealth, especially from China and Russia, is having a dramatic impact on European cities and traditional rural havens.
The beaches, resorts and assorted tourist attractions of Europe are undergoing a quiet revolution; a transformation to match the foreign-holiday boom unleashed by cheap package tours in the 1960s. The Russians are no longer coming. They have arrived. And the Chinese are on their way in even bigger numbers.
With its pretty piazzas and ancient churches, Montecatini is a typical Tuscan town. But it is also one where the mayor has proposed that all street signs should be written in Russia’s Cyrillic script, reflecting an unprecedented invasion of pleasure-seekers from the east.
Across the rest of the continent, the picture is the same. Russians, Asians and Arabs are rewriting the rules of European tourism as newly enriched tycoons and middle-class beneficiaries of the world’s booming economies buy properties and take up beach space once jealously guarded by northern Europeans.
Outbound tourists from western Europe and the United States have remained fairly static in recent decades but the numbers going in the other direction are startling. Take China, where a travelling boom has marched in step with the country’s vertiginous economic growth. Five million making foreign visits in 1996 became 60 million by 2010. Over the same period, 12 million visitors from Moscow, St Petersburg and the rest of Russia multiplied into almost 40 million.
As the eurozone (and Britain) wonders where sustained economic growth is going to come from, in the depressing aftermath of the banking crisis, governments overseeing flagging economies in southern Europe are pulling out all the stops to attract non-EU visitors with cash to spare. Countries such as Portugal, Cyprus and Spain have even offered residency permits to foreign house buyers to energise their property markets.
Joannna Leverett of Savills estate agents said there were several trends. “Russians are still buying in the south of France, Tuscany, Turkey. Buyers from the United Arab Emirates, Kuwait and Qatar have started buying in Turkey as well as the south of France. Marbella remains popular. They tend to buy large villas in serviced resorts. Americans continue to buy in Italy and France. Chinese are buying newly built apartments in Paris and London, but here it’s related to education and visas and less about tourism,” she said.
In the context of the eurozone crisis, a knockdown sale of assets appears to have begun. Last week the emir of Qatar bought six Greek islands for £7m, continuing a trend started by King Fahd of Saudi Arabia when he fell in love with Marbella in 1974. The king spent up to two months on the Costa del Sol every summer and he was joined by much of the Saudi court and many other Middle Eastern princes. Each royal visit was said to pump £60m into the local economy.
Marbella is still a magnet for visitors from the Middle East. The Saudi royal family owns the 200-acre Nahda complex that includes a clinic, a mosque and a replica of the White House, among other palaces. Sheikh Abdullah al-Thani of Qatar owns Málaga football club. But Russian wealth has become a bigger player in recent years.
Jelena Cvjetkovic, also of Savills, said that wealthy Russians were still looking for “trophy assets” and last year one had bought a private property for more than £40m in St Tropez. The latest fashion, she said, was for the very wealthy to add a countryside property to their seaside property. “We are seeing a surge of interest in Tuscany. They already have a seaside property and now they want a countryside property with a vineyard. A lot of these sales are carried out privately, but I have heard through lawyers of many going for £30m-£40m,” she said.
Meanwhile, the emerging Russian middle class – the merely well-off as opposed to the super-rich – are transforming the mass tourism market and adding to their own, more modest property portfolios. In 2011 Russians were the largest group of visitors to Europe, with 24.6 million, followed by the US with 20.6 million. Next is China with 4.7 million, Canada with 4.2 million and Japan with 4.1 million.
Many of those visitors are also buying. Mike Bridges, editor of International Residences, a Russian property magazine, said: “The majority of Russian buyers are now from the middle classes with an average budget of €500,000. They normally don’t need mortgages and pay cash. The Russian economy is doing very well, and the middle class is immense.”
As a result, large Russian communities are emerging in north-east Spain, Montenegro and Cyprus where there are Russian shops and services on offer. Bridges said: “Russians are looking for places with direct flights to St Petersburg and Moscow and they need a lot of interpreters at the other end. Developers normally need Russian-speaking staff. Bulgaria and Montenegro are popular because of the linguistic similarities, but Spain has become very popular because of the cheap property prices.”
Russians now account for 9% of the property market on the Costa del Sol, ahead of the Germans on 7%, but still way behind the British on 35%.
The new influx has had its darker side, amid accusations of mafia activity and corruption. In Cyprus, a court in 2010 bailed a Russian accused of spying in the US, giving him the opportunity to escape. In Spain, Russian businessmen and Spanish politicians have been accused of collaborating in corruption.
But as the spending capacity of the new powerhouses of the global economy inexorably grows, the new kids on the block will become more numerous. And if Russians are the present, the Chinese are the future. Young Chinese people are steadily moving from organised group travel to independent travel, making reservations and buying tickets on the internet and going beyond the major tourist attractions.
The UN has predicted 100 million Chinese tourists will travel somewhere in 2020. Europe, or at least the continent’s most alluring spots, are set to become a playground for the new rich of the east. It’s all a long way from the Costa Brava in 1970.
Scramble for a continent
The British climate does not lend itself to non-European sunseekers, but the race for prime property grows ever more intense. When the Malaysian owners of the Battersea power station development released the first batch of 600 apartments for sale in January they were snapped up in two days.
“We’re in the eye of the storm right now,” says James Moran, sales director at Winkworth’s South Kensington office. “Sales are up 60% on last year and we’re seeing traditional markets, such as the French and Italians, being replaced with buyers from Russia, the Middle East and Asia.”
The Arab spring has also resulted in a surge in demand from Egypt, Libya and Iran as buyers look for a safe haven for their money.
The Russians are still buying holiday homes on the French Riviera, but they are now being joined by sun-starved Scandinavians and cash-rich Egyptians. The “Golden Triangle” – Cannes, Cap d’Antibes, Châteauneuf – remains popular. Fredrik Lilloe, of Estate Net Prestige-Knight Frank, says his agency is seeing buyers from the Middle East, particularly Egyptians. The Chinese have shown great interest in Burgundy vineyards, but in general they do not live on the estate. They get someone to run it and ship the wine to China.
Mark Harvey, of the French team at Knight Frank in London, said Paris was popular with Middle Eastern and American buyers as well as Russians and Italians.
President François Hollande’s threat to impose higher taxes has sent many buyers out of the country to seek “safe-haven” investments in places such as Monaco and Switzerland.
With the collapse of the housing market after the residential property bubble burst five years ago, buyers of all nationalities have been scarce – though Russian president Vladimir Putin was among those reportedly snooping around Marbella’s exclusive La Zabaleta luxury estate last year.
The government is so desperate to sell off the estimated 1m empty new-build properties that it plans to change visa laws to allow non-Europeans who spend more than €160,000 (£140,000) on a house to live in the country.
Secretary of state for commerce Jaime García-Legaz said the move was specifically aimed at attracting wealthy Russian and Chinese buyers. With prices down more than 30%, Russians overtook Germans last year as the second biggest buyers of property – after Britons – on the southern Costa del Sol. In eastern Alicante they snap up the more expensive properties.
Chinese buyers, meanwhile, are also looking at far bigger investments. A Chinese consortium is considering a 4.6 square mile site on the outskirts of Madrid, where it plans to build a new finance centre.
All of that pales, however, beside the site at Alcorcón, near Madrid, where US billionaire Sheldon Adelson plans to build a vast complex, known as EuroVegas.
Russian oligarchs and their bottle blonde wives have been a common sight on Sardinia’s Emerald Coast for years now, propping up the bar at Flavio Briatore’s Billionaire nightclub. The Russian tide has since hit the mainland, with the mayor of Tuscan resort Forte dei Marmi growing so alarmed by the spiralling house prices he decided to set aside new homes for locals only.
Further inland, Svetlana Medvedeva, the wife of Russia’s prime minister, Dmitry Medvedev, took over an entire spa hotel in Montecatini Terme last year with her 30-strong entourage, prompting the mayor to suggest he would put up Russian street signs in the hope Medvedeva’s arrival would lead a boom in high spending Russians.
Gulf Arabs are thick on the ground and expected to swell in numbers after the Qatar royal family signed a deal last year to buy out the American owner of the Emerald Coast – a stunning stretch of Sardinian coast first developed by the Aga Khan. Plans for large-scale development by the Qataris have been rumoured, prompting fears that sleepy coves will be crowded by new villas catering to Gulf Arabs.
Italian hoteliers are meanwhile desperate to figure out how they can grab a slice of the growing Chinese tourism business, from offering the right tea to complying with Feng Shui rules.
Their fear is that Chinese entrepreneurs will buy up hotels to accommodate Chinese tourists, shutting out Italians from the goldrush. Milan already boasts its own, all-Chinese hotel, the Huaxia.
Indian tourists are now a common site on the streets of Rome, displacing the traditional mobs of baseball capped, camera toting Japanese.
Germany is not a country accustomed to foreign investors. In a characteristically blunt commentary the tabloid Bild recently lamented that “Russians, Chinese, Indians and Arabs” were “stuffing their pockets” with “German bargains”.
“And they have even more of the best cuts of meat in their sights” Increasing numbers of shipyards on the north German coast have found themselves in foreign hands, much to the disdain of many Germans who feel the shipyard sellouts are just the tip of a much more widespread foreign takeover of corporate Germany that leaves Europe’s biggest economy exposed to speculation and short-term visions
When it was part of Yugoslavia, Montenegro was the favourite destination for the Serbian middle classes. The Bay of Kotor was the last home of the Yugoslav navy and the resort of Herceg Novi was known as little Belgrade for the number of tourists that came every summer from the Serbian capital.
Now Russians almost equal the number of Serbians who travel to Montenegro but are greater buyers of property. !e Russian newspaper Novaya Gazeta reported last year that 40% of Montenegrin property was owned by Russians. Russian oligarch Oleg Deripaska is the owner of Montenegro’s aluminium plant, the country’s biggest industry.
After three years of economic crisis Greece is beginning to attract investors. The emir of Qatar confirmed last week that the debt choked country is a buyer’s market, picking up six islands in the Ionian Sea for a mere £7m.
“Properties have lost 50% of their value since 2007 and foreigners who smell an opportunity are calling,” says Christos Vergos, of the Athens branch of Remax. Bargains are such that Qatar’s oil-rich monarch, Hamad bin Khalifa al-!ani, wants to buy 12 more islands off the coast of Ithaca for the purpose of building summer palaces for each of his 24 children.
Property specialists say hundreds of cash-rich Lebanese and Israelis have snapped up holiday homes on the island of Mykonos.
“They are the people with cash in hand who can get a deal,” says Roi Deldimou who represents Beauchamp estates on the island. Turkish investors are also moving in, cutting deals to snap up hotels in the historic heart of recession-ravaged Athens, where the cash-strapped state, desperate to meet the demands of international lenders, is also offloading properties.
The Chinese, who recently bought the operating rights to the port of Pireaus, are taking advantage of depressed prices to purchase property around the capital.
Russians have led Greece’s wave of new investors. Oligarchs have acquired luxurious homes along the Athenian Riviera following Roman Abramovich’s acquisition of a huge estate on Corfu.
The island embodies the drive by non-Europeans to invest in the European Union. With the collapse of its British second homes market, the Chinese have moved in, buying retreats at a record rate.
“Since November last year there have been around 700 sales to Chinese investors,” says Peter Christofi, overseas marketing manager at Antonis Louizou and Associates.
The promise of permanent residency visas, procured with properties over €300,000, has spurred all the interest. “In our experience the attraction is all based on this law involving residence visas and has little to do with Cyprus itself,” said Christofi.
With its low taxes and abundant sunshine, the island has also been a magnet for Russians almost since the collapse of the Soviet empire.
Based in Limassol, the 40,000-strong community has made huge property investments.
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