00 BUSINESS XxxxxxxxxxxxxxxYOUR SHOUT 16 | LETTERS
www.opp.org.uk | XXXX 2012 What do you think?
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Look beyond the headlines and tap into Russia’s obvious investment potential Dear Editor,
Whilst Russia is still regarded by many as an economy dominated by the oil and gas sector, it is actually domestic consumption which contributes 63% of their economic output and is the main driver of growth. Investors and businesses looking to gain from Russia’s rising infl uence on global markets would do well to consider a few points. Firstly, Russia is a “middle income” country. Over 68% of Russians are defi ned
as “middle class” according to The World Bank’s measure, by far the largest of the BRICs which include Brazil (31%), China (13%) and India (3%). According to Goldman Sachs’ projections, Russia will maintain the highest GDP per capita of all of the BRICs in the coming decade, exceeding China and India by some distance between now and 2050. Secondly, Russian consumers have no signifi cant debt. The average mortgage debt in Russia is negligible (€130 per person) compared with €12,370 in the Eurozone and €26,040 in the USA. While there has been a reluctance amongst Russians to borrow over the past two decades, with interest rates at 16% p.a. or over, this is changing with interest rates declining to more aff ordable levels. For example, SberBank, Russia’s largest retail bank, now off ers an “888” mortgage loan package which is becoming very popular (8% p.a. fi xed home loan rate for 8 years with approval within 8 days), and is likely to trigger more domestic spending on a wide range of luxury goods and other domestic items.
Best of the Blogs China property giant’s foreign ‘tryout’ By Esther Fung at
wsj.com
In September 2010, property company China Vanke told The Wall Street Journal that it had no plans to expand abroad. In May, it said it is taking a 74% stake in Hong Kong-listed Winsor Properties Holdings, which has residential, offi ce and warehouse projects in Hong Kong
and Singapore. The new interest in markets outside China raises a question: Is Vanke hinting that its view of the domestic Chinese market is souring? In a statement, Vanke said “there is still good potential for development in the Chinese property market in the coming 15 to 20 years.”
“In the long term,” it added, “overseas expansion is mainly a ‘tryout’ for Vanke, not its main development direction.”
Tan Huajie, Vanke’s board secretary, said in a statement late Monday that the 1.08 billionHong Kong dollar (US$139 million) investment is an attempt to internationalize the company as part of its long-term development. Tan added that the latest deal will pave the way for future deals.
Recent offi cial data showed the local real-estate market continues to tread
water, to the dismay of property companies and analysts. Residential investment in April is almost fl at year-on-year, and construction starts and activity have declined over the same period, following the government’s two-year eff ort to defl ate the housing bubble. Besides a continued decline in residential sales since October, land sales have plunged, with developers being more cautious of where they would park their money. While it is hard to say if other Chinese property developers would follow Vanke, real estate types are now less exuberant about China’s property market prospects than they were in the past. That said, Vanke isn’t stepping too far from China. The property markets in Hong Kong and Singaporeare infl uenced by the Chinese economy and Chinese buyers, and are also impacted by government property cooling measures.
Thirdly, Russian incomes have risen signifi cantly. The average monthly income
is now more than $1,000 per month, and with the highest rate of income tax at only 13% and very little debt to service, Russians have very high levels of disposable income. Not surprisingly, Russia now leads the whole of Europe in the sale of key consumables and retail sales in Moscow now exceed Paris and London. By 2025 the consumer market in Russia, which is now approx. 142 million, is expected to be larger than Germany’s. Fourthly, Russians are travelling and spending money overseas. 2008 was by far the best year ever for Russia’s tourism industry with 11.3 million Russians taking vacations abroad. After a short dip caused by the global fi nancial crisis, this fi gure is expected to triple again this year. Russians are also amongst the world’s largest spenders. Travel operators report
that Russians spend on average US$1,000 per head on their holidays and 72% of tourists pay for their holidays in
cash.Don’t be misled by the media’s obsession with the re-election of Putin as President. There has never been a better time to invest in Russia and the time to do it is when everyone else is negative.
David Thomas,
www.davidthomas.asia David Thomas is a BRIC expert well-known in the Asia Pacifi c region for his experience in identifying, building and facilitating business and investment relationships between developed and emerging countries. For more information, please go to
www.davidthomas.asia
Best of the Blogs Slowdown won’t trouble Turkey
By Les Calvert at
property-abroad.com Based on the government’s actions, it is likely that the economy in Turkey is slowing down. The government stated that it is looking forward to soft landing on a 4% growth. This will most likely give it the chance to pay attention to taking actions for strengthening the economy,
following a few incredible years. Some believe that nothing will be provided as a cushion. However, the real estate sector need not be concerned about this as the parliament in Turkey adopted a bill that permits foreign investors to purchase property in Turkey. The bill, which was long-awaited, will allow them to buy additional land without requiring them to take special permission for it. The old law had a reciprocity clause base on which citizens from 89 nations
that did not permit those from Turkey to purchase property, were not allowed to buy in the country. The new bill does not have the clause, opening the doors to buyers from several nations. However, the government clarifi ed that buyers from all countries will not be accepted, and that it is yet to decide which of them will be allowed to own property in Turkey. Real estate agents are quite certain that Arab countries, which were banned till the new law was introduced, will be allowed to buy in Turkey. This confi dence is in light of the fact that Arab countries are not competing with Turkey for investment or tourism as the Arab Spring - the uprising in North Africa and the Middle East - has made its countries (some say - ed) quite unsafe for holidays. Arabs, go to other Muslim countries if the conditions in the Arab countries are not favorable - as they are now. This makes Turkey, a Muslim country, one of the preferred options for Arabs to holiday in. In addition, Turkey has inked several deals for visa-free access in the eighteen months leading to the Arab Spring. Some of the deals were with Arab countries. This has made Turkey one of the best destinations for Arabs looking to holiday.
www.opp.org.uk | JUNE 2012
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