Italy is battling France to become the new playground for Russia’s billionaires as Europe’s luxury destinations seek buyers of property and companies to weather the debt crisis.
“It’s incredible stuff,” Riccardo Monti, head of the Italian Trade Agency, said last month on a promotional tour of Russia, touting a palace for sale in Venice’s Grand Canal and a villa that once belonged to the King of Naples. “Trophy assets are really loved by big Russian entrepreneurs.”
The agency has sent him to Russia three times since May, while envoys from Nice in France were there last month. Both seek investments by Russians, whose foreign-property purchases more than doubled since 2007 to $12 billion, even as values risk falling due to a worsening economy. The 10 richest Russians are worth a combined $150 billion, Bloomberg estimates.
“Purchases are going at full steam,” said Georgy Kachamzov, head of research at Moscow-based Tranio.ru, which surveys more than 200 Russian brokers selling real estate in 43 countries. “The most popular locations for elite residences are London, followed by the Cote D’Azur. Then comes Spanish Marbella, the Italian Riviera and Tuscany.”
Italy, mired in a fourth recession since 2001, has turned to real estate sales to help cut the euro area’s second-biggest debt burden after Greece. The government has targeted for sale 46,000 state properties valued at a combined 55 billion euros.
Tom Cruise
Among them are medieval Orsini Castle outside Rome, built for a pope and the site of the wedding of Hollywood actors Tom Cruise and Katie Holmes, and a Sicilian villa redone in Oriental style by Ferdinand IV of Naples in the 19th century.
Scenari Immobiliari, an Italian property research company, forecasts a record 4,600 property transactions in Italy by foreigners this year, valued at 2.1 billion euros ($2.7 billion). Russians, who made up 2 percent of buyers in 2005, held a 13 percent share in the first half of this year after Britons and Germans.
“The opportunity is there now with the crisis,” Monti of the trade agency said. “Foreign investors want to buy cheap and they know that at one point they have to enter the market.”
While more Russians have purchased property in Italy than France, the French Riviera has drawn Russia’s biggest buyers, such as Roman Abramovich, who has a residence in Cap D’Antibes.
Nice, once a holiday spot for the Tsars, is seeking to leverage that history as it competes for Russian cash. Two years ago, the city reopened a luxury railway from Moscow that had run from the imperial capital St. Petersburg from 1864 until the Bolshevik Revolution in 1914.
Russian Visitors
About 250,000 Russian visited Nice last year 2011, up 15 percent on the previous year, and they were the third-biggest foreign spenders although in fifth place in terms of numbers, according to the city’s tourism office.
“Many of the Russian tourists we welcome are major businessmen who run big companies and want to establish themselves overseas,” said Rudy Salles, head of Nice’s tourism office and deputy mayor. He recently visited Moscow with a delegation of hotel owners and investment-promotion officials.
Even with France’s economy in its fifth consecutive quarter without growth, luxury real estate prices have held steady since dipping slightly between 2008 and 2009, according to the website Priximmo, which tracks the French market.
“Prices on the French Riviera continue to remain stable,” Maria McLean of Burger Sotheby’s in St. Tropez said in an e- mail. The Mediterranean climate “and of course its luxury lifestyle” are attracting buyers mainly from “eastern and northern Europe.”
Possible Risks
Buying luxury properties isn’t without risk, however. Real estate prices in exclusive Italian resorts such as Capri fell an average 4.4 percent in the year through September, according to Bologna-based research institute Nomisma.
There’s also the threat of tax increases as euro-area governments enact austerity measures to tackle the debt crisis, as well as legal disputes. Russian tycoon Mikhail Prokhorov had to forfeit a 39 million-euro deposit in 2010 after failing to conclude a deal to pay 390 million euros for a mansion near Nice built for Belgian King Leopold II.
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