Investing in Sochi Сommercial Real Estate

February 13th, 2014 by Alisa Sava

The long-expected Sochi Winter Olympic Games’ officially began last Friday. These Games are expected to be one of the most expensive in the history.

Investing in Sochi Сommercial Real Estate

Investing in Sochi Сommercial Real Estate

The astronomical sum of money spent on the organization will hardly influence the overall economic situation in Russia. However, it may create a longstanding legacy for the city of Sochi, attracting new investors in the region.

 

A year round resort city, Sochi is located on the Black Sea coast at the foot of Caucasus Mountains. It features a warm climate, beautiful nature and over 4,800,000 visitors during summer and winter seasons.

 

The biggest challenge the Russian Government faced while preparing for Olympic Games was to convince the International Olympic Committee that Russia is able to provide the vision and proper infrastructure to host this large-scale event. Another goal that arose was to promote Sochi as a world-class winter sports resort to attract as many visitors as possible.

 

And Russia succeeded. A new infrastructure, grand stadium, skating arena and numerous resident facilities for the city’s guests have been organized on a higher level. It has been estimated that the cost spent on Olympic Games’ organization is around $50 billion. Much of this spending was used to turn a tropical Black Sea resort into a winter sports destination. This was a difficult task, as Sochi rarely experiences temperature below three degree Celsius.

Iceberg skating palace

Iceberg skating palace

Olympic Games Effecting Commercial Real Estate in Sochi

 

According to the European Bank for Reconstruction and Development’s Report (EBRD), these Olympic Games won’t influence the current economic situation in Russia. However, they will positively effect Sochi and the Krasnodar region attracting businesses and foreign investors to this area in the future.

 

The previous Olympic Games’ experience shows that all the hosting countries, including Vancouver and Atlanta, have benefited from this event. But, some skeptics think that such economic boost is possible only in developed countries. However, a lot has been already done to improve local Sochi infrastructure, upgrade travel links (airports, train stations, roads), create new hotels and conference centers and provide necessary high-quality services (restaurant, hospitality facilities, etc.) for thousands of visitors.

 

“Sochi built or refurbished 43,000 new hotel rooms, and created a new highway and rail system to ferry stadium-size volumes of visitors. It erected a gondola system to carry spectators to mountain venues that won’t see much use after next week,” the Wall Street Journal reported

New accommodation

New accommodation

Therefore, the resulting new accommodation and improved transport infrastructure will provide a modern state-of-the-art tourism environment and generate investors’ interest in Sochi.

 

According to the EBRD report, once the Olympics come to close, the athletes quarters will be turned into the affordable houses for local residence which will help contribute to the resolution of the housing problem in the region. Moreover, a great tourist boom is expected during the first post-Games seasons.

 

“All Olympic host cities have seen growth in the number of visitors… We are expecting tourist arrivals to grow by more than 30% in the first year,” said Valery Sychev, director of a spa chain.

 

The major racing championship “Formula 1”and the 2018 World Cup will also stimulate the demand for further construction development. As a center-focus of high-profile sporting events Sochi is expected to continue to experience a regular tourist influx as well as a steady income to the regional budget.

Formula 1

Formula 1

Today, the real estate market in Sochi is at the initial phase of development. The land prices are stably growing in Sochi from year to year, for the economy class housing in particular. On the contrary, the luxury sector experiences a sharp price reduction. The construction of many elite residence complexes have been frozen for an indefinite period.

Potential Risks

 

Many real estate experts think that Sochi is overbuilt, especially in terms of shopping malls and entertainment centers. According to Bloomberg News, developers have added around 43 million square feet of housing and hotel space.

New establishments

New establishments

The high prices in the real estate sector in Sochi are another problem. This is the reason why Europeans are reluctant to buy apartments. Apartment prices jumped about 50 percent in 2007 when Sochi won the bid for the Olympics. Today, the tendency persists.

 

“Sochi prices are at a peak and won’t grow substantially, so the property is not interesting as an investment for the moment,” notes Elena Yurgeneva, Knight Frank Russia & CIS elite property department head.

 

Russian banks intend to stabilize the situation in the real estate market by bringing down mortgage rates, currently at 12,5 %.

 

“This could help raise attractiveness and demand to sell residences in Sochi,” said Evgeniya Starkova, marketing director of MR Group, a Sochi real estate developer.

The Most Attractive Real Estate Assets in Sochi 2014

 

There are a number of newly-built buildings in Sochi waiting for their owners. The most attractive real estate is located in a ski resort Krasnaya Polyana. Being a pearl of Sochi, Krasnaya Polyana has been chosen to hold the Winter Olympic Games in 2014. Today, Krasnaya Polyana offers a lot of hotels, chalets and restaurants. Before the Olympics, a new railway line was built to improve a transportation problem and connect this area with the airport.

The Most Attractive Real Estate Assets

The Most Attractive Real Estate Assets

The Best Residential Complexes to Invest In

Residential Complex “Winter Palace”

 

This 6-storeyed residential complex is located in the ski resort Krasnay Plyana in 37 km from the airport. The neighborhood has a well-developed infrastructure and transport connections. Climatic characteristics, high-quality service and landscape design create perfect conditions for comfortable living and pastime. The complex offers unfurnished apartments, but there are also ready interiors in different styles – from classic to modern.

 

The required price is 130.000 to 160.000 rub for sq.m.

 

Residential Complex “Fort Vidny”

 

The building is situated in the ecological area of Sochi, just in 20 km from the airport and 500 m from public transport stop. All the apartments are already furnished, and half of them offer a fascinating view of the sea. The territory around the building is fenced and guarded. There is also provided a children’s playground, cozy square and well-equipped parking.

 

The required price is 64.438 to 74.136 rub for sq.m.

 

Residential Complex “Soned Hill”

 

“Soned Hill” is located in popular mountain resort Krasnaya Polyana, in a short distance from federal road and 5-7 minutes from ski trails. This five-storeyed building is designed in alpine design and consists of a basement, three residential floors and the attic. All the apartments offer a view of the surrounding mountains and encompass a pool, playground, fountains and a waterfall create a perfect environment for recreation and living.

 

The required price is around 75.000 rub. for sq.m.

Residential Complex “Millennium Tower”

 

This 23-storeyed building is located in the center of apartment houses – “Golden Triangle.” All apartments on the top floor have open terraces with magnificent views of the Black sea coast and the Caucasian mountains. There is also a fitness-center, hairdressing salon, Internet-club, leisure facilitates on the ground floor of the house as well as a spacious duplex penthouse on the last floor.

 

The required price is from 136.968 to 300.000 rub. for sq.m.

 

Residential Complex “Ideal House”

 

This elite residential complex has been designed by a well-known architect V.M. Ginzburg. It is located in a beautiful area on the Southwest slope of Bytkha mountain. The house is a part of club system. From each apartment there opens a magnificent view of the sea.

 

The required price is from 100.000 to 195.000 rub. for sq.m.

 

Hosting the 2014 Winter Olympic Games has become a perfect chance for Russia to restore its reputation. Sochi has undergone considerable changes, turning into a gigantic building site and perspective investment area. Despite the lack of stability and high inflation rates in the country, Sochi has taken the path to revitalization and has a chance to become a year-round tourist destination and major European winter sports center.

 

 

Alisa Sava

Alisa Sava is an experienced journalist and translator of Spanish and English languages. She has studied in Spain and Poland. In her articles she is focusing on the financial analytics and real estate perspectives. She loves travelling and is passionate for Basque culture and baking.

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