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City Realty » Apartments for sale » Useful information about purchasing real estate Useful information and advice about purchasing real estate in Russia
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Question: What are the current market prices for property in the center of St. Petersburg?
The market price for apartments in the center of St. Petersburg is extremely dependent on the following factors:
- Location - particular street, view onto water or historical monuments
- Entrance of building - entrance directly from street vs. entrance through a courtyard (dvor), type of stairwell (main stairwell vs. servants' stairwell)
- Direction that windows face - windows facing the street vs. windows facing the courtyard vs. windows facing both sides
- Type of apartment ownership - one owner vs. multiple owners vs. communal apartment
- Level of renovation - non renovated vs. Western renovated
- Building condition - condition of utility connections (piping, electricity) and general building structure
To give you a better idea of the market, a few examples are presented below
- $1200 - $1500 per square meter: Communal apartment in city center on a typical residential street, most likely with windows facing the courtyard, non renovated (quite large renovation would need to be completed), difficult ownership structure. Transaction period could take between 3 months and 8 months.
- $1500 - $1800 per square meter: Non renovated apartment in city center. Windows would most likely face the courtyard, entrance most likely from the courtyard, street would most likely be very residential and not one of the "prestigious" streets of St. Petersburg. Most likely private owner.
- $2000 per square meter: Non renovated apartment in city center on one of the better streets, windows most likely facing the street (if on a typical center street) and courtyard (if on a prestigious street), entrance from the street. Could also be a renovated apartment on a typical residential street.
- $2500 - $3000 per square meter: Non renovated or renovated apartment on one of the prestigious streets of St. Petersburg with good street entrance, good view, windows facing street, historical building. Most likely one owner.
- $3000 + per square meter: A truly unique property in center with great view
Question: What are the major differences between purchasing a property in Russia vs. in the USA or Western European countries?
- In Russia, the information from real estate databases or private advertisements often contains unchecked and/or unauthenticated data. For example, an agent may put an apartment into a public listing based only on 1 phone call from a seller.
- The advertised property is not ready for a quick transaction usually due a number of reasons including:
- Necessary title documents are not ready
- Legal problems associated with the particular property may not be resolved
- The transaction may be rather complex (see section below on communal apartments)
- There are up to 500 registered real estate agencies, approximately 100 building companies with their own sale divisions and many freelance middlemen working on the St. Petersburg market. Every agency has its own small base of properties for sale. There is a tendency for the agencies to put the interests of the seller ahead of the buyer due to commission arrangements.
- It is highly probably that more than 1 agency will be involved in a transaction. There will be an agency representing the seller, usually one representing the buyer and if the seller requires not only cash, but property as well to complete the deal, there may be a 3rd agency involved - the representative of the property that the seller is interested in.
- There are no standard rules for Russian real estate agencies. Every agency has its own set of standard service agreements for the buyer to sign. Few agencies have English speaking specialists and few will offer contracts and other documents in languages other than Russian.
- Russian real estate agencies rarely divide commissions between agencies representing the seller and the buyer for property transactions.
- There are some additional property rights for Russian citizens such as "an individual's local residency registration" (propiska). In other words, a person may have the right to occupy a property without actually owning the property.
- There are many communal apartments in the city. Communal apartments are single apartments with a number of co-owners and/or occupants, each of them has a special right to occupy their own, separate rooms.(see section on communal apartments)
- Mortgage programs are not well developed at present. In 80% of real estate transactions, the owner (seller) cannot move into another apartment until he sells his own apartment. Usually this person does not have a place to live between the two transactions, therefore, he will already require a place to move into on the day that the title passes from the seller to buyer. This type of transaction is called a vstrechnaya pokupka (purchase where 2 ends meet). If a buyer would like to purchase a communal apartment, all or most of the owners usually require other property in order to agree to move out of their current apartment, this type of very complex transaction is called a rasselenie (a move out).
Question: Can foreigners legally purchase apartments in Russia and do they have the same property ownership rights as Russian citizens?
Yes, there are no restrictions on foreigners purchasing residential property in Russia, and foreigners have the same rights when it comes to property ownership as Russian citizens.
Question: What are the key things to look for when inspecting a property for purchase?
It depends on the particular purpose of the purchase (to live in full time, occasional occupancy, to rent out as an investment, to make an investment for the short or long term). Regardless, the most important points to look for are as follows:
- Location (near to historic buildings or monuments, metro stations, parks, river or canal embankments, shopping centers, kindergartens and schools)
- Building condition (old building - with or without capital renovation, see section on capital renovation, a building after reconstruction, the material with which the building is constructed, i.e. bricks, concrete panels, etc., the year when the building was built or renovated, the condition of the attic and cellar, the condition of the pipes and electric lines, etc.)
- Entrance (stairwell condition and entrance. Entrance from the street or from a clean, renovated courtyard are preferred)
- View from the windows (views onto water, historical monuments or onto a beautiful building are highly rated and cost more), noise factor. Sometimes it is better when the windows face a quiet, green courtyard. Prices are usually lower if the windows face a dark, small courtyard.
- Apartment layout (preferred when windows face 2 sides of the building), the type of bathroom (separate or combined, the price is lower if there is no bathtub in place), ceiling height.
- Floor (in general, the ground and last floors are less expensive, but if it is possible to use the ground floors for commercial purposes the price may actually be higher than for other floors).
- Apartment condition (renovated or not renovated)
- Safety (security, parking)
- How soon the property can be purchased
- Legal transparency
The more positive points the property has to it, the higher the price.
Question: What type of research must be done to determine if the apartment is completely legal and has no problems associated with it?
- A check to match the apartment characteristics to the ones stated in the apartment's legal documents.
- A check on the property rights of the owners and the owners history and apartment history.
- An inspection to determine if there children registered at the property that may have special issues relating to moving them out - this is rather complex and results from Russia's strong social laws.
- A check made of the tenant's local registration rights to the apartments propiska.
- Checks made regarding spousal approval of the sale.
- There are quite a few more issues that may also have to be inspected. The list above contains the most common checks conducted.
Question: What is a communal apartment and what is the process for purchasing one?
Communal apartments are a left over facet of Soviet life. They are usually large apartments built before the revolution in which a few families live together in one apartment - each owning 1 or 2 rooms. They share a communal kitchen and bathroom. If one of the rooms in the apartment is not privatized, each family (individual or individuals) has the right to live in the given room (or rooms) on the bases of a decision (order) provided by the local, city administration. The remaining members of the family are considered to be renters or co-renters of the given living space. Owners and renters are recognized by the State. In the event that the rooms are later privatized there arise issues affecting the remaining portion of the living space - this space may end up belonging to the State. Areas of the apartment which are not listed as living space (the corridors, bathroom, toilet room cupboards, etc.) are considered legally as areas for general use by any of the tenants and they may not be owned by any one given individual.
Neighbors within the communal apartment have the right to purchase a room(s) from other neighbors. In order to sell a room in a communal apartment it is first necessary to receive a written notice from all of the other tenants (except for the State) that none of them desires to purchase the given space. Separate rooms may not be rented out without the agreement of all of the other owners.
Compared to a regular apartment (one which is not a communal apartment) it is usual for one family to own the entire living space or to live there based on a legal social rental contract (on the basis of a State order). It is possible to make a regular apartment into a communal apartment by mutual agreement between the owners or by an order from the courts.
Usually the only way to transform a communal flat into a regular flat is by purchasing all of the rooms in the apartment from their current owners. This is usually done step by step. The buyer first buys a piece of property for each family in the buyer's own name. Then when this is completed, the buyer trades these properties for the rooms in the apartment - thereby purchasing the entire apartment. This process can be quite long and entails a bit of risk. The usual time frame is from 4 to 8 months but in some cases if the owners decide to start playing games, this can be much longer. For this reason, communal apartments are usually less expensive than apartments owned by single owners but they can often be a good investment.
Question: What is privatization?
Property rights were granted for different types of property in Russia after the collapse of the Soviet Union beginning in 1991 when the Law on Privatization was approved. This law allowed citizens of Russia the free transfer of living quarters in which they resided into private property. Before the privatization process, individuals were living in places either by a legal social rental contract which registered the individual through the use of a propiska (registration).
Privatization can be completed for an entire apartment or individual rooms of that apartment if they are located in a communal apartment. The privatization process is carried out by the regional agency for privatization and is currently free of charge (there is a draft law in the works which may put an end to free registration), payment is needed only for the services of the corresponding organizations who are carrying out technical work (preparation of the agreement, preparation of the technical specifications of the apartment, State registration of the right to ownership of the apartment, etc.).
Adults in the Russian Federation are able to privatize their living space only once, while children are able to privatize twice (the second time being after they become adults). Citizens may refuse to privatize their living space and simply continue living in it based on a legal social rental contract. If adult tenants do choose to privatize their property they may but if there is a child registered in the property, they must first receive permission from the Opeki agency (which looks after children's rights) and the local municipal education committee.
In the event that an individual chooses to privatize a newly built apartment, this privatization may take place only after the entire building is built.
Question: How do I open a bank account in Russia?
It is quite easy for foreigners to open bank accounts in Russia if they are already in Russia (on vacation, a business trip or if they live here). It is extremely difficult to open an account if you are located abroad. To open account while in Russia, you will need the following:
- Passport
- Russian visa
- Russian immigration card (given to you when you enter the country)
- Minimum deposit (For example, Raiffeisen Bank, an Austrian bank that has branches in St. Petersburg and Moscow,
requires a minimum deposit of $500. Many of our clients have accounts with this bank. If you would like more information about opening an account with them, Raiffeisen Bank's phone number in St. Petersburg is +7 812 118 6811)
Question: Is there any limit on the amount of money that can be brought in or taken out of Russia?
For foreign nationals, there is no limit on the amount of funds that can be transferred into or out of Russia by bank. In the past, there was no limit on transferring funds into Russia but the maximum amount for transferring funds out of Russia could not exceed the amount transferred in. If the person wanted to transfer more funds out of Russia than were originally transferred in, it was necessary to receive an official declaration proving that this person legally acquired the additional funds inside of Russia. This declaration could (and can) easily be bought at the St. Petersburg hard currency market exchange and stock exchange or in any bank. The cost of such a declaration usually ranges from 0.3% (stock exchange price) to 1% (bank price). The laws involving hard currency transfer change quite frequently so it is always best to check at the time that you are planning to make such a transaction.
Question: How does the payment process work when I am ready to buy and sign the papers?
The usual steps follow, however, there may be different or added steps if the deal is complex.
- The first step is to sign a contract with a real estate agency and make a deposit to secure the apartment for purchase.
- The agency will then make a down payment to the owner of the property or his representative in order to secure the property but only after negotiating and inspecting the legal papers associated with the property. If the result of this inspection is negative, the buyer will receive his money back in full.
- When the exact date of the transaction is fixed, the buyer must be prepared to have the required purchase amount in cash available to make payment. Approximately 95% of all transactions in Russia take place using cash. The cash is usually deposited into a bank safe on the day of transaction which only allows access to the buyer and the seller or their representatives at the same time - therefore limiting the risk that the property transfers hands without payment or payment is made without transfer of the property. This safe deposit box is similar to the escrow account used in Western real estate transactions. The bank where the safe is kept and or the agent representing the buyer, becomes the third party ensuring that the funds are not moved until all requirements of the buyer and the seller have been fulfilled (title registration, etc.).
- The control of the safe is governed by the conditions of a contract set up with the bank and the buyer and the seller. The buyer is the owner of the money until the purchase contract is signed with the seller and the apartment is registered with the State. Parties usually split the bank service fee (up to $60).
- The parties then sign and notarize the main purchase contract and send it to the State registry. The buyer will usually pay a notary fee (1.5% of the contract cost) and always the State registry fee (about $20). The buyer can also sign a contract without using a notary but it is strongly recommended to notarize the agreement to avoid problems in the future.
- The buyer and seller may agree to write an arbitrary property price (for example the property's book value or any other price that the parties agree upon) into the contract if the seller wants to avoid paying a large sales tax or if the buyer wants to reduce the notary fee - however this price must not be less then inventory one (book value).
For example:
Real (market) price - $80,000
Inventory cost (book value) - 450,000 roubles (~$15,000)
Contract cost using market price - $80,000
Notary fee using market price - $1200
or
Contract cost using book value - $15.000
Notary fee using book value- $225
- The seller usually receives his money from the bank according to the following schedule:
- 50% - after receipt of the new, State registry certificate
- 40% - after the cancellation of every tenants' registration (propiska)
- 10% - after the apartment handover act has been signed
Question: What personal documents do I need to present in order to purchase an apartment in Russia?
- Passport and visa
- A Russian notarized translation of your passport.
- Permission from the buyer's spouse, notarized with apostil if this permission was notarized outside of Russia. The Russian notarized translation of this document and notarized translation of the spouse's passport.
- Marriage license and a Russian notarized translation.
- The buyer must also hire a special, certified interpreter if they do not speak Russian.
Question: What documents must be collected from the seller in order to purchase an apartment in Russia?
It really depends on the situation. A list of State organizations that issue special documents related to the purchase or renovation of property follows:
- State Registration Bureau of Property Rights (GBR) registers the transaction and the title rights.
- Regional Project-Inventory Bureau (PIB) prepares the technical passport for the apartment and also renovation plans.
- Passport-Visa Services provides registration/de-registration for citizens residing in the property.
- Regional Interdepartmental Commission (MVK) reviews and provides approvals for renovation work in apartments (especially when walls need to be taken down or moved).
- Department of Municipal Education, the guardian of children's welfare and rights.
- Committee for City Construction and Architecture (KGA) controls issues relating to new construction.
- Committee for State Inventory and Protection of Monuments (KGIOP) controls transactions associated with historical landmarks.
- Regional Committee for Land Resources (KZR) prepares the necessary documents for transactions with land plots.
Question: What are property taxes like and what other monthly or annual payments must I make once I own my apartment?
The owner usually pays a small annual tax on his property inventory cost. This is usually between $100 and $200. Monthly utility payments for a medium size apartment are between $50 and $100 plus about $20 for electricity and $5 for using the telephone number.
Question: Will I be taxed on rental income if I decide to rent out my apartment?
If you live in Russia for 182 days or more, you will be considered a resident of the Russian Federation and will be taxed on your rental income at a rate of 13% of this income. This is considered your personal income tax.
If you live in Russia for less than 183 days, you will be required to pay a non residential tax on income generated in Russia of 30% of your rental income.
Question: At what rate will I be taxed if I decide to sell my apartment?
- If you own your apartment for a period over 5 years, you will not be required to pay any tax on the sale price.
- If you have owned for a period of less than 5 years and you are not considered a Russian resident, you will have to pay 30% of the sale price minus a deduction of 1 million roubles or 30% of the capital gain (current sale price minus original purchase price). You must choose one or the other of the systems but cannot choose both (it is not allowed to pay 30% of the capital gain minus a deduction of 1 million roubles). To be considered a resident of Russia, you must be physically located in Russia for more than 182 days per year.
- If you have owned for a period of less than 5 years and you are a Russian resident you will have to pay 13% of the purchase price minus 2 million roubles.
Question: Who can take care of my property when I leave Russia?
Our agency can handle property management for owners in Russia if they are renting out their apartments. This usually costs 10% of the monthly rental price per month. Please contact us, to learn more.
Question: What is a dvor?
Dvor is the Russian word for courtyard. Buildings in St. Petersburg are constructed with a facade part (the part of a building with a street entrance and windows facing the street) and a courtyard part. The courtyard part usually is much larger than the facade part. Apartments with entrances from the courtyard sometimes have windows facing the street or windows looking out onto the courtyard. Courtyards come in all different shapes and sizes, there are large, light, green courtyards and small, dark courtyards. If the apartment that you choose has windows facing a courtyard, it is usually best to choose one that is light and green. The darker variety are called kolodets or wells and it isn't much fun to live in a well.
Question: What is capital renovation (kapitalny remont)?
Capital renovation is a term used for the overhaul or reconstruction of a building's structural elements and communications / utility lines. The State pays for this renovation and it occurs once in a very long time. There are still many apartments in the center of St. Petersburg that have not gone through capital renovation. For these apartments, the piping and electricity may be in poor shape. Buyer's purchasing these buildings must be careful. This is because, if capital renovation is scheduled by the authorities, the tenants of the building will be forced to move out of their apartment for the period in which it takes to fix up the building - sometimes up to a few years.
Question: What is the best, quickest and safest way to purchase an apartment?
- Study the answers to the questions in this section and ask us for more answers if you need to know more.
- Carefully determine your needs and match them to the price level (all materials are available by contacting us).
- Fill in an inquiry form with your requirements and we will send a representative selection of properties to you.
- It is best if you can come to St. Petersburg to look at the places and really get a feel for the market.
- If you know the city quite well and don't have much time but would like to seriously start looking for a place to purchase we can make a remote selection for you with detailed descriptions, plans and photos, but in this case we would ask for a small prepayment for our time. This prepayment would then be used towards our agency service fee if you decide to purchase an apartment.
- After choosing the right apartment, our agency can research the property and make a recommendation on whether to purchase it or not.
- If we come to a positive conclusion and obtain your agreement, we can start preparing the paper work to complete the transaction.
Question: What is the most common size of apartments in the city center?
It is probably easiest to split the sizes of apartments in the center into 3 catagories.
- Small 25 - 70 sqm (1 - 3 rooms)
- Medium 70 - 120 sqm (2 - 6 rooms)
- Large over 120 sqm (3 and more rooms)
The small and medium flats are usually made up of the parts of large, pre-Revolutionary apartments. These flats were artificially separated into several parts to accommodate families. Most of the flats had two entrances - one for the owners and another (near the kitchen) for servants. The servant's entrance was usually called a black entrance and usually leads to the courtyard (dvor). The same process of dividing apartments took place during the capital renovation of a number of buildings between 1948 and 1991. Some of them have a main street entrance while others have the black entrances. These types of flats make up the majority of the center.
Large flats usually have 2 entrances and they may still be communal. Many of the larger apartments are still in their original condition with original layout, fireplaces and antique stoves, etc. and can really be incredible after they are renovated. Many of these have not gone through renovation and can be in quite terrible condition
Question: How long does the transaction usually take?
It depends on the complexity of the transaction. If the deal is simple (a direct sale) i.e. the owner sells directly to the buyer and receives payment it usually doesn't take more than 2 weeks.
If the apartment is a complex transaction involving a communal apartment or a deal in which the owner requires not only money but another apartment to move into to complete the sale, it may take from 4 weeks (requires apartment and money) up to 8 months (communal).
Question: How can I purchase an apartment in a building that is currently being built?
Apartments purchased in buildings currently under construction are not considered by law to be private property. Instead, the buyer becomes a participant in the investment process and is considered one of the builders/investors of the project. The main document which provides for the rights to the apartment and the responsibilities of the parties in this instance is an investment
agreement. The right to ownership for this type of apartment occurs at the time of State registration and takes place over the course of several months. There are several stages in the process, starting with the completion of construction, then State commissioning, leading to the transfer of the building documents to GBR (the State registration bureau) and finally the individual apartment "owners" filing for registration. As with any investment activity, this investment may entail a certain amount of risk, but financially is more advantageous than standard purchases. The workmanship of the building is usually of good quality with decent layouts of the apartments. The other advantage which should not be overlooked is the social level of the new neighbors (they will be much wealthier than the average citizen and may be easier to live with as neighbors).
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