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What Impact Do Russians Have on the U.S. Real Estate Market?
March 14, 2022

What Impact Do Russians Have on the U.S. Real Estate Market?

by The CE Shop Team

The U.S. Government Plans to Seize Luxury Real Estate Owned by Russian Oligarchs

In the weeks since Russia invaded Ukraine, the United States has joined countries around the world in imposing economic sanctions on Russia. 

The sanctions include efforts to target Russian oligarchs with connections to President Vladimir Putin, highlighting the ways in which money from ultra-wealthy, politically powerful Russians flows through the U.S. economy — and the real estate market.

“The U.S. Department of Justice is assembling a dedicated task force to go after the crimes of Russian oligarchs,” President Joe Biden said in his State of the Union address on 3/1/22. “We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets. We are coming for your ill-begotten gains.”

The United States isn’t the only country to target Russian oligarchs’ assets. In early March, French authorities said they had seized a yacht linked to sanctioned Russian oligarch Igor Sechin, NPR reported. Sechin, the CEO of state oil company Rosneft, served as Russia's Deputy Prime Minister from 2008 to 2012.

As the war in Ukraine intensifies, we’re taking a look at the presence that Russians have in the U.S. real estate market.

A ‘Destination of Choice’ for Money Launderers

Of course, not all Russians who buy property in the United States are oligarchs, nor are all Russians laundering money with their real estate purchases. When Biden talks about seizing assets, he’s targeting a small number of ultra-wealthy Russians who have close ties to Putin.

That being said, it remains unclear how successful the U.S. government’s efforts to seize assets from Russian oligarchs will be. 

NBC News reported that “members of the real estate community and lawmakers are skeptical about how successful [Biden will] be at getting access to the money Russians have been pouring into real estate for decades. 

“From Sunny Isles, Florida, to Cleveland and high rises in Manhattan, post-Soviet oligarchs’ money has poured into big cities and the heartland in recent decades with little recourse.”

That’s in part because the U.S. real estate market has become a “destination of choice” for money launderers across the world, Louise Shelley, the director of the transnational crime and corruption center at George Mason University, told NBC News. It also can be difficult for the government to tie assets back to particular Russian oligarchs.

As the U.S. continues to pursue sanctions, even Russians who aren’t oligarchs are getting nervous. Luxury real estate Broker Dolly Lenz told Fortune that she’s begun hearing from Russians who are considering offloading their property in the U.S. or canceling deals that were in the works.

"The heat is up. They're scared that they're going to have their real estate seized or potentially seized. Or linked to someone who is seized. They're scared to death of [guilt] by association," Lenz said. "There are already more inquiries, and that's how it starts. That's how we know [a flood of listings by Russians] is coming."

‘Little Direct Impact’ on the U.S. Real Estate Market

Overall, “Russia has little direct impact on the U.S. real estate market,” the National Association of REALTORS® said in a recent blog post. Foreign buyers accounted for 1.8% of U.S. existing-home sales from April 2015 to March 2021, and Russians made up only 0.8% of foreign buyers. 

“Any decline in international real estate transactions will have little direct impact on the U.S. housing market,” and in fact, “the decline in foreign demand will ease supply constraints for domestic buyers,” the blog post says.

In a 2021 report, International Transactions in U.S. Residential Real Estate Report, NAR found that 29% of purchases made by Russian foreign buyers were in Florida, followed by 16% in Georgia, 13% in New York, 8% in California, and 5% in Illinois.

Of Russians who purchased residential real estate, 41% lived abroad, while 59% lived in the U.S. as visa holders, including students, diplomats, and workers.

Russian buyers’ median purchase price was $325,000, just slightly higher than the median purchase price among all foreign buyers, which was $303,200. 

“However, the average purchase price among Russian buyers was $652,915, compared to $480,695 among all foreign buyers, suggesting there were more high-end Russian buyers,” NAR says.

The report also found that 51% of Russians paid in cash when purchasing property, compared to 44% of all foreign buyers.

A Boost in Backyard Bunkers

Sanctions and efforts to seize assets from Russian oligarchs aren’t the only ways in which the Russian invasion of Ukraine is affecting the housing market.

Interest in properties with underground bunkers has spiked amid fears that Russia could use nuclear weapons, Realtor.com reported. Online searches for “fallout shelter,” “bunker,” and “underground bunker” have increased by more than 1,000% since Russian troops entered Ukraine.

A Texas-based company that sells steel bunkers and bomb shelters recently received over 700 inquiries during a time frame in which they would typically receive about 10, Vice reported.

The anxiety fueling the inquiries is reminiscent of Cold War-era fears, but experts say that while threats of a nuclear attack should be taken seriously, Russia isn’t likely to use nuclear weapons anytime soon. 

As the world grapples with Russia’s invasion of Ukraine, time will only tell what kind of effects it could have on the U.S. real estate market.

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