A sharp tumble in the value of the ruble has prompted some Russian real estate investors to try to break their American real estate contracts.

New York-based lawyer Marlen Kruzhkov has seen a surge in the number of Russians seeking to flip their real estate contracts.

Buyers “were offering to sell the contract at a loss, willing to take a 50 percent loss on a down payment as not to take a hundred percent loss,” Kruzhkov told the New York Observer. “Due to the exchange rate, they did not have the liquidity to finish the transactions.”

Many of the properties are second and third homes for the Russian buyers. These properties stopped being a priority for purchase after the value of their money plummeted to the point where the deals could not be closed.

“An apartment in Miami, even the most glorious beachfront apartment, is not a priority right now,” Kruzhkov said.

Russians have also canceled deals in New York, with investors looking to escape contracts in the negotiation phase.

“I have had Russian clients who were about to purchase properties in New York change their minds within days of Russia occupying Ukraine,” Petro Zinkovetsky, a lawyer, told the Observer.

He said one of the buyers was in the process of purchasing a $10 million home, and another was seeking to spend $17 million.

A tumbling ruble

Economic sanctions and falling oil prices have put the ruble in a dramatic tailspin, which has left Russian billionaires scrambling.

Viktor Vekselberg, Gennady Timchenko and Alisher Usmanov, along with another 17 of the nation’s wealthiest people, lost a combined $10 billion in the week leading up to the holidays, Bloomberg News reports.

The fall is largely associated with crude plunging to a five-year low following the United Arab Emirates announcement that OPEC won’t rein in production. This resulted in Russia’s central bank raising its benchmark interest rate overnight to 17 percent from 10.5 percent on Dec. 15.

“The optimists who thought in March that everything would be all right in the end now understand that nothing will be OK,” Stanislav Belkovsky told Bloomberg News. Belkovsky is a Kremlin adviser in Vladimir Putin’s first term and is now a consultant for Moscow’s Institute for National Strategy, a research firm.

While economic hardships may cause average American homeowners to foreclose their sole properties, wealthy Russian investors — who typically operate in the $5 million to $15 million range, according to Kruzhkov — tend to switch to less expensive apartments in busy downtown lofts. These are easier to rent out.

Sales of U.S. homes to foreign buyers rose to an estimated $92.2 billion in 2013, the highest sales volume in at least four years, according to the most recent annual report from the National Association of Realtors.

Most overseas buyers were from Canada, China, Mexico, India and the United Kingdom, which together accounted for 54 percent of international sales. Russian buyers have accounted for 1 to 3 percent of international sales in recent years, NAR reported.

When Russian buyers started getting scarce in the New York City real estate market last spring, Corcoran Group CEO Pamela Liebman noted that in sheer numbers, “the Chinese outspend the Russians in every segment of the market.”

NAR 2014 Profile of International Home Buying Activity

NAR 2014 Profile of International Home Buying Activity

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Don’t miss out! Inman Connect Las Vegas starts today and you can catch all the excitement with a virtual ticket.Register Now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription