Russian homebuyers face 30% mortgages, three-year payoffs

Kenneth V. Smith, California, USA

SAN FRANCISCO U.S. policy makers get concerned when the homeownership rate here drops below 65 percent. But things could be a lot worse.

Take Russia, where homeownership is less than 2 percent and mortgages generally have three-year payoff terms with interest rates exceeding 30 percent.

With dozens of documents to sign, and disclosure after disclosure, a real estate transaction in the United States often seems overly complicated to the Realtor and consumer alike. But, the complexities of owning, buying and selling real estate in other countries came as a surprise to most of the Realtors in a recent workshop on internationalreal estate at the National Association of Realtors convention here earlier this month.

Although Russians have a strong desire to purchase their own home, the extraordinary cost of home financing places homeownership out of reach for most of the country's citizens, the representatives noted. "A lot of people want to buy, but for many, it is not possible," said Konstantin Aprelev, president of the Russian Guild of Realtors.

Representatives of the Eastern European real estate associations pointed out that the home buying process in their respective countries is far more difficult than that of the United States. For instance, in Poland and the Czech Republic, mortgages with interest rates of 25 percent to 30 percent are common, due to the extremely high rate of inflation.

Through increased international outreach, the National Association of Realtors is expanding its efforts to assist foreign real estate practitioners with industry privatization, according to association representatives.

The forum, sponsored by NAR's International Section, included presentations by NAR President Art Godi, representatives from the United States Agency for International Development and Oscar Arias, Nobel Peace Laureate and former president of Costa Rica. More than 800 foreign real estate professionals from more than 35 nations attended the International Section's programs during the convention.

Highlighting the forum was a bilateral real estate signing ceremony between NAR and five Eastern European countries. The National Real Estate Associations of Russia, Czech Republic, Poland, Hungary and Bulgaria all signed cooperative agreements with NAR. Including the five Eastern European real estate associations, the international section now maintains cooperative agreements with 35 real estate associations in 31 nations.

The agreements are designed to increase business and professional networking opportunities among members of the associations. They also provide for an exchange of market information through publications and statistical profiles between the five countries and NAR's international section. Godi noted that signing of the agreements will help create home ownership opportunities for the citizens of Russia, Czech Republic, Poland, Hungary and Bulgaria in a manner similar to what is available in the United States today.

"Expanding our services to meet the needs of real estate markets throughout the world is crucial to a successful global real estate market for the future," Godi said. "Our work in Eastern Europe is especially important because we are helping introduce a concept that is new to them -- home ownership. The great American Dream isn't limited to us -- it's all over the world."

According to Godi, there is a growing movement by Realtors throughout the United States to establish international councils, which is a solid sign that foreign direct investment, immigration, and international real estate education programs are having a positive effect at the grassroots level. "The reality of the global economy is finally starting to hit home," Godi said.

Thomas Dine, assistant administrator for USAID's Bureau for Europe and the New Independent States, noted that NAR has been at the forefront of the U.S. private sector response to the fall of communism in Eastern Europe. "You have brought a message about the importance of owning private property to people who have lost the concept," Dine said. "As the countries of Eastern Europe transform economically and socially, housing will be high on the agenda."

As part of the transition from publicly owned to privately owned housing, USAID is working with these countries to develop private maintenance contracts for multifamily units, he noted. The agency also is encouraging the reduction of public housing subsidies.

Arias pointed out that the ability to own property has been "one of the building blocks of peace and democracy" in Costa Rica. "Those who do not have their own home feel marginalized from society, if not deprived of many opportunities and rights," he said.

Arias urged Realtors to continue their efforts to expand home ownership opportunities in the United States and participate in programs to provide decent, affordable housing. "Poverty exists everywhere and constitutes a grave threat to peace and democracy. It excludes millions of families and individuals from exercising their right to (own) property," Arias said. "Any effort undertaken to fight the expansion of poverty, such as housing programs, contributes to global peace."

In addition to the international real estate workshop, brokers and agents from other countries were eager to learn more about American real estate practice and technology. For example, a 30-member delegation from Malaysia fanned out through the trade show exhibit area to make sure that not one vendor would be missed.

Nearly running from booth to booth to pick up literature and shoot out questions, Cyndie Ng of Hosanna Properties and Jesslyn Sim of Richmond Realty in Kuala Lumpur, Malaysia, had as their goal learning as much as possible about the Internet as a medium for marketing properties and conducting transactions.

Ng said her brokerage uses Windows NT and Microsoft Office 95 and her task at the trade show was to find software that would permit seamless posting of new pages to the World Wide Web. "We are too far behind and we have to go to the Internet for our international clients," she said, as she stuffed a dozen brochures into one of three bags and raced to the next vendor.