Only a few months ago, billionaire Sergei Polonsky, the developer behind an array of gleaming Moscow skyscrapers, seemed invulnerable.
But now that the global financial crisis is hitting Russia, he has warned that the country’s construction industry is “on its knees” and begged journalists for help in a bid to stave off disaster.
“The future and success of builders depend on you, dear journalists!” the 35-year-old tycoon pleaded in an open letter posted on his blog this month and republished in the Russian press.
PHOTO: AP
“We ask you to cover our industry wisely and to paint things in a positive light,” said the owner of Mirax Group, whose projects include Federation Tower, which it says will be Europe’s tallest building at more than 500m high.
After a decade-long boom that turned Moscow into one of the world’s most expensive cities, Russia’s real estate sector has experienced the contagion of the US subprime crisis.
It is a worrying trend in a country where many have ploughed their savings into apartments rather than bank accounts and where officials once boasted the oil-driven economy would be an “island of stability” amid global turmoil.
The credit crunch has been rough on property developers, whose share prices have tumbled since the beginning of the year, some by as much as 90 percent.
“Whatever credit lines were available to developers until very recently have all but disappeared,” Renaissance Capital, a Moscow-based investment bank, said in an advisory note earlier this month.
“We believe the sector is likely to experience a wave of delayed completions and project freezes, potential forced sales of development portfolios as well as smaller players’ bankruptcies,” the bank said.
Even as the Russian government has poured billions into the banking sector, property developers were unlikely to get such treatment, said Barry Schumaker, an analyst at Moscow-based investment bank Uralsib.
“The government is going to stand behind the banks before it stands behind the real estate companies,” Schumaker said.
Schumaker predicted that the hardest-hit firm would be Mirax Group, whose owner Polonsky was said to be worth US$1.2 billion by Forbes magazine this year.
“They’re struggling, they basically have to curtail their projects,” the analyst said. “Mirax [was] one of the most aggressive developers going into this problem and they didn’t accept it soon enough.”
Smaller players have not been spared either.
“Of course, we feel the crisis coming,” said Fyodor Indukayev, head of a small real estate agency in Moscow. “We have already sold some [properties] at a loss.”
The impact is likely to be felt in residential property too: the business daily Vedomosti reported on Friday home prices would fall from 15 percent to 20 percent by the end of this year.
Russian officials have promised help, including President Dmitry Medvedev.
On Thursday he named construction as one sector of the “real economy” which needed government assistance in dealing with the credit crunch.
“Effective enterprises and private entrepreneurs should not experience financial hunger, and we should undertake all the necessary, sufficient efforts” to prevent this, Medvedev said.
The Moscow city government also plans to aid struggling developers by buying US$2 billion worth of land and apartments from them by the end of this year, Vedomosti reported.
One of the developers to get help is Mirax, whose owner summed up the situation succinctly in his open letter to journalists.
“It is a frightening picture,” Polonsky wrote.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS