Global Real Estate Trends – Part One: Russia and The UK

by Ken DeLeon

First you master the game, then you change it! For the first 10 years of my career, I practiced real estate under the traditional model and became the #1 ranked agent in the nation by REAL Trends Inc. as published in the Wall Street Journal. After that, I founded DeLeon Realty and with great insight and contributions from our CEO Michael Repka, we created an entirely new business model focused on the client rather than the agents.

While our model is totally unique in America, some of our insights were inspired by international travel, and integrating some of the best components of other countries’ business models into our own. This three-part article explores the real estate industry as practiced in Russia and England. In subsequent articles I will delve into China, India, France, and Japan and then conclude each with what lessons Michael and I learned and incorporated into our own model to bring about what we feel is the best client experience provided by any real estate business model in the world. This Global Real Estate series will explore what the business model is in each country and if they have an MLS (most countries do not), what the commission rates typically are, what typical mortgage rates are in that country, whether a primary residence is exempt from capital gains, and finally, a market snapshot of that country’s real estate pricing.


Overview of Russia

Russia is a country in transition from a chaotic housing market with little organization to a country that is moving towards a multiple listing service (“MLS”). Michael and I were very impressed on our visit to St. Petersburg and Moscow, and we met with many of the nation’s top agents and consultants. We spent an entire day with an expatriate who is trying to bring a regional MLS to Moscow to replace the current system, which is presently fragmented and segmented by the top agents who dominate the market. While we envision a regional MLS coming to fruition soon as trends are heading that way, the lack of a buyer’s agent for most transactions and listing agents solely showing their personal inventory of listings will continue for the near future.

Business Model & Commissions

In 2002, the Russian real estate market was bifurcated into some sellers doing For Sale by Owner (FSBO) transactions and some working with agents who were charging 7.5% (all commission rates cited in this article are per WSJ). Now, the majority of sellers will use an agent and the sellers pay 3-5% commissions (generally 4%) to their listing agent. There usually is no buyer’s agent (except for expats who do not speak Russian) and, if there is one, the buyer pays directly for this service.


The mortgage market is a relatively new invention in Russia, with mortgages becoming common only in the last 15 years. While the rate is much higher than in America, the principles of the Russian mortgage market are very similar to the U.S. in that most loans are for 80% of the sales price and new mortgage payments cannot exceed 35% of the borrower’s net income. Unlike the United States, no portion of the mortgage interest is deductible. This is particularly painful since the mortgage rate in Russia can be up to 10% higher than in prime European markets and generally ranges from 12% to 12.5%.1 Vladimir Putin is trying to lower this rate to spur the housing market, but market forces are currently preventing this.2 Due to high mortgage rates in Russia, most buyers purchase homes with all cash.

Capital Gains on Primary Homes: Even though we think of housing as a piece of Americana and reflective of the American Dream, home ownership is indirectly subsidized by many nations with an exemption for capital gains being the most common tax benefit. Russia exempts ALL (note no limit of $500k per married couple as we have in the U.S.) capital gains taxes if you own your primary residence for five years or more.

How Expensive: Moscow is arguably a world-class city with over 12 million residents, natural beauty (except during the frigid winter, Michael and I visited in summer), and stunning new skyscrapers. That being said, the drop in the exchange rate of the Ruble coupled with the drop in home values and rent has greatly lessened the expense of Moscow relative to other international cities. In 2008, Moscow made headlines for being the most expensive city to live in the world.3 In 2018, Moscow had dropped to #17.4 Given this relative drop, you may be wondering if now is a good time to buy. As discussed in the market snapshot below, this decline does present an opportunity but also a risk as Moscow’s real estate prices are tied to the price of oil and other commodities, plus whether the Western embargo ever gets lifted. So there are a lot of non-real estate factors impacting real estate values in Russia. Market Snapshot: As you would anticipate, the last few years have been very volatile in the Moscow property market. Economic trade embargoes, Russia’s taking over Crimea, the Ruble losing 50% of its value relative to the dollar in the last five years, and high mortgage rates, have all negatively impacted real estate prices. Even excluding any currency fluctuations, the Russian market is down from 2015 in inflation-adjusted returns. Coming from this depressed vantage point, some analysts are bullish on Russian real estate as they anticipate that these relatively low prices will be buoyed in 2019 due to anticipated higher oil prices and a continuing economic recovery.



Although the U.S. used the U.K. as a model for several things including our legal system (except for the Francophiles in Louisiana), there is very little similarity between the U.S. and U.K. real estate business models. For example, there is no exact equivalent of the MLS in the U.K. In 2016, a multi-listing platform called Agent Hub was launched that also incorporates a CRM (Customer Relationship Management) tool. There are numerous public websites where buyers can search for inventory. Among the popular ones is, However, these databases have not been embraced universally and no market is as transparent and open as those in the U.S. Overall, is a bit more similar to the LoopNet structure used by commercial brokers in the US, rather than the MLS used by residential brokers, in that only a fraction of available listings are on the website.

Business Model & Commissions

Fees charged by traditional real estate agents in the U.K. are amongst the lowest in the world. Commission rates range from 1% to 1.5%, with 1.5% being the most prevalent rate.5 In the U.K. there are no buyers’ agents, and the listing brokerage coordinates and works with the buyers who purchase those company’s listings. Unlike the U.S. independent contractor model, real estate agents in the U.K. are paid a salary with small bonuses for sales and rental contracts (rentals are called lettings). The salaries are generally low and so are bonuses, so this is not as lucrative of a field as it is in the U.S. When you visit real estate agency websites, it’s all about the company. Rarely are individual agents marketed or branded. The business model is company-centric instead of agent-centric. By having the focus on the company and not on the individual agent providing services, more services can be provided by a well-funded company to the benefit of the client. Some agencies offer their services for a fixed fee, and this practice is common with online real estate agents.

Mortgage Rates

Looking at HSBC’s public mortgage rates6 you can see that mortgages start with a low fixed rate for the first 2-5 years, after which they go up. The low rate starts at 1.5% – 2.5% (higher if your Loan-to-Value, (“LTV”), is higher), and after the initial fixed-rate period, increases to a variable rate of 4.2% – 5.25%.7 These are their published rates and, I am sure that like the U.S., lower rates can be found or negotiated. For owner-occupied properties, mortgage interest is tax-deductible on U.K. income taxes for both residents and non-residents. U.K. mortgages tend to be a bit more conservative than U.S. mortgages, with loans generally around 60%-70% of the purchase price (versus easily up to 80% in the U.S.) and you can only borrow up to 3-3.5x your annual gross salary. In the U.S., most banks allow you to borrow up to 4.5-5x your annual gross salary.

Capital Gains on Primary Home

Residents are exempt from paying any capital gains on their primary residence, which is defined as having lived there your entire time of ownership.8 For investment properties, the capital gains rate is generally 28%.

Market Snapshot

London is a world-class and very affluent city that is home to the highest number of millionaires (over 350,000) in the world.9 London, which once had the second most expensive real estate in the world after Hong Kong, has recently dropped in price. Prices peaked in July 2017 and average prices have been coming down since, caused mainly by the uncertainty attributable to Brexit and also due to inflation. Also, the pound dropped by 10-15% versus the dollar and Euro since Brexit, making London property much more reasonable to foreign investors. Overall, effective prices are down 25% when both the pricing and currency declines are factored in.10 That being said, London is still a very desirable location and is a haven for foreign investors looking to park their cash in a city that is still considered the financial center of the world and maintaining hegemony over New York and Singapore. There is an opportunity to get property in a renowned city full of culture, wealth and prestige, but those seeking certainty in London will wait for a new equilibrium to emerge post Brexit.

Lessons Learned

From these countries we integrated the following three concepts, (1) having buyers agents on salary, (2) having agents specifically focus solely upon buying or selling homes and not both, and (3) creating a “buy direct model” to allow clients to gain the expertise of a buyers’ agent, but not necessarily bear this expense. In the United Kingdom, having agents on salary seemed the best model for clients. I personally have always disliked aggressive sales people who are focused on the sale and not on the clients’ best interest. Much of the negative perception of real estate agents stems from their desire to quickly sell a home to clients instead of advising them. Instead, I have always strived to be a true fiduciary, similar to how I felt when advising clients at my old law firm of Wilson Sonsini. By putting all 45+ of our employees on salary, this allowed for better service for both buyers and sellers. By having our buyers’ agents on salary and their raises based upon our buyers’ feedback instead of just sales, our buyers’ agents act more as trusted fiduciaries providing consultative advice versus a proverbial used car salesman looking for any deal with no regard for the clients’ satisfaction. Also, by having agents on salary, I can assign them to focus on certain geographic areas and, by specializing, our agents have greater insight than other agents who sell in any area as they chase deals and dilute any expertise they may have.