Olympics to boost Sochi real estate & tourism

The Sochi region will get a major economic boost from winning the right to host the 2014 Winter Olympics, and much of it will be focused in the real estate and tourism sectors. Russia's government will invest up to $US12 BLN in regional infrastructure.

Apart from federal support, a significant amount will come from Russia's big corporations and business groups.

Russian millionaire Oleg Deripaska's Basic Element Group has already announced it will pump up to $US2 BLN into the Riviera – the location of some major Olympic venues.

Investment Company Interros also plans to invest $US 1.5 BLN in sports facilities.

And analysts say this path is likely to be followed by foreign investors, boosting competition in the region.

Even with a lot of investor's attention – Sochi still has very little to offer in terms of hotels, modern leisure infrastructure and transport.

Analysts expect further development in the real estate sector.

“You even have to start from the new airport, from new connections from the airport to the city, be it road or rail, a new public transport system. For the Winter Olympics itself a new connection between Sochi and Krasnaya Polyana which probably will have to be a combination of road and rail as well as all the supporting infrastructure such as electricity, water, gas and everything else what you need to make all the new infrastructure function correctly. So there is a huge amount of investment required,” Tim Millard, analyst at Cushman & Wakefield points out.

With the growing number of new shopping malls and hotels opened, the prices of commercial and residential property is also growing.

Analysts say current apartment prices do not significantly differ from ones in Moscow.

“After Sochi won the bid for 2014 Winter Olympics we now expect the construction in the city to grow dramatically. The demand for new real estate will grow as well as the supply. The government will try to keep the prices down however I do not expect the prices will reach their highest points over the next three years,” Bari Mirzoev, manager at Rus-Story company in Sochi believes.

Commercial estate prices in Sochi represent half of Moscow prices for office space.

On average the price of one square metre reached $US4,000 and is expected to rise further, driven by growing Russia's spending power, the attraction of Sochi as a holiday destination and lack of quality supply.

“Now as the bid is actually confirmed it is clear thet there will be a huge amount of investment in Sochi, in the infrastructure, in supporting things as well as in building things. I think it will be a lot more interest there as well. And I think we can expect the prices in all sectors to increase and probably to increase quite significantly,” Tim Millard predicts.

Winning the right to conduct major international events has always had a major impact on the economy of the host country.