Marbella is missing the money that made living easy for big-spending Russians in the marina and nightclubs of the glitzy Spanish resort.
As their home country slides toward its first recession since 2009 after a slump in oil prices and the ruble, Russians at home and abroad are feeling the pinch. For those used to lapping it up on the Mediterranean beaches, they’re now scaling back on their party lifestyles and spending on property.
“Russian businessmen in Marbella are having to remind their wives that they have a budget when shopping at Christian Dior,” said French socialite Olivia Valere, who lives in the town and hosts an annual summer bash that has drawn celebrities from Eva Longoria to Prince. “They’ve had to rein in expenses and, in some ways, it has been a humbling experience.”
The economy of the world’s largest energy exporter shrank 2.2 percent in the first quarter from a year earlier and is forecast to keep contracting through 2015 as the weaker currency and soaring prices erode consumer spending power. Coupled with sanctions on Russia, the effect is rippling out and being felt in places such as Puerto Banus, Marbella’s marina and luxury shopping district.
“Of course it affects Russians, even those with a lot of money,” said Natasha Romanov, a former kayak champion for her home country who mingles with Marbella’s wealthy Russian community accompanied by her Maltese pooch, Hippie. “Russians are making money in rubles, but spending in euros and dollars — everything is twice as expensive.”
‘State of Shock’
Russia’s central bank forecasts that gross domestic product will plunge 3.2 percent in 2015. The ruble has fallen 23 percent against the euro in the past year.
The currency’s slide left Marbella’s Russians “in a state of shock,” said Mila Kremleva, a Russian real estate agent in the town who arrived in Spain from Siberia in 1995.
“We didn’t know what was going to happen, whether we’d be able to take money out of Russia or go to war,” she said in an interview at one of the Marbella properties she’s trying to sell for a client.
The owners, a Russian couple, are selling the two-bedroomed home for 600,000 euros ($675,000) and moving back to Russia. At the peak of the market, the same house would have sold for 850,000 euros, according to Kremleva.
“Russians have been a dose of oxygen for Marbella,” said Ricardo Bocanegra, member of the business association CIT Marbella and head of the Russian-Spanish International Forum. “We’re talking about upper-middle class and wealthy Russians, who like to spend and know Marbella as a holiday destination from word of mouth”
The developments bear out the warnings from Spain’s Foreign Affairs Minister, Jose Manuel Garcia-Margallo. He said in March that sanctions related to the conflict in Ukraine had cost the European Union 21 billion euros and hurt Spain’s tourism and agriculture.
Coinciding with the start of the Ukraine crisis, the number of Russians visitors to Spain is down more than 28 percent in the first four months of 2015 compared with the same period a year ago, according to the Industry and Tourism Ministry. Russians accounted for 7.5 percent of all Spanish house purchases by foreigners in 2014 compared with 9.6 percent in 2012, according to the property registrar’s office, which blamed the decline on the weak currency and Russia’s “current situation within the European Union.”
“Russians are very competitive, if your neighbor moves into a big house, you need a bigger one, social status is very important,” said Kremleva. “That era is over.”
Revenue from visitors to Spain dropped 13 percent in 2014 a the year earlier. While the ruble has staged a recovery this year, gaining 20 percent, the effect may be felt for some time, according to Valere.
The days when increasing numbers of wealthy Russians flocked to Puerto Banus to moor their yachts and go shopping in Louis Vuitton and Dolce & Gabbana may be over for now, she said in an interview at her home in the upscale gated community of Guadalmina.
“Even the wealthy aren’t immune to shocks like these,” she said.