Mikhail Ermolenko: in 2011 at an elite market of Kiev to continue the limited supply

03.12.2010 12:29
Real Estate Market Analysis | Mikhail Ermolenko: in 2011 at an elite market of Kiev to continue the limited supply Residential real estate market in Kiev is actively growing until the crisis in 2008 growth of the economy and the availability of mortgage lending led to a huge rise in prices in 2006-2007. In late 2008, under the influence of the crisis, demand for housing has fallen sharply and the housing market in Kiev is almost stood up. The first surrendered to the segments of economy and business class - in the IV quarter. 2008 prices on the market fell by 26% and 22% respectively.

Luxury Real Estate has been more stable, lower prices that fall did not exceed 1%. In early 2009, the market reigned complete uncertainty, developers frozen one project after another, and experts do massive assumptions about the disastrous prospects of the residential market. The situation was aggravated by a significant devaluation of the hryvnia against the dollar and euro. In the segment of the primary housing plummeted interest in projects in the initial stages of construction, the market went speculative capital. On the background of panic of market participants faltered, and elite segment - in 2009 the reduction was (-16%). But in the second half of last year there have been signs of stabilization - has intensified the demand for a number of elite objects observed increase in the cost. Stability of an elite primary real estate to the crisis confirmed by the smallest drop in prices compared with the segments of business and economy.

Related article: For a year in new apartments in Kiev rose and they became less

The market is gradually emerging pent-up demand. Thus, since the crisis elite real estate in Kiev fell on average by 24% (II quarter of 2010 relative-but III quarter 2008), price declines in business and economy class for the same period was 41% and 38%, respectively. In spring 2010 the market showed a traditional seasonal revival - in the primary market recorded an increase in luxury sales. Thus, the market is gradually emerging pent-up demand. Apartments are currently sold primarily for their own residence, investment transactions are no more than 5-6%. As regards price dynamics, then, in March 2010 shows a small elite segment, but positive growth in prices. Positive trends in the elite segment confirmed the resumption of active construction - with the II quarter of 2009 to the present time, the market of elite Kiev newly replenished with 8 new objects in 2 projects announced second stage of construction, as well as the renewed realization of one of the frozen in crisis projects.

Market risks. The most important factors for the positive development of the housing market is the economic situation in general in the country, so the risks associated with the state of the economy, assigned relatively high values. The political situation is generally stable and predictable, which is reflected in the level of associated risk. Among the factors that have a direct impact on the housing market, most sore are the issues of credit both developers and end-buyers. Average real mortgage rates vary from 18% to 27% in national currency. Funding issues developers are even more acute as demand for construction projects is minimal. Demand in the luxury segment is relatively stable and less dependent on economic turmoil. Therefore, the market for luxury housing part referred to the risks are less significant. For example, the availability of mortgage lending is significant only for a quarter of potential buyers of luxury housing. Many elite projects of Kiev realized in the form of small club houses, and therefore do not require massive funding.

A small number of suites ensures their rapid implementation, and way out of the project. Therefore, developers in this segment are in a better position in obtaining loans or restructure the loan debt.

Forecasts and trends. The yield of new facilities and the resumption of previously frozen should have a positive impact on the market - lead to a stabilization of prices and quality against the background of growing competition. But the lack of demand for the objects in the initial stages of construction can neutralize these effects. Given the characteristics of current demand, most developers have just begun elite draft plan to open sales only at the final stages of construction, ie until late 2011 - early 2012. Thus, in 2011, an elite primary market of Kiev to continue the limited volume of supply. This fact, together with the gradual intensification of buyers and the entry of pent-up demand will stabilize and even push prices up in the elite segment. In the IV quarter of this year's price increase likely to be 1,5-2%. The projected rate of growth of prices in 2011 - 2.1% for the quarter.

Mikhail Ermolenko, Knight Frank LLC Ukraine General Director

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