Residential real estate market in Ukraine

09.10.2009 12:45
Real Estate Market Analysis | Residential real estate market in Ukraine
Ukraine. Housing market.


Until recently, the Ukrainian real estate has attracted the second largest (after the financial sector), foreign and domestic investment. Today, the once thriving Ukrainian real estate market is going through hard times. In connection with the global financial crisis, investors in real estate in Ukraine face major economic difficulties. As a result, many construction projects initiated were frozen, and some of them for sale.

Related article: For a month the price of apartments in new buildings in Kiev has increased by 0.7%

Common sense tells us that sooner or later, economic growth, respectively, and interest in real estate resumes.
Why do people invest in real estate in Ukraine?
To make money, you need to buy cheap and sell dear. As an example, consider the pre-crisis prices of residential property in 2007. The relatively low compared with Western European countries the level of prices per square meter of residential real estate look very attractive to investors. At the same time due to the high dynamics of growth in real estate prices over the past few years have made the Ukrainian market of one of the most profitable and desirable places in Europe for investors. Domestic real estate is one of the best ways to earn money.
According to the Kiev real estate agency Blagovest, the average prices of apartments in Kiev, was 51% in 2006, 44% in 2007 and 17,6% in 2006. What were the reasons for the boom with rising real estate prices?

Here they are:

1. With the increasing level of income people are looking for investment opportunities and improve their living conditions.
2. Real estate is traditionally one of the safest modes of investment, which was confirmed after the banking crisis in early 1990 and 2008-9 years. When people lost their savings did not trust banks.
3. The economy of Ukraine are few other investment alternatives, where you can invest money.
4. People tend to move to big cities, where large capital and opportunities.

But today the real estate market of Ukraine froze. According to Colliers International "Real Estate. Review" (2009, Ukraine) to expect full recovery of investment is not worth while the economy of Ukraine does not show clear signs of recovery. Nevertheless, the interest of foreign investors to the Ukrainian market will remain strong. Therefore, in this 2009, it's worth taking the time to review the existing strategies in real estate and search are sold at a reasonable price, objects which in the coming years. will generate income.

Urban Real Estate in Kiev - the results of the first half of 2009

There is no doubt that the bottom of local price has been reached in April 2009, after which began the price rise. Operational market data on real sales confirm this, although the parties of transactions are often unaware of growth, because they do not always have full and objective information for comparison.

When forecasting future crises, which are bound to arise, it must be remembered that the first to react to the economic collapse of multi-room apartments and modern types of housing, but the first to reach the "bottom" and then show up apartment prices rebound with the highest risk mortgages. These apartments in Kiev were: one-room apartments, such types as “gostinki” and “khrushchevki”. Despite the high liquidity of these apartments, the risks and the price fluctuations have been here the maximum.

Today, it should be noted differing vectors of expectations, both among the population, and among professional market participants. Some experts predict a further drop in prices after a technical rebound (delays) up to an additional two-fold reduction in the cost of real estate. The forecasts of other experts are based on expectations of a devaluation of U.S. currency, which will inevitably rise in prices for real estate nominated in the U.S. $.

The processes of the real estate market in general depend on the state of Ukraine's economy and its dynamics. Today there is no consensus regarding the hryvna exchange rate at the end of 2009, so the forecasts for the price dynamics become rhetorical in nature and is a continuation of some macroeconomic projections.

Due to the devaluation of the hryvnia real estate of Kiev has become quite cheap compared to other European capitals. Once foreign investors are aware of the current underestimation of the Ukrainian real estate, we can expect a wave of investment demand. The first signs of investment demand, particularly from Russia's capital, can be seen today.

In Ukraine, a collapse in housing prices, has become one of the largest in the world.
Prices are fixed in dollars and their collapse was more closely linked to the devaluation of the currency. In UAH hryvnia prices declined by only 8%, which is significantly less reduction in many developed economies.
However, given the 15%-term inflation over the past year, real estate was still cheaper by 23% in real financial terms, which is a significant incentive for consumers. In the case of strengthening the national currency can be made an additional social effect - the price of real estate to foreigners (in currency) will be higher, and for the Ukrainians (in Euro) below. However, this is only possible after the stabilization of the balance of trade of the country, and what should be targeted.

Therefore, the second wave of the crisis and price fluctuations of real estate is now likely, but not obvious. Her expectations associated with the expectation of strengthening the economic crisis and the second wave of devaluation of the hryvnia, which is not a positive economic expectations. If a downturn happens, its depth will not be as significant as the first time. A survey in March, a comparative analysis of property prices in the European capitals shows that our prices are close to their objective value.

Correction in prices has meant that the profitability of construction in Kiev, close to the normal 20-25% per annum. In the regions of construction activity generally unprofitable, the positive margin is preserved only in big cities and resorts. If prices will drop even more, it will lead to loss of investment attractiveness of construction projects, as a result formed a housing deficit, which in a year - half will lead to higher prices and revaluation of real estate.

The housing shortage is now a factor that creates long-term expectations on real estate prices. The construction boom of recent years failed to remove the low availability in real estate. At a Ukrainian average will continue to account for 22-24 square meters of housing, which is one of the lowest in Europe. We believe that the current price level is quite an objective for sustainable development of the real estate market, and further reduction in the cost of housing should not be associated with crises, but with an increase in supply, the pace of construction and growth of housing for the population of Ukraine.

Market of the outside city (rural, suburban) real estate.

Sharp drop in the rental cost of country cottages, houses and cottages, fueled a demand for this property: over the summer season of 2009 three of the four proposed sites found in the hiring of its clients. However, with the end of the warm period, many proposals left without tenants, while rental rates have fallen even more.

The last warm season of 2009 was marked to market rent of country cottages, houses and cottages by two trends:
1. sharp increase in supply and
2. equally rapid decline in prices in dollar terms.
Above all, increased as a percentage of the offer facilities business and economy + classes. Increasing the number willing to donate such houses for rent due primarily to the decline of sales in the suburban real estate: in comparison with last year the number of transactions declined by more than 35-40%. Of course, many owners of houses have decided to try to pass their property to rent in order to get at least some income from its exploitation. And to prepare for this, they began with the winter, investing in renovations and improvements. This is often dealt with objects in a bank mortgage.

According to experts, the growth of the proposals would have increased much more if the delivery of houses for rent does not imply complete interior decoration, furniture and household appliances. Given that many owners of suburban real estate continue to bring to mind its bare walls, we can safely say that next year the agency database grows by another 15-20%.

Despite the general stagnation of the real estate market, the demand for rental of country houses fell in comparison with other segments is not so much.
According to the director of agency services AN "Sitikon" Edward Brasas, compared with last year the number of transactions decreased by no more than 7-10%. Significant role in this played a significant reduction in rates in dollar terms. According to head of marketing company SV Development Vladimir Stepenko, the average market price for the rental of country houses have fallen in price by 30-50%. Minimum cost of renting cottages budget segment declined by up to $ 100/mes season. to $ 200 a year ago, houses class economy - up to $ 300/mes. against 500 last year, the business class cottages - from $ 1,5 to 1,2 thousand / month., premium-family houses - from $ 5 thousand to 3 thousand / month. and the houses with classified Deluxe - from $ 8 thousand . up to 5 thousand "That game with the prices allowed not to lose customers. If at the beginning of the season the owner could not pass their property on the desired price, it greatly reduces the cost of rent, "- says Stepenko. Indirectly, his words and the data confirm the Ukrainian real estate group. For example, for $ 400/ sq m. This year was commissioned a house area of 65 sq. m with all amenities, 25 km from Kiev (pp. Gnatovka, Kiev-Svyatoshinsky rn), which last year rented for $ 600. Residential building area of 57 sq. m with all conveniences and a set of necessary furniture in Brovasky area, who in 2009 surrendered for $ 600/sq m., was leased for $ 380. The cost of the same "cheap and bed apartment" without amenities in older suburban towns in the season kicked off with $ 100 a month., Whereas the year before their minimum price did not fall below $ 170-200 a month. "Unofficially, rent suburban housing, but elite segment is directly tied to the cost of hiring a similar class apartments in Kiev. When last year's minimum rent one bedroom apartments in the capital was $ 500 per month., Rental rates for the cheapest, but decent suburban housing also started with $ 500. Today the average price of "unity" has dropped to $ 300-350. For the same amount can now be removed and a small vacation home ", - commented on PR-manager of Ukrainian real estate group Daria Druzhchenko, adding that prices are in UAH per year remained virtually unchanged.

Experts estimate that the combined gross income of owners of donations collected in vacation rentals country real estate of Kiev region this year amounted to about $ 8.10 million, compared to $ 15-17 million a year earlier. Significantly decreased and revenues of agencies: in 2008 their total fees exceeded $ 1 million, then in 2009 they amounted to no more than $ 180-200 thousand Such a sharp drop in income real estate companies due not only to lower prices and fewer transactions, but decrease in the size of awards from 100 to 30-50% of the monthly rental rates.

With long-term view

According to a leading specialist branch of Park Lane Agency Irina Sologub, during the season in 2009 have remained vacant for about 20% of the proposed rental houses. "The main reasons for which are not removed some of the objects was a discrepancy of price and quality, unsuitable location and the lack of well-maintained local area", - she said. According to the company, the greatest demand in the current season, enjoy the home area of 200-300 square. m c furniture, the presence of all household appliances, landscaping and a good transport interchange, which are located at the Obukhov, Zhitomir, Odessa and Warsaw areas. Typically, the cost amounted to $ 1,5-2 thousand per month. Fall in the market remained just a segment of long-term lease of country objects. According to Vladimir Stepenko, now the proposal was reduced to 1,3 thousand houses, of which 500-600 have already been rented for a period of six months. "Maximum demand accounted for homeownership cost $ 1-1,2 thousand a month is not more 15 km from Kiev, in such towns as Old and New Petrovtsy, Hotyanovka, Hodoseevka, Plutovo, Kozin, Lucky, Mount, cherries, Glevaha, Vasilkov , Zazimya. Typically, customers are looking for a cottage area of 150-200 square. m with an independent water supply, heating, furniture, a standard set of household appliances and all amenities. So criteria not all exhibited in a long-term rental of facilities, so the order of 30-40% of demand will remain unclaimed, "- he said.
Independent expert market Jaroslav Tsukanov argues that long-term leasing of suburban housing in the mainly interested in the same customers who shoot apartments in the heart of the capital - visiting top managers and foreigners. "Housing in the center and a country house cost to tenants in about one sum. But if you shoot mostly flat single workers, the home - family, especially foreigners, who are accustomed to have a lot of square meters in nature ", - he said. The cost of long-term lease of suburban housing, typically 10-20% lower than in the summer season. However, the proposal, which will be vacant even one or two months, according to experts, will throw another 10-15% from current prices.

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