Real Estate Development, 2008: Speculation, stagnation and resuscitation

08.12.2009 16:01
The outgoing year was no surprise to the developers - everything happens at the Odessa real estate market was the result of past unprofessional actions of developers and buyers. The future as promising professionals must become more rosy, though, because there's nowhere worse.

Beginning of the End


Prerequisites for the situation that has developed in the market today and in particular the Ukrainian Odessa real estate, outlined at the end of 2002, when the construction industry after a long stagnation began to develop rapidly and property prices have just skyrocketed. Came the "golden age" of the builder: within 4 years (from 2002 to 2006) of residential property has risen to 6.10 (!) Times, some objects are resold three times a year.

- In the early 1990's, many residents of the CIS were burned to participate in pyramid schemes - trust funds. In 2002-2006, the situation repeated itself in the real estate market, - says Andrey Grandfathers. - In Odessa, appeared just unreal the number of ordinary real estate agents, who had owned several apartments under the mortgage. The market had been withdrawn cottage villages, whose land was also under the mortgage. But it ended in 2007, when it stopped selling in January. Normal February-June rise was not, and it tried to explain the upcoming elections. Elections were held, and the October-December growth also occurred.

Decline in demand for property is not long in coming. Experienced investors began to take away their money "from the tower blocks away and began buying up land. For example, last year, analysts have noted a huge increase in the number of proposals "cottage towns". And then there's inflation. C April 2007 to April 2008 it had grown to 30%! At the same time in 2007, was issued in 1,5 times more credit than has been accumulated in bank deposits.

As a result, in early 2008, the market is "woken up" with an excess of proposals (now in Odessa, according to the company "Resource Development", more than 180 high-rise residential new construction, and more than 40 "cottage towns"). "At the breakfast market has received the decision of the National Bank of Ukraine on liquidity (May 2008) aimed at" improving "relations between earmarked funds and credits (and in fact for the credit funds buy up to 80% of housing). A "for dessert" - hryvnia deficit, reduced credit rating of Ukraine (as at end July Standart & Poor's lowered the index of our country at 29%), appreciation of currency borrowing and lending virtually unavailable, ie, their appreciation for 3-10%, plus shortened to 2 times the credit period - from 25-30 to 10-15 years. The result - a significant decrease in the number of transactions in the real estate market, zatovarennost storage of building materials and general crisis in the industry.

True, in 2008 experts called a watershed. This year, say market participants, the positional battle between buyers and sellers first began to win customers.
Residential ...

Considering each of the segments of the real estate alone, Andrew Grandfathers sure that balance is achieved only under high-rise residential real estate:

- Now the prices here range from 800 to 8,000 dollars per m2. Widely represented all classes: from the "economy" to "premium". Lower financial bracket separate living space - about 30 thousand dollars

One of the main problems of this type of real estate experts call is still inflated price per square meter and nondescript belonging to a particular class. And ideally, in such an object must be competent financial scheme with a clear documentation that the bank simply has not found the arguments do not recognize the object of mortgage collateral.

In the segment of cottage building situation is less optimistic. According to opinion polls, 52% of the population of Ukraine would like to have a private house - just a huge demand. At the same time today at the Odessa market for more than 40 cottage offers, and none of them does not satisfy the demand or the price or quality.

- A large number of cottage projects came at the peak of land prices. They bought and resold the speculators - says Andrey Grandfathers. - Now on the market comes to a real client and did not see anything worthy. The current owners of the land simply can not understand that their designated price is prohibitive and does not allow the developer to allocate enough space under the infrastructure. Odessa gladly snatch up a few projects, cottage building, but they should ideally be well developed and, again, from a financial scheme, which would enable the buyer to use the current mortgage rules.
... And non-residential

Commercial real estate market experts call an even more controversial than residential. So, commercial real estate in Odessa, it seems chronically "suffer" extremely unsatisfied demand, and, as a straight retail, and in the segment of retail and entertainment centers. Fifteen of the existing mall and shopping center - small, poorly-conceptual (except perhaps one, working with buyers B + - wealth is above average and high) and the demand is not satisfied. The demand is confirmed by annual growth of sales prices - up to 27 thousand dollars per m2, rental rates - up to $ 300 per m2.

- GSM market is pleased to host the first truly large-scale shopping mall that had already been designed and will appear in the city in 2009-2010.: An area of ??110 thousand m2, the second - 150 thousand m2, - said Andrey Grandfathers. - Total same in Odessa today declared a dozen new shopping mall. The first of the planned although foreign consultants initially positioned as an object for buyers in categories C and C (average wealth and lower-middle), but eventually starts a tenant of a clear category B.

Now, experts say, for the Odessa real estate market is characterized by a phrase uttered by one of the national consultants: "Failed projects do not exist!" However, experts warn: this is still the market forgives all: the failure location, and "salad" of tenants (where the neighbors T-shirts for 20 USD. and exclusive watches from $ 500), and other lapses. Today's market shopping mall is estimated as the most promising, and hence is not far away are the days when developers have to work on the concept of a project.

But the office property may be under attack: this segment is most sensitive to the economic situation in the country. In Odessa, projected more than 20 office buildings, and developers have big concerns about the occupancy of these areas. Potential consumers of new construction of office - calling into our market, foreign companies with high corporate demand for office, as well as the "younger generation" of domestic companies. Unfortunately, the first does not contribute to the global crisis, and if they come, it was mostly to settle in Kiev. Second, among other things, prevent, and even domestic economic situation: taxes, inflation, tightening credit conditions of business, etc. Since March, the hryvnia rate on corporate deposits rose by 7.2% to 17.5% for the contribution up to a year, and some banks are the third and fourth groups (ranking NBU) are willing to pay up to 30%. All this, of course, applies to the loan. Office real estate market today in a state of stagnation, as evidenced by the uselessness of the squares in the two new office centers, where the initial rental rate in the planned $ 50 per m2 has already been reduced to 35 at. e.

Situation with the supply of real estate can be called funny if she was not so sad. Until this year, Odessa was only 2 modern logistics facilities in the area of ??30 thousand m2. Today is declared multiple objects, and the overall "logistics" of Odessa area must cross ... half a million (!) M2.

- It seems that our real estate development is constantly acting, guided by some kind of slogan: from 2002 - "Getting all build homes!" From 2006 - "We want business centers!" Now, "a blow on logistics!", - Says Andrew Fathers. - Moreover, this impulse yielded as foreign companies, such as "Eurasia", which went under the construction of 70 hectares, and local developers. I do not see the need for so many squares of logistics.

The main clients for these squares, according to Andrew Dedova - is, first of all, the pros and logistics companies, manufacturers, trade and distribution networks. However, some of these consumers believe that the logistics of the city with a population of less than 2 million people in developing interesting. Others think that it is important to promptly cover the whole territory of Ukraine. Still others live by the principle: "Where the head office, where the remaining units, and stop at Kiev. The fourth did not want to communicate with the Ministry of Transport of Ukraine. As a result, today the logistics capital of Ukraine is the national capital - Kiev. Odessa region is, though, and remains a center of maritime commerce, logistics performs far only role overload.

Finally, another segment of real estate, development of which argue developers - hotel. In light of Euro 2012, this market could develop with extraordinary rapidity, but experts state: here the developers do not just rush to resist impulse, knowing that the football championship last two weeks, and real estate will then operate for many years. Today in Odessa, more than 100 hotels, of which officially certified as Five Star was the only one. Unofficially, the "higher category" rank as one more.

- The media called some astronomical number, - said Andrey Grandfathers. - However, there are legal limits: in our country prohibited the construction of housing at a distance of 500 to 2,000 meters from the coastline. That built housing and apartments are called, ie hotels extended stay. In general, I think that the hotels of the lower and middle segment of Odessa is provided. But two or three hotels of high, indeed of European quality lacks.
Investments around the head?

- Pakistan is not developing "because", and "contrary", - says Andrey Grandfathers. And he added: - Now the government finds increase in foreign direct investment. I think that the domestic business, trying to protect their property, activates translation of assets under foreign jurisdiction.

One of the major indicators of the prospects of real estate market in Ukraine, experts say, is the arrival of foreign consultants. It began about 12 years ago and continues to this day. Among the most famous: Colliers Int, Knight Frank, CB Richard Ellis, etc. They support the intentions of such major retailers like Inditex Group, NewYorker, Marks & Spencer, Stockmann, etc. By the way, 1,5 thousand m2 new building Zvezda Greece on the Greek area (first floor) has leased it «Marks & Spencer», which is soon planning to open another in Odessa at least three stores.
In general, the Professionals say that the crisis need not to wait, and overcome.

www.zagorodna.com

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