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Realities and prospects of the real estate market of Ukraine

15.03.2018 Analytics

Ukraine’s real estate market throughout 2017 experienced the impact of both economic and political crisis phenomena, under pressure from the economic downturn and lower purchasing power of the population.

Despite all the negative trends, construction statistics in the period 2017 recorded positive results, which are confirmed by such an authoritative world ranking of Doing Business ease of doing business, conducted by the World Bank, in which Ukraine has improved its performance and rose to the 76th position. In this study, it was recorded that according to the indicator of “obtaining permits for construction” the country had a record improvement in its results and hit the top 40 countries.

OFFICIAL DATA

Based on the data announced by the State Statistics Service, in Ukraine, growth in volumes of construction works in all segments of construction has been recorded. For example, during the period of 10 months of 2017, it was noted that the data for the overall increase amounted to 23 %, in particular, the construction of residential buildings increased by 13 %, non-residential – by 27 %. Construction of engineering structures grew by almost one-third – 28 %. In the monetary equivalent, the total volume of work amounted to 73.5 billion UAH.

At the same time, NBU experts note the decline in housing prices in the segment of the Ukrainian real estate market, which is reflected in the reports of the regulator. Due to the lack of demand, the price of a square meter is sold at virtually the cost price.

If speaking geographically, then large cities of Ukraine are replenished with new complexes and new buildings.

For example, statistical data confirm that over the period of 9 months of last year, the housing stock replenished by 6.8 million square meters. m, ie increased by 21.4 %, compared to the same period in 2016. During this time put into operation about 84.4 thousand apartments, the cost of 1 meter square is about 12000 UAH. In 2018, experts predict a rise in price to 14340 USD. per square meter m, however, all experts refer to an increase in demand.

THE FIRST CRISIS

Recall that the real estate market reacted to the crisis in 2008, a sharp fall in prices, but in 2012, the situation on the real estate market has stabilized.

In 2014, changes reoccupied this segment due to the appreciation of the dollar / UAH, ie the fall was about 2 %. The factors that led to the fall in prices were the annexation of Crimea, as well as the war in eastern Ukraine. Already in 2017, market experts stated that during this period, the price drop was about 0.5 %.

It is forecasted that in the current year the market should be stable, although, it is possible to gradually reduce prices.

The catalyst for price growth may be an increase in real estate demand, experts do not predict it (demand) in this period of the year. To date, it is known that the supply exceeds the demand in this segment.

It is interesting to know that throughout the year 2017 a price decrease of 10-15 % was recorded throughout the real estate market due to the insolvency of the population, as well as the result of the war with the Antiterrorist Operation, and the people who have the opportunity to purchase real estate, are in no hurry to invest, referring to instability situation, as well as lack of mortgage lending.

As a result, in the period of 2018, the trend in the real estate market will lead to a 10 % decrease in prices, a sharp collapse in the real estate market should not be expected.

A new trend is the transition from a price point to a qualitative one, that is, an emphasis on a buyer who chooses not only the most advantageous cost, but also a set of certain benefits. Now our developers have to rely on the experience of European states, where people choose not only an object for living with high-tech and innovative management means of the house, but actually fall into the mini-state with modern parks, cycle tracks, children’s play and sports grounds, entertainment complexes.

PRICE FOR NEW BUILDINGS

If we talk about the price of a square meter in the capital, then buying an apartment in the segment of “economy class” on average is possible for 17630 UAH per іquare meters, in the segment of “comfort” the price will be already 21724 UAH per іquare meters, and in the “business class” – 32,913 UAH per sq. m. m, and the top price in the “premium” – about 49861 UAH per іquare meters.

DEVELOPERS

  • The leader of the developers is the company “Ukrbud”, which handed over 18 thousand 231 apartments.
  • Second place in the company “Kyivmiskbud”, which delivered about 4 thousand 333 apartments.
  • The third place in the company “Capital of the Group” – 947 apartments.

SUBURBAN DEVELOPERS

The first place among developers of the suburb is the company “Synergy”, which delivered 944 apartments, city of Irpin.

  • Second place – Martynov Real Estate – 594 apartments, village Borshchagovka
  • The third place – “Novobud” – 498 apartments, village Svyatopetrivske.

SECONDARY MARKET

During the first month of this year, a slight decrease was recorded, which was reflected in the volume of the total area by 3.3 %, and in the dollar equivalent by 3.6 %.

The median price per square meter of housing for the month decreased by 0.4 % to $ 1053 per іquare meters, which in the annual equivalent was 4.9 %.

The minimum number of apartments in the segment of secondary housing is represented in the center of the capital – 20 %, the Left Bank shows about 31 % of apartments, Right Bank is the leader of sales – 49 %.

If we talk about the size of apartments, then the secondary market offers:

  • one room – 27 %;
  • two-room – 32 %;
  • three rooms – 34 %;
  • four rooms – 7 %.
  1. The leader of the proposals is Darnytsky District – 15%.
  2. The second place is Goloseevsky district – 14%.
  3. Bronze medalist – Pechersk district – 13%.

Specialists of the Ministry of Justice published joint statistics on transactions in the secondary market during the third quarter of 2017.

Complete information by region will appear at the end of February / beginning of March.

According to data only from July to September, state and private notaries confirmed 65484 transactions of sale and purchase of apartments and houses. If conditionally divided into the number of Ukrainian regions, then approximately 2800 transactions / region will turn out.

RENT

If we analyze the trends of the lease segment, then there is every reason to predict the increase in price growth due to demand. The peak period is August-September, which is already stable and traditional in the market.

The segment of elite housing rental has practically not changed, but offers cheap housing showed growth.

Experts note an increase in demand for apartments in major cities of Ukraine, where there is an offer of work: Kiev, Kharkiv, Dnipro, Odessa, Lviv, Ternopil.

In 2017, the increase in the price of apartments for rent was about 15-20 %. In Kiev, renting a small one-room apartment on average is estimated at 6 thousand UAH.

True, tenants now prefer to rent real estate in multiapartment complexes.

COTTAGE OFFERS

At the beginning of the year, the price of a square meter in a cottage located in the Kiev region was fixed at about UAH 16,556, which confirms the price increase by 3%, if compared with the same period last year.

Topovymi are proposals for sale in a relatively close location to the capital – up to 12 kilometers: Vyshgorod district, Irpin, Bucha, Obukhiv, Odessa directions.

Gold prize-winner of a square meter price in a cottage town is Obukhiv district – 27060 UAH per sq. m.

It follows the Vyshgorod district – 20039 UAH per sq. m, Vasilkovsky district – 15984 UAH per sq. m.

The “square” here grew by 5.4 % compared to January 2017, which is equal to 818 UAH.

PRIVATE SECTOR

Private house sales analysts recorded an increase in sales proposals in the Podolsky district of Kyiv by 9 %, in Obolonsky district by 8 %, and in Desniansky district by 3 %.

The decrease in activity is reported in Solomensky, Shevchenko districts.

Experts inform that the sale of houses in the suburbs of Kiev and in all regions tends to decrease in the amount of 1 %: Borispol, Brovary, Vasylkivsky, Vyshgorodsky.

COMMERCIAL REAL ESTATE

Throughout 2017, the commercial real estate market was affected by the economic downturn.

Business activity of this segment of the market recorded a decrease, as, indeed, in other segments of the real estate market.

The sphere of the office and trade market was marked by an increase in vacancy against the background of raising UAH rates.

The median price of lease of retail space at the beginning of this year in large cities of Ukraine was $ 12.5 per sq. m, which indicates a 7.7 % decrease in prices if compared with the beginning of 2017.

HOTEL REAL ESTATE

The hotel business has fixed a decrease in occupancy. Major market developers have delayed the opening of the facilities, taking into account a number of economic factors.

Demand decline is fixed by market experts in the trading segment as a result of the devaluation of the UAH, which eventually affected the retailers’ activities, that is, the reduction of trade resulted in the reduction of retail space.

Experts predict that most retailers still have to postpone plans to expand the trading pavilions. True, such global representatives as IKEA and H&M are looking at the Ukrainian market and have announced their entry.

Ukraine’s economy over the past year has demonstrated stabilization and the first signs of growth. But the need to change the very model of economy in Ukraine has come to an end: to transfer from the raw material type to create an additional cost in the middle of the country.

Such reforms should relate to the real estate market as one of the segments of the economy, which should become an important factor in the formation of the country’s GDP.

PERSPECTIVES

The real estate market is “young”, because its formation begins with the declaration of the independence of Ukraine. The real estate market in the state is being formed now: the legal, legislative, legal bases are being improved, financial and bank lending is regulated, attractive conditions for doing business are created, and as a result – a guarantee for attraction
of investments, the experience of European countries in this field is used, which will allow develop the real estate market and substantially increase revenues to the state budget.

As an example of reforming and improving the legal framework, the Cabinet of Ministers is preparing amendments to the Housing Code, which should define the rules in the field of leased housing.

The future implies expansion of options in real estate, where the owner of the rented accommodation will be able to act not only the individual, but also the company, state enterprises and the state, which requires the creation of a legal mechanism that regulates the relations between the parties, will expand the function of redemption of tenants of housing. As a result, the market will become an effective source of replenishing the country’s budget.

Due to the possibility for young people to purchase their own housing on the market appeared flat-smallscale segment smart, that is, these apartments have a minimum area of up to 20 meters square. The market has already reoriented to the needs of customers, for example, it was recorded that in new buildings 53% of apartments – one-bedroom. Experts explain such a trend in the growth of utility bills, modernization and compliance with the requirements of buyers, which in the end affects the formation of the value of apartments. And besides, modern people spend
at least the time in their homes, which influenced the standards of the infrastructure plan (development of the necessary for life and entertainment structures on the territory of the complexes).

INVESTMENTS

Ukrainian companies-developers have passed the stage of “cleaning”, that is, there are still strong players in the market with history and reputation. But this does not mean that the market is closed to young and prospective companies. Cities that have a job market are regions that are attractive for construction. Experts predict a renewed interest in commercial real estate.

Ukrainian investors remain the main source of financing for M&A transactions, second place is foreign strategic investors who already have their assets in Ukraine and are ready for further expansion of business. For example, in 2017 an agreement was made according to which Ukrainian businessman Sergiy Tigipko bought 100 % of the assets of the developer company “Building Invest Group” through his company Devisal Limited. It is interesting to know that the acquired company – the developer of the construction of a shopping and entertainment center (shopping center) Podol Mall.

During 2017, New Ukraine PE Holding bought two operating Business Centers Prime and Eurasia from BTA Bank and the Turkish company Beta Kimyasal Maddeler Yatirim A.S. (Beta, Istanbul) increased its share of assets to a control package at Miroplast (Dnipro), a manufacturer of metal-plastic windows.

The problem of providing citizens with comfortable and comfortable housing remains a major, urgent necessity. The first and main work should begin with the release of an emergency housing fund of the Soviet period, in particular such popular old “Khrushchev”. Therefore, the real estate market has a considerable potential and development prospect based on the implementation of innovative technologies, energy saving, new building materials, scientific achievements in the field of construction and architecture, the creation of “smart” and ecological buildings, the
construction of non-isolated buildings, and entire complexes with complete infrastructure ( schools, shops, sports centers, roads, cinemas, swimming pools) are mini-territorial and residential independent associations that offer citizens a comfortable and decent living. Only such an innovative approach will create attractive conditions for investors, for bank lending, for the establishment of the real estate market as a truly important sector of the country’s economy.

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