The Business Online

14/03/2007

UKRAINE is one of the most promising property markets in the world, according to Knight Frank. The international agent opened its first office there last autumn, dealing in prime residential real estate and commercial property. Ukraine is a comparatively young market and Knight Frank reckons its growth could parallel Moscow’s heady development.

Western and Russian investors are scouring Ukraine, with those looking for residential property focusing on prime areas such as the capital, Kiev, the fashionable Crimean coast and the fast-growing ski resorts of the Carpathian Mountains, including Slavsk. Budget airlines have yet to put the country on their radar but there are plenty of scheduled flights to Kiev and Lviv (via Vienna) from Britain (BA and Ukrainian airlines) from £120 return. The journey time from London is under four hours.

Investment dollars are pouring into Kiev property for similar reasons to those in Moscow: rising prosperity, a housing shortage, increasing accessibility of mortgages and a lack of other reliable investment options. With those dynamics, Kiev has been undergoing a price boom and values are still rising by around 2% a month, according to UA Properties, which has offices in Ukraine and Britain (www.uaproperty.com). The estate agent sees no sign of price rises slackening in this edgy, cosmopolitan capital, home to 30,000 Americans, as well as many other nationalities.

Though Kiev’s best bargains have gone and prices are not cheap, they’re considerably lower than in Moscow and a snip by European capital standards. A two-bedroom apartment in the newer part of town can be had from around $80,000 (£41,000, E61,000), while across the river in the historic heart of the city, an attractive two to three-bedroom flat costs anything from $200,000. For good letting potential, the closer to a metro station the better. Around $1,500 a month can be charged for a studio flat in a good area, with rent for two-bedroom apartments rising to $4,000 a month.

Another hunting ground for investors is Ukraine’s south Crimean coast, centred on the resort of Yalta – a favoured hideaway for fashionable Muscovites and a seaside playground for well-heeled Ukrainians. This stretch of the Black Sea shore, with its historic towns, stunning scenery and Mediterranean microclimate, is also becoming better known among westerners. Yalta is pricey by Ukrainian standards, with swanky villas fetching millions but you can grab a two-bedroom seaside apartment from around $150,000 or a rentable studio with sea views from around $40,000 to $60,000.

Investors could also look for opportunities in historic Balaclava, where new construction has been banned, according to Emma Cornah at UA Properties. At present, a pretty apartment with great views can be had for as little as $80,000. An airport is being built nearby, making access easier. Investors are also showing interest in the Russian side of the Crimean peninsula, bordering the Sea of Azov, where you can buy a large beachfront villa plot for around $30,000. Rental rates in the prime Crimean resorts are from around $50 to $70 per night in the summer season, for an average studio or one-bedroom flat.

The cost of building on your plot will depend on access to local services and supplies, but average building costs are around $500 per square metre. That means you could build a typical three-bedroom villa in most coastal locations for around $70,000, plus the cost of the land.

For rentable properties, winter resorts in Ukraine’s Carpathian Mountains are a good hunting ground. At present, the hottest place to buy is the ski resort of Slavsk, an hour’s drive from Lviv airport, which has fine runs with a good snow record, and is currently being redeveloped. Popular with Russians, Ukrainians and Poles, Slavsk’s hotels are packed out in peak season, with even basic rooms renting for $150 a night within the resort and $100 a night out of town. A building plot can be had from $30,000, while $300,000 will buy a large plot with two ready-built wooden ski chalets.

Buying Costs

Investing in Ukraine is not without risk. Buyers should be especially cautious if buying off-plan, because developments tend to lack insurance-backed guarantees of completion. Any land and property ownership rights should be transferred to the buyer on signature of the contract, or at least by the second instalment, but not all developers offer this type of contract. Also, get local advice on tax. Ukraine has recently introduced a 5% capital gains tax on property. Buying costs are around 3%-4%, plus local notary fees, legal fees, translation costs and estate agency fees if using a local broker to negotiate a deal.