October 2008

The cost of housing on the primary property market in Kyiv according to the September results left stable.

Thus, housing of economy class grew in price by 0.2%, housing of business class has fallen in price by 0.4%, and cost of residential property in Ukraine in premium segment raised in average by 3.6% comparing to August of current year. These are data of analytical department of building-investment company "Kyiv Zhytlo-Invest".

As it was reported by the analytical department of the company in September in 11 object the cost of housing was reviewed into the side of increase: 2 of them are in economy class, 2 - in business class, 3 - in premium class. Besides in last month sale of 8 objects, 5 from which are of economy class, were renewed and started.

Economy class

90 objects (1244 apartments with area from 32 to 355.3 m2) located in the 4-th zone were analyzed. Comparing to August 2008, average price of 1 m2 of housing of economy class increased by 0.2%, and included 10627 hrn per 1 m2:

- one-room apartments - decreased by 2.7% (by 325 hrn) to 11313 hrn;

- two-room apartments - grew by 2% (by 213 hrn.) to 10662 hrn;

- three-room apartments - grew by 0,6% (by 64 hrn.) to 10129 hrn;

- four-room apartments - grew by 2.2% (by 219 hrn.) to 10369 hrn.

Business class

63 objects (767 apartments with area from 39.35 to 330.4 m2) located in 3 and 4 zones were analyzed. Comparing to results of July 2008, average price of 1 m2 of housing of business class decreased by 0.4% and included 14832 hrn per 1 m2:

- one-room apartments - decreased by 0.6% (by 89 hrn) to 14497 hrn;

- two-room apartments - grew by 0.6% (by 91 hrn.) to 14654 hrn;

- three-room apartments - grew by 0,05% (by 7 hrn.) to 14808 hrn;

- four-room apartments - grew by 0.2% (by 27 hrn.) to 16047 hrn.

Premium class

24 objects (210 apartment with total area from 44.55 to 380.34 m2) located in 2 and 3 zones, were analyzed. Comparing to August 2008 an average price of 1 m2 of housing of premium class increased by 3.6% and included 24018 hrn per 1 m2:

- one-room apartments - decreased by 5.8% (by 1328 hrn) to 24259 hrn;

- two-room apartments - grew by 4.9% (by 1219 hrn.) to 25852 hrn;

- three-room apartments - grew by 2.5% (by 585 hrn.) to 23778 hrn;

- four-room apartments - grew by 1.3% (by 284 hrn.) to 22676 hrn.

Ukrainian real estate for sale didn't lose interest for investment

From the beginning of this year the economy of the world lost 19 trln of dollars, 2.6 trln of which were lost during last days. World financial crisis from some side touches Ukrainian economics. Main Ukrainian fund index decreased from May 2008 approximately by 60-70%.

More than others struggled property companies, which successfully reached IPO and attracted foreign investments to real estate in Ukraine. Developers companies reprofile their profiles in order to save interest for foreign investments into the Ukrainian property for sale. Analysis of new strategy of developers companies shows that now "favorites" are office, trading and elite Ukrainian real estate, as well as hotel property in Ukraine. The last events on the property market do show this tendency. The first decisions were made by one of the largest investing developers company in Ukraine - "21 vek" ("21 Century"). They proclaimed first that due to world economy crisis of liquidity, "21 vek" will focus mostly on realization of profile projects of commercial and elite property. Correction of strategy of company's development also influenced the limitation of investments, partial personnel dismissing. As well recently it became to known that pure income of the company XXI Century Investments (Cyprus), holding company of developers group "21 vek" (Kyiv), in the first half of 2008 included 76 763 mln USD, since during the 1-st half of year 2007 the company finished with pure income of 1 mlrd 18 432 mln USD. Another huge developers company "HCM group" also announced about changes in its plans. The company will not build housing of economy class and will focus mainly on the projects of elite and commercial property in Ukraine.

Managing company "Tiko Constrcution" decided to act more radically without termination of realization of any objects, but putting them for sale. Leaders of the company announced about the sale of building objects of logistic complex in the village Kopyliv (Makarivska area) and cottage town in the village Hnidyn (Boryspil area of Kyiv region). Such decision was adopted due to necessity of attraction of investments to the profile projects of the company.

Investing in the Ukrainian property is absolutely of great interest for the Western and Russian investors with those looking for housing focusing on main elite areas such as the capital, Kyiv, the fashionable Crimean coast and the quickly-growing ski resorts of the Carpathian Mountains, including Slavsk. There is a great number of scheduled flights to Kyiv and Lviv (via Vienna) from Britain (GB and Ukrainian airlines) from 120 GBP return.

Ukrainian capital definitely raises the level of the most prominent European capitals. Though Kyiv's best bargains have left and the cost is not cheap, it is considerably lower than in Moscow and a snip by European capital standards. Investing into Kyiv property for sale is highly reasonable decision for the reasons as rising demand, a housing shortage, increasing accessibility of mortgages and currently holding world economics crisis. With such dynamics, Kyiv had been and keeps undergoing a price boom and values are still rising by around 2% a month, according to UA Property company results, which possesses offices in Ukraine and Great Britain.

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

In the formation of development project in the West on the stage of reception of permission for building the key participants are realtors (search for the square), marketing specialists (conclusions as for the plot, data for marketing investigations), consultants (development of conception of the property object), lawyers (registration of right of utilization), estimators (estimation of property object for reception credit resources in bank establishments), brokers (square realization) and investors. After that a time of real development starts, which includes work of architects, planners, management companies, designers, brokers and others. In the Ukrainian practice the majority of these functions are executed by developers.

Conventional scheme of development in Ukraine differs from mentioned one. In its basis lies availability of land site within which a conception of the project is developed. For today service market in the management of projects develops more systemically than it used to be several years ago. It can be mentioned that the stage of single projects has gone.

It was mentioned by the specialists that Ukraine today is considered to be one of the most promising property markets in the world in spite of the world crisis in economy. Ukraine is a young market that can already compete with the property for sale market in Moscow.

The majority of property specialists think the crisis will not touch the elite property in Ukraine. The level of demand for any property is formed, including by the buyers' possibilities. The capital housing of "premium" and "de luxe" class always have their payable buyer, interested in a high quality of house, good location, decent neighbors, large area of the apartments. Such apartments, both in primary and secondary property market, can wait for their buyer for several months. But when he is found, all moral and material expenses are covered by the high cost of housing in the elite house, the price in which starts from 5000 USD per 1 m2 and reaches 20 000 USD per 1 m2.

In any case the Ukrainian property still is of great interest for investing by different investing companies. For instance, ROSS Group (Russian holding) plans to come into the Ukrainian market (see below). The company provides all spectrums of services in the sphere of trading and office property. The British company European Future Group in coming future has the intensions to realize the first large project in Ukraine - Trading Center on the Brovary prospect.

Total volume of investments in the projects in property field of the investing industrial group "Eurasia" in 2008-2010 will include 6 mlrd USD. Probably part of these funds will be directed to Ukraine, where the company already possesses several office centers. The other companies in Kyiv that struggled from world crisis still announce their optimistic plans.

For example"KDD group" plans to invest into its projects about 200 mln USD during this year. "21 vek" is ready to invest at least 100 mln USD into existing projects. And these are not all investment plans of the Ukrainian and foreign companies, that gives the basis for hope that Ukrainian property will be able to move through the crisis situation without significant losses.

In the nearest future the prices for property in Ukraine can decrease

In the nearest future the prices for the real estate for sale in Ukraine can decrease by 30% from the level at the beginning of the year. Such opinion was expressed by the leader of property department of the company Development Construction Holding Nadezhda Lysenko.

As well she added that this index for today is an average, and nobody can definitely tell how the decrease will be segmented in different market sectors.

Russian companies will be activated at the Ukrainian property market

Holding ROSS Group (Moscow, Russia) has the intensions to enter the Ukrainian property market.

It was reported in the company report. "In coming future holding ROSS group plans to enter the Ukrainian market. During the exhibition (Mall Expo, that took place on 17-19 September 2008 in Kyiv) we became sure that currently the real estate market in Ukraine develops very quickly, developers and investors have the necessity in high quality service of consulting, broker and managing companies" - commercial director of the company Alexander Bakhteev reported.

Company ROSS Group provides the whole spectrum of services in the sphere of trading and office property. It includes ROSS Consulting, which manages marketing investigations, development of conceptions of trading recreational centers and business-plans; ROSS Development, which provides services as for the building consulting, technical observation, project financing and putting of the object into operation (development management); ROSS Management - manages technical exploitation, management of financial problems, relations with renters and management of marketing (complex management of an object); ROSS Cinema is in charge of creation and management of multihall cinemas in Trading centers. As well the company includes ROSS Region Management - provides management of the objects of commercial property in Pryvolzhzhya region of Russia.

Crimean property for sale

In the specialists opinion the prices for the residential property in Ukraine on the Black sea resorts will definitely grow. According to some data Yalta real estate will grow in price at least fby 50%, and other forecasting says about 70-100% during coming 3-4 years. As a result the flats of economy and business class can increase in price for 3-4 000 USD per 1 m2, and high quality Crimean real estate will cost 7-10 000 USD per 1 m2, that is similar for the prices in Sochi.

In the South-Eastern part of the Crimean peninsula the prices increase more than locally. The most expensive housing is located not in the largest city of Feodosia, but in the villages Koktebel and Novy Svet. The cost of land site here reaches 10 000 USD per 100 m2. And in Feodosia still the land can be bought for 1 000 USD per 100 m2.

Today Russians take not very significant part among the buyers of the Ukrainian property - about 15%. Last year the specialists in real estate operation fixed the increase in demand for the real estate in the Crimea for about 10-15%. Some decrease in growth definitely was caused by political situation in Ukraine.

Hence today prices for the expensive Yalta real estate can suit the Sochi objects. High quality Ukrainian property in the city can be purchased for the price of 4-5 000 USD per m2, economy class flats - for 1.5-2 000 USD per m2. Hence you have to be ready that the latter will be not in very satisfactory condition. Village house in the suburbs near the city can be bought for about 50-70 000 USD, and the longer distance from Yalta the cheaper the prices for the plots are (about 2 000 USD per 100 m2).

Generally there is no much new real estate in the Crimea. The primary market is mostly presented by the local developers - mostly on the Southern coast of the peninsula. Ukrainian developers propose the customers business-class real estate for the price of 1.5-3 000 USD per m2 on the primary stage of building, and apartments of elite- class - for 2.2 -3.5 000 USD per m2. The prices for the economy class on the primary real estate market start from 0.7 -1 000 USD per m2.

Property in the Western Ukraine

The market of residential property in the Western Ukraine develops by the same scheme as the capital one - demand decreases, and prices stand where they are. And till the end of the year the situation is not going to be changed.

Lviv, where the average price for the apartment on the secondary property market reaches 2000 USD per 1m2, didn't lose its buyers. On the contrary, the demand here is stable. By the way the same price is put for the apartments in Odesa, Dnipropetrovsk and Kharkiv - large mega cities of Ukraine, trading and industrial centers, in general very important Ukrainian cities.

It is ought to mention that according to the results of the first half of year, in the rate of the cities by the price for the residential secondary market property, that was concluded by the Committee of Property Specialists Association, Lviv takes the fifth place, coming forward Dnipropetrovsk, Kharkiv and Sympheropol.

In Uzhgorod the average price of the apartment on the secondary market reaches 1700 USD per 1 m2. According to the words of Uzhgorod property agency "BEYAandCOM", for the first half of year the prices for the secondary market property grew in price by more than 26%. But there are forecasts that till the end of the year the prices for property will not grow and will be stable. For today the cost of one-room apartment in Uzhgorod reaches 40-70 000 USD.

In Ivano-Frankivsk the apartments on the secondary market have the prices of 35-80 000 USD. There are also more expensive proposition. According to the words of director of property bureau "Business partner" Nina Tykhon', there are no tendencies to prices decrease in the city. Of course, except of the cases when somebody needs to sell the apartment urgently. Then the customers significantly decrease the price. In general, from the end of August the apartments grew in price in the city, and demand for the Ukrainian property for sale significantly increased. Tykhon' mentioned that from the beginning of the year demand for the property in Ivano-Frankivsk grew in price by 20%. "If at the beginning of the year the cost of price was 1000 USD per 1 m2, then now it is 1300 USD", - she added.

Suburb housing in the Western Ukraine

Suburb residential property in the Western Ukraine is now of great interest among the investors, especially if the house is located in tourist area. Tourist season can bring much benefit for the owner of residential real estate in Ukraine. "Three years ago my wife and I have rented an apartment in Slavske in a cottage for 40 hrn per day. Last year the owner asked 150 hrn."- PR Manager Alexey shared his expression as for the rest in Carpathians. If all the rooms were occupied, and according to Alexey words there are five of them in the house, then the owner got 750 hrn (more than 150 USD) per day. That is why purchase of the house here can be a pretty beneficial investment.

Today in Lviv region, as well as in Slavkse and other resorts, there are houses for sale for leasing of rooms - with 4-5 rooms, three lavatories, storage room for skis and other facilities. The cost of such two-floor wooden house can reach 550 000 USD. More simple houses are indeed cheaper. For example, in 5 km from Truskavets, one-floor wooden chalet with area of 30 m2 will cost 30 000 USD. Three-floor cottage in Yaremche (Ivano-Frankivsk region) with nine bedroom, sauna, will cost more than 750 000 USD. More simple house in a famous Ukrainian ski resort Bukovel will cost 250 000 USD.

But a village house in Khotyn (Chernivtsi region) not far from Dnistro river costs about 26 000 USD. In Svalyava area of Zakarpattya region the houses are sold for 60 - 160 000 USD.

Primary values

Building companies that work in the Western regions do not see the reasons for prices decrease. In particular, according to the opinion of Roman Tymkov, director of building company "Extrim" (Ivano-Frankivsk), there is no sense to talk about crisis on the market of primary property, as the city has the lowest prices for the residential property. If to compare with other large cities of Ukraine, the cost of plan-off housing in Ivano-Frankivsk is about 800 USD per 1 m2. Hence, Nina Tykhon' says that this is price for the apartments on the suburb of the city. In center the property in Ukraine has the price of 1500 USD per 1 m2. In Uzhgorod the prices for primary property reach 2000 USD per 1 m2.

Expensive meters

Approximate prices for the property, USD per 1 m2

Putting of the property into operation in the Western regions of Ukraine, thd. of m2

According to the data of Main managements of statistics of the regions.

More articles about perspectives of the Ukrainian property:

http://www.uaproperty.com/articles/Commercial-Property-Perspectives.html
http://www.uaproperty.com/articles/Office-Rent-Kyiv.html
http://www.uaproperty.com/articles/Eesti-Ehitus-Contract-Ukraine.html
http://www.uaproperty.com/articles/Ukrainian-Property-Market-Review.html