Investment in Ukraine Outlook

The real estate market in Ukraine is absolutely worthy of consideration for international citizens interested in investments into real estate and seeking longer term investment assets; and 2009 will be definitely a good year for market introduction.  Although the best bargains to be had in the capital city of our country are long sold, there are plenty of alternative proposition at the property market.

Our 2008 outlook for real estate investment in Ukraine is divided up into four target angles for an investor to consider – you have the tourist and tourism field, the residential real estate market and both office and retail sectors on the commercial field to consider for the best chances of securing attractive rental yields as well as locking in to long termed capital growth.

The marvelous corner of the Ukrainian and other European lands – Crimean Peninsula that is located in the Southern Ukraine has been a real hotspot for the Ukrainian and Russian tourists for many years and currently its popularity is increasing among a wider international investment in Ukraine audience circle. 

The peninsula is sweet home to ideal sunny beaches, attracting historic architecture, it has a mild subterranean climate and it already has an active property market.  The Crimean cities such as Yalta or Alushta are very popular and the town has seen property prices rising consistently and strongly for the past several years but still prices are largely affordable. 

An investor in Ukrainian real estate can consider purchasing to let to the tourism market with real estate management companies in abundance offering a well cost service – alternatives have renovating stock for resale to the growing numbers of the Ukrainians and Russians searching for holiday homes in this part of Ukraine. 

Yields from well situated real estate in Ukraine stock let over the short term during the warm weather season are good. As the popularity of the destination grows and, according to World Tourism Council more visitors will be arriving annually between 2008 and 2016, it is highly likely that property held long term will return an investor an attractive increase on original real estate investment.

Those searching lesser explored locations with growing travel potential could look east and consider port towns such as Mariupol or Berdyansk where there is demand locally in the spring, summer and autumn and increasing Russian interest.  Both towns have great many of attractions from health spa salons to historical memorials as well as being sea fronted and offering typical seaside rest.  Investments in real estate in Ukraine made in these locations will require a lower outlay initially but a longer investing commitment.

Economy and Investment in Ukraine

Real estate investment in Ukraine involves examining the country's recent economic situation. Maybe 20 years ago, Ukraine was one of the unknown tourist destinations, as well as unknown destination for property investors. Hence the reform of Ukraine’s economy, particularly since 2004, after Orange revolution, has led to significant economic results. With the Ukraine union of a steadily-growing economy, rising travel potential and extremely competitive real estate in Ukraine prices, the Ukraine property market currently provides one of the best returns globally, particularly when it reaches Kyiv new construction.

Ukraine's economy has seen significant expansion since 2002 and GDP growth between 1999 and 2004 was about 50%. Growth in GDP in 2009 is forecast to be around 7%. Currently Ukraine is showing promising economic growth forecasts. An additional positive feature is the fact that foreign direct investment has risen by a massive 300% only during last 4 years. Between them, Ukraine's economic statistics augur well for future Ukraine real estate investment.

Our country is formerly part of the Soviet Union and suffered sustained neglect and economic depression under the Communist leading; complete independence came finally in 1991 with the dissolution of the USSR but Ukraine continued to struggle with the concept of true democracy and to suffer continued corruption until 2004 when Viktor Yushchenko was democratically elected.

Concerns remain that Ukraine is very susceptible to external influences, it has inequality intrinsically structured into the tax system and the changes necessary to reform the country completely are slowly to happen - this is the reason why any real estate investment made in Ukraine should be considered a long term bet as the best returns will only be made when the country has reformed sufficiently to attract sustained foreign direct investment and to be accepted internationally as a market economy and a country with solid political and economic systems free from corruption and inequality.

Those who invested into Kyiv around 18 months ago when the city was in the grip of a substantial renewing and modernization stage have seen Kyiv growth in the region of 60% already on current investments made into the real estate sector.  But local property experts admit that these levels of growth can’t be sustained long term but that the domestic and overseas intension in rental and even resale residential real estate in the popular cities and Kyiv is and will remain strong. 

Tourism Potential and Investment

If you have the intension to purchase in this country, Ukraine real estate investment will also receive a boost from the growing travel industry. While it is not at the moment one of best-known countries in Europe for tourism and traveling, Ukraine is fast obtaining a reputation as a destination waiting to be explored. The capital of Ukraine – the city of Kyiv, resorts on the Ukraine Black Sea such as Yalta, Alushta, Feodosia, Foros at the Crimea Peninsula and not less prominent ski resorts in the Carpathian Mountains present just several of Ukraine's attractions. Visitor numbers rose by 10% in 2007 to 22 million and these indexes tend to increase regularly.

The most prominent destination in a guide to Ukraine is Kyiv, modern and dynamic city. Its cosmopolitan population with students and workers creates a substantial demand for rental living with the followed potential for investment in Kyiv real estate. Kiev proposes a union of old and modern architecture, and is the main Ukraine host city for the football cup Euro2012.

The power of demand from professionals and tourists alike has led to substantial costs rises particularly in the most fashionable districts of Kyiv. As Kyiv becomes ever more popular so the demand for residential property will rise, furthermore residential purchasing power is beginning to slowly improve opening up a long term resale prospect for real estate in Ukraine investors.

Those who have intension to move away from the already established Kyiv market have the whole of the rest of our country to explore!  The country boasts beautiful rural communities untouched by the hands of time where one can step back a generation and truly escape from the modern fussy world.

There’s no refusing fact that the Ukraine is geographically, climatically and architecturally an attractive country, furthermore its attraction will only bring the increase in visitor numbers and over the long term it may well become a strong home destination.  Domestically the people of the Ukraine are clamoring for possibility and will form strong long-term real estate resale demand - therefore opportunity for a property investor in the Ukraine is intense but the immaturity of the country’s property market and its very recent inroads into democratic rule and economy advancement make it high risk.

The EURO 2012 in Ukraine (football matches are to be held in the cities of Kyiv, Lviv, Donetsk and Dnipropetrovsk), will provide huge real estate investment in infrastructure, including Ukrainian off-plan properties. These cities are considered to be top property investment spots in our country.

Ukraine presents ideal potential for real estate investment and for those having desire to purchase, Ukraine is currently a country that ticks all the right boxes in an investment portfolio.

Ukraine Investment and Real estate Market

Ukraine currently represents one of the most promising and perspective real estate markets in the worldwide property investing market. With Ukraine property values that have increased a 600% in the last 4 years, it is easy to find the potential for Ukraine properties. The market for off-plan apartments in Kyiv is one of the most interested and obtains in Kyiv property generally were around 80% in 2007. Those considering real estate investment in Ukraine will also be interested in rental yields, currently around 10% for Ukraine homes as a whole and between 7% and 11% for Kyiv property.

Mortgage in Ukraine and Investment

When you purchase real estate or land site in Ukraine, you will probably need Ukraine mortgage information. The market for Ukraine mortgages is currently on its early steps of development, but once the possibility for a Ukraine mortgage is completely realized, the Ukraine real estate investment market is expected to profit greatly and the demand for real estate in Ukraine will increase strongly.

You have to get current information on Ukraine mortgages from your Ukraine lawyer. As an alternative to a Ukrainian mortgage you may wish to consider releasing equity from real estate you currently own.

Taxes in Ukraine and Investment

In case you purchase in Ukraine, expect to find the buying process different to the one you may be used to and independent legal advice from your Ukraine lawyer is vital. This will ensure your investment into real estate in Ukraine is made correctly. A buying process in Ukraine includes Ukraine tax payments including 1% duty. This is payable by the person who buys or seller, depending on the agreement for your Ukraine real estate - your Ukraine solicitor can supply with information on Ukraine tax and other aspects of Ukraine Law.

Purchasing Ukraine real estate also means you are liable for certain state and country taxes. These include income tax on rental income from a Ukraine real estate investment.

 Residential Real Estate in Ukraine

In Kyiv there is currently an abundance of demand and a lack of supply of quality real estate stock and this has caused prices to grow dramatically and rental rates chargeable to go through the roof.  The cost for land sites has risen threefold in certain parts of the city in just 18 months and there are more skyscraper projects being considered now as a result.  The latest to be pronounced is Mirax Plaza complex, a 44 storey multi purpose development consisting of 380 apartments, business and trading centre, a recreation zone with restaurants.

We believe the Kyiv real estate investment market to be overpriced but many local agents and experts believe that prices are going to continue to increase with no indications currently suggesting a crash or even stagnation of prices in the near future.  For this reason the capital could well be a good market to consider for residential property investing especially for purchasing to let or buying off plan in the latest developments for resale upon completion to an awaiting market which favors brand new property stock.  But investors really need to get a feel for the market on a month by month basis before making a step.

An ideal alternative for investment in residential real estate is Odesa – it is enjoying magnificent infrastructure investment and foreign direct investment is inward introducing in many sectors. The city proposes sea services to the likes of Istanbul and it is also becoming a favorite location for holiday makers searching for an accessible destination with massive charm.  The city population is increasing as the appeal of Odesa increases and job opportunities are formed, and Odessa could be one of the markets for a slightly shorter term turnaround of an investor’s commitment with short to medium term gains likely to be attractive.

Investing into Commercial Real Estate in Ukraine

Developers are now strongly searching permission for the building of alternative space just outside of the main city centre area while market demand is awaiting this provision to reach completion there’s plenty of possibility for larger investors to acquire lower grade space in need of investing and improvement or to purchase into existing stock or invest in future development projects.  Mainly as the economic features of Ukraine develop and grow and the government continues its focusing on attracting sustainable foreign direct business real estate investment, so demand for quality office area particularly in Kyiv will continue to surge.

The other commercial real estate in Ukraine sector to look at is definitely retail – there is a serious undersupply per head of retail space when you compare the whole of the country to any European nation for instance, and international retailers have realized this as have local developers and they are all now trying to cash in on the consistent double digit growth in retail spending that is being witnessed in the Ukraine annually.  Three new large malls are under construction with the majority of development focus centered in Kyiv, Odesa and Lviv giving investors a broad range of possibilities to explore Ukraine.

Ukraine is going through a period of fast growth, development and expansion, its economic features are blooming and inward real estate investment is strong. All signs are for a continuation of the growth in fortunes of the nation and as a result it is highly likely that well thought out and located investments in real estate made today will reap an investor strong returns over the medium to long term.

Foreign Investment Process in Ukraine

By now foreigners do not have restrictions in their purchase, ownership, use and resale of real estate in Ukraine and specific types of non-agricultural land.  Some foreign citizens prefer to buy in the Ukraine by means of a local limited company type system to protect their privacy and assets from non-desired attention.  Whether or not this approach suits the individual investor is something to discuss with a lawyer in the Ukraine, hence now Ukraine doesn’t oblige foreigners to create a company in order to invest in real estate in Ukraine.

The services of a decent lawyer should be secured as soon as an investor sets foot in Ukraine and well before any offer to purchase real estate is made. The next person an investor will need to assist with the real estate buying process is an estate agent.  Ukraine is a country where there are both very good estate agents and incredibly corrupt agents who attempt to profit from both the buyer and vendor and potentially resell the same piece of property repeatedly.

If at all possible a real estate in Ukraine investor should seek the advice and recommendations of trusted sources over which agents can be trusted.  Decent property agents in Ukraine are well worth doing business with as they will know about real estate that are for sale before they are ever marketed, but their fees and who actually pays them should be negotiated in advance.

Once a piece of real estate or land has been identified as meeting an investor’s objectives an offer to buy it can be made which, if accepted, will result in the investor and vendor entering into a conditional preliminary sale-purchase agreement.  This contract should be checked by the buyer’s lawyer and then signed in front of a notary and notarized.

At this step a non-refundable deposit should be paid by the real estate investor and the investor’s lawyer should begin doing their due diligence on the real estate, the vendor and the title deeds of the property.  There is usually at least a 14 day gap between the preliminary agreement being signed and the signing and registration of the final contract to allow searches and surveys to be carried out.

To aid the buyer’s lawyer in his searches the vendor should offer the following documents: -
1) The certificate of privatization or a previous purchase agreement or proof that the vendor is the owner of the real estate as a result of inheritance
2) The certificate from the Unified Register of Prohibitions on the Disposal of Immovable Real Estate to prove that there is no outstanding debt or legal issues against the real estate being offered for sale 

In terms of the fees, charges and taxes that a real estate investor in Ukraine may incur these include the lawyer’s fees, real estate agent’s fees, property registration fees, pension fund duty and notary fee.