12 February 2015

Ukrainian Hryvnia collapsing against Dollar, opportunities available for investors

Ukrainian crisis offers opportunity for property investors

The toppling of the former president Viktor Yanukovich and the annexation of Crimea has led to a significant devaluation of the Ukrainian currency, the hryvnia. It has lost 25% of its value in the past three weeks. This presents opportunity for profit investors to acquire Ukrainian property at local currency prices.

The dollar rate at the beginning of April has now gone over 11 hryvnia, up from under nine in early March. A Royal Bank of Scotland estimate is that the rate may weaken in 2014 to 12.50.

Ukrainian sellers property are likely to be motivated by fears of further Russian interference in their country and by growing economic difficulties. Ukraine’s economy is forecast to contract by 3% in 2014, which is in contrast to the pre-crisis IMF prediction of growth in the economy.

The previous highly corrupt government is alleged to have largely cleaned out the state’s coffers and the country is facing bankruptcy, unless international loans come through quickly. The IMP agreed on March 26 to lend Ukraine between $14 billion and $18 billion to help avoid a default.

However, IMF conditions will require the slashing of state expenditure, the removal of subsidies and a general austerity that is likely to prove traumatic to a nation that is already experiencing difficult economic times. The sharp increase in Russian gas prices will add to the misery.

There are likely to be many who will be forced to sell property, and in a buyer’s market they will need to price low. If denominated in the local currency, there could be some excellent deals for those foreign investors who are interested in the longer term.

In other words, a classic crisis investing opportunity.

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