As they have done in past crises, Ukrainians are pulling their savings out of banks in order to invest in real estate. Property is seen as a relatively safe investment, especially compared to keeping deposits in banks, which aren't lending at attractive interest rates anyway.
There’s still not enough money or credit to go around. Builders say demand dropped threefold in 2014 compared to the previous year.
Russia’s war, which has contributed to Ukraine’s recession and the sharp hryvnia devaluation, are the big reasons.
“The biggest regulator that affects the purchasing of an apartment is the price,” said Valeriy Kodetskyi, general manager of UDP, a leading residential property developer in Kyiv. “Buyer’s demand is falling down right in front of our eyes.”
Companies like UDP, have been trying to make it easier for buyers to purchase apartments. Some investors are cutting prices while others are offering five-year loans.
About half of UDP’s customers who purchase apartments pay the entire amount upfront, while the other half opts for installments. “It’s searching for a compromise, considering the difficulty of the market,” Kodetskyi says.
But UDP is not willing to lower its prices in hryvnia terms.
Colliers International, a global real-estate services company, says that most people seeking apartments are not ready to offer substantial price cuts because of poor economic conditions in the country.
As for the consumer side, prospective buyers are not confident in the future, which makes it difficult for them to invest. “This is the biggest problem,” Kodetskyi said. Part of his pitch is to assure potential clients that things are going to get better.
Maksym Mikitas, president of Ukrbud, a state-owned residential property developer, agrees that fear of the future is the biggest factor. According to him, many Kyivans do not lack money to invest in an apartment. On average, a square meter for a standard, or economy class, apartment costs about Hr 14,000. Apartments at this rate are within the possible range of many potential buyers in the city, he said, but they fear uncertainty.
UDP’s Kodetskyi blames the government for such hardships. They are not doing enough to send a message to builders and buyers that will enhance the interest of investing within the country. “There is a lack of qualified (government) managers,” the UDP founder says. “Instead of simplifying everything, it is becoming more difficult.”
Kyivmiskbud President Ihor Kushnir speaks with the Kyiv Post on June 3 from his office in downtown Kyiv.
In 2014, UDP operated with 211,300 square meters of apartment space, selling around 600 apartments, 1.5 times less than the previous year.
The general trend in market demand decreased by three times in 2014. “This is because the dollar went up three times,” said Ihor Kushnir, president of Kyivmiskbud, one of the nation’s biggest real estate developers with 300 employees serving up to 500 contracts each month.
However, last year the company operated 302,000 square meters of apartment space, 18 percent higher than in 2013.
“Apartments are bought either by refugees (from eastern Ukraine) or by people that don’t believe in the bank system and take out their savings to invest into square meters,” Kushnir says.
“Real estate is related mainly to the situation in the east, and not so much with the economic situation,” UkrBud’s Mikitas says.
For example, recently many people were afraid that the war in Ukraine’s east would escalate after the first days of the May holidays, Mikitas said. But once they didn’t see any substantial Russian aggression, their confidence in the hryvnia went up, and thus in the apartment sector as well.
Overall, some industry experts expect the political and economic conditions to stabilize. “We are observing a light recovery of the market,” Mikitas said.
Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].
