The real estate market in Ukraine is either depressed or full of possibilities, depending on one’s perspective.
For developers, the dramatic plunge of hryvnia since early 2014 means fewer buyers and tenants.
For buyers or renters, the crisis brings cheaper prices and bargaining leverage — if they survived the 2014–2015 recession with jobs and income intact.
Residential market prices probably took the biggest hit due to the hryvnia plunge and absence of affordable mortgages. Sales picked up in response.
Downward pressure was felt in hotel real estate, too, but in a different way: It hiked interest in economy hotels and even new ones are about to open.
Retail shows signs of recovering: the country’s biggest shopping center Lavina Mall opened in December, and 10 more malls are commissioned for 2017–2018 in Kyiv only.
Office space is predictably taking a hit from the economic crisis, with nearly no new business centers opening. At the same time, coworking spaces are growing in numbers, filling up the need for cheaper offices.
Residential: Buyer’s market
The prices in dollar equivalent have gone far down since 2014, bringing good investment opportunities to those who have cash to spare.
The average price of a square meter in residential properties in Kyiv went down from $1,700 in 2014 to just $1,070 at the beginning of 2017, according to the data collected by the real estate news website Domik.ua.
Prices kept falling throughout the winter, reaching $1,039 by the end of February, but went up a bit in spring.
The peak time was, of course, in 2008, when average prices were almost reaching $3,000 per square meter. After taking a huge plunge in 2009 due to the economic crisis, residential prices never went back up and remained stable until 2014.
In response, sales picked up: 17,555 apartments were bought in Kyiv in 2016, according to Ukrainian Trade Guild. This is more than in any year since 2007, the earliest year with data available.
For comparison, the pre-crisis year of 2013 saw only 14,951 deals in Kyiv.
It is the absence of affordable mortgages that additionally holds prices down. The interest rates on mortgages in Ukrainian banks vary from 19 to 26 percent a year, with down payments of 30–40 percent.
At the same time, the government has taken some crucial steps to help the construction industry.
A new law came into force in May that cancels some required construction permits. Also, the equity contribution that a developer must pay to the city budget went from 10 to just 2 percent from the cost of the construction.
Retail up, office down
Nothing reflects a stagnating economy like depression in the office sector.
Kyiv business centers offer a total of 1.7 million square meters of office space, according to Ukrainian Trade Guild. But some 22.5 percent of it is vacant, explaining why the new construction is decreasing.
In 2014, 99,460 square meters of office space were added to the market, but in 2016 the number fell by half — to just 43,100 square meters
Moreover, all of those came from the new sections of five already operating business centers that were being finished, not from new properties.
The rates stood at $15-$28 per square meter for Class A office space and $8–16 per square meter for Class B in 2016, according to the Ukrainian Trade Guild, and they have been falling steadily since 2013.
Retail property, on the other hand, shows signs of recovering. The new Lavina Mall, the biggest shopping center in Ukraine, opened in December, and has been gaining tenants.
Even though new brands aren’t rushing to enter Ukraine, some are increasing their presence, including sought-after brands like Zara and others belonging to Inditex Group, which has rented a chunk of Lavina Mall for its shops.
Also, 2016 saw rental rates in malls go up.
According to Yevhenia Loktionova, director of the Ukrainian Trade Guild, the malls, where rates are fixed in dollars, responded to the 2014–2015 devaluation by working out individual deals with tenants to temporarily keep the hryvnia rates increasings. In 2016, the rates went up in accordance with the actual hryvnia-to-dollar rate.
Hotels: Economy class is hot
The economic slump is about to fix a long overdue distortion in the Kyiv hotel scene: add the much-needed economy hotels to the market oversaturated with premium-class ones.
Ibis, a global economy hotel chain, is plotting a massive expansion in Kyiv.
The first Ibis hotel in Kyiv that opened in 2011 on Tarasa Shevchenka Boulevard near the city center proved to have much higher occupancy rates than average: 80 percent, while the average hotel occupancy rate in Kyiv stands at less than 50 percent, according to Ukrainian Trade Guild.
Now Ibis, acting as an operator partnering with a local investor, will open three more hotels in Kyiv within the next several years. The first one will open near the central railway station in late 2017.
Another international brand of economy-class hotels, Mercure, may enter the Kyiv market very soon.
According to Andriy Davidenko, the general manager of the first Ibis hotel in Kyiv, Accor Hotels, which is parent company for both Ibis and Mercure, reached an agreement to lend the Mercure brand to one of the existing hotels in Kyiv. The rebranding is expected to take place in 2017, according to Davidenko.
