A big crisis and a very difficult unstable situation in the country, great excitement and uncertainty about what will happen tomorrow. Ukraine is now in a very difficult situation, but despite this, and the problems that our economy is now facing, as well as the real estate market – it is quite realistic to think about buying real estate.
For an ordinary layman, all this, of course, will seem a little strange, but right now is the time when you can buy real estate in our country quite profitably, thereby increasing your funds through investments. First of all, you need to decide in which particular region of Ukraine it is best to make a purchase.
Real estate market trends in Ukraine
Throughout 2021. A fairly stable growth in construction volumes was recorded in Ukraine.
“Compared to 2020, the construction products index increased by 105.1%. Three regions became the leaders in terms of growth in construction: Ternopil, Vinnitsa and Cherkasy, — Deputy Minister of Communities and Territories Development Natalya Kozlovskaya reported on February 21. In general, the volume of construction in the previous year increased the enterprises of 13 regions.
Prices of residential real estate in the primary market during 2021 rose by 25-30%. The most expensive apartments. Which are in new buildings in Kyiv: the approximate price for 1 sq. m. at the very beginning of 2021 was equal to UAH 28 thousand, at the end of the year it had already increased to UAH 35 thousand.
At the beginning of 2022, the price went up even more – from 1.3 to 10%. All this despite the fact that due to constant reports of danger from Russia, demand has fallen sharply in the primary market. Experts explained this by the fact that this is directly related to the increase in the cost of construction.
With the advent of March 2022, the construction of new buildings, as well as real estate sales, were almost completely stopped. After the start of the full-scale military invasion of the Russian Federation, almost all developers notified investors that they would not accept payments related to the purchase of apartments for some time. Fines were completely abolished, but construction was also completely stopped.
From the first day of the war, the State Register of Rights to Real Estate did not work. Therefore, realtors were not able to formalize real estate purchase and sale transactions. They cautioned their buyers against looking for loopholes in the law, making a purchase as a will, etc., as these agreements cannot be legally enforceable.
By May, access to the registries was partially open. The exceptions were the regions in which hostilities continued. At present, the government has determined all the features of the work of notaries, as well as all the necessary restrictions during martial law. Since that moment, only single purchase transactions have been recorded.
How construction resumed in Ukraine during the war
Already in the middle of spring, construction companies resumed their work. Already in May, more than half of all construction projects that were working on February 24 were resumed in Ukraine.
The market, of course, immediately reacted with a large jump in prices, to the gradual return of construction. In May, the prices of all residential complexes in Kyiv were UAH 52.272. Per sq. m. This is 16.2% more than at the beginning of the year. By June, prices had already dropped significantly, and amounted to 46.905 UAH. +4.2% compared to January.
The state of the primary real estate market at the end of 2022
According to the data provided by LUN, in December, on the interactive map “Where housing construction was resumed in Ukraine”, it is reflected that the majority of construction sites are working in Odessa-42, in Kyiv – 85, in Khmelnitsky – 49, in Lviv – 75, and in Ivano-Frankivsk – 40.
Even despite the low demand, prices still continue to rise rapidly compared to the pre-war period. This is most likely due to the increase in the cost of logistics, lack of labor, rising prices for building materials, changes in exchange rates, as well as new laws requiring additional costs from developers.
According to the data of the State Property Fund, in Ukraine, starting from February 24, 4.6 times less real estate was sold when compared with the corresponding period in 2021. The largest share – sale of housing.
What kind of income investors expect in 2023
Investors who invested in the earliest construction of the residential complex at the end of 2021 will receive much less profit in 2023 than expected. Here, the calculation was mainly that prices would rise by 30-35% for the total construction cycle. Even without taking into account the quality of the project, the profit level will not be higher than 20%.
In addition, the level of profit depends on the state initiative to grant the rights of buyers of real estate to investors in the primary market. It’s in entails a tax burden for investors who have not just invested funds to avoid their depreciation, but for categories of professional investors, that is, rentiers. It is this category of investors that acquired approximately 15-20% of the total number of apartments sold by developers in 2021.
Today, the largest number of investors is concentrated in the primary housing market. Investment priorities may slightly change the yield from other segments. First of all, we are talking about service apartments, which are a promising segment of development, as well as investment. At the end of 2021, the return on investment in this segment averaged 10-12% per annum, which gives a very competitive return compared to the primary housing market. This profit can also be constant, in contrast to the “primary” The return on investment reaches 7-20 years.
Which apartments to buy for investment in 2023
The best option for investment, most of all are considered to be comfort- and business-class objects, mostly apartments, which have an area of up to 60 square meters. m. Buyers are always consciously willing to pay extra for the quality of housing or additional amenities, as well as services that are available on the territory of the residential complex. This is due to the closure of most human needs: food, entertainment, shopping, training and education, and many others.
Due to the high saturation of the rental market, many people who buy an apartment to earn money mainly consider all projects in the “home-work-leisure” format. This greatly increases the value of rental housing.
Many people want to buy an apartment in a new house in order to immediately make repairs. Also this year, the request for finishing housing with the help of the developer for an additional fee will also increase.
For several years, developers have been drawing up plans for the first floors to be used for commercial real estate. In 2023, there will be even more such projects.
Investors will remain the same – Ukrainians working in the IT sector, whose income is made up of currency in dollars. In this market, there will also be those investors who have more than 20 years of experience in investing in primary real estate and this is their income. If we take a portrait of a foreign investor, then the leaders here are investors from China and Israel.
Conclusions
In order to fully resume the primary housing market after the victory in the war, it will take at least three years. From this we conclude that 2023 may just become the basis for positive changes in the future
