Bad news and devaluation scared off potential buyers of real estate

Photo: Konstantin Melnitskiy

The real estate market in Ukraine is at a standstill with expectations of positive news. Over the past five-six months sales dropped two to three times on average over the corresponding months of the past year, says Managing Director of ARPA Real Estate Mykhailo Artyukhov. At that, the situation on this market has been quite volatile over the course of the year, adds Commercial Director of the NEST Development Company Kostyantyn Bravo. It largely depends on the latest political and economic news. Indeed, over the first two weeks following the inauguration of President Petro Poroshenko real estate sales were actively on the rise. “Over that period more deals were made than over the entire month,” says Artyukhov. After the beginning of the active combat actions in the east of the country, the number of deals took a nosedive.

In June and July of this year, 1,400 and 1,450 deals were signed in the nation’s capital, which is 2-2.5 times less compared to the same period in 2013, Artyukhov pointed out. “In August, the situation did not change substantially with around 1,200 deals being signed on the primary and secondary markets in Kyiv,” the expert specified. The trend of a decline on the real estate market continued in autumn. In September, according to ARPA Real Estate, 1,330 deals were registered in Kyiv, which is two times less than in September 2013.

Reorienting towards the primary real estate market

Over the past several years, the number of deals on the secondary market was higher than those on the primary real estate market. Last year, however, developers managed to take over. Deputy General Director of T.M.M. for Marketing and Strategy Oleksiy Hovorun says that apartments in new buildings accounted for half of all sales in 2013. “Apartments in new buildings are more attractive as they are being built in compliance with new technologies, design, etc.,” explains Hovorun. Developers attracted customers offering different loyalty programs, including discounts, payments in installments, presents (for instance, a parking space was offered at half the price, if a customer purchased an apartment), the possibility of a mortgage loan, etc. Meanwhile, although the majority of these instruments are no longer on offer, Ukrainians still prefer apartments in new buildings.

Of the 1,325 apartments purchased in September, 795 were purchased on the primary real estate market, says Artyukhov. Managing Partner at KievStandard Consulting Company Oleh Perehynets says many development companies offered preferential rates of UAH 8-10/US $1 for apartments. “On the secondary market, the housing is sold for hard currency,” he added. Even now, says Hovorun, the real deals in the sale of real estate in new buildings are based on the exchange rate of UAH 10-11/US $1. Around 40% of newly constructed buildings (overall there are 150 construction sites) do not peg the rates to hard currency,” adds Honorary President of Liko Holding Development Company Ihor Lysov. The prices of apartments in such buildings increased 15-20% on average in the national currency.

Sales will decline

Further development of the situation will depend on fluctuations in the exchange rate, predicts Senior Specialist at SV Development Serhiy Kostetskiy. “If the dollar continues to grow, developers will raise prices,” he believes. This will freeze sales. “Buyers, as a rule, do not make any decisions on purchases until the situation stabilizes,” says Bravo.

However, even if the exchange rate remains stable, sales will still be twice lower than last year, Kosteskiy believes. Potential buyers do not have the financial wherewithal to gather the amount of money required for a purchase, while at the moment home mortgages are practically not being offered.