Prices for real estate in Ukraine have changed drastically throughout the last decade, and buying or renting an apartment isn't the same as it was even several years ago. We interviewed a real estate expert with 20 years of experience, Glib Denysenko, and asked about the main tendencies for investments, the best time for investment and forecast for 2018.
The best time for investment
According to Glib Denysenko, now is a good time to invest in real estate: the market has been in stagnation for a long time, which gives an opportunity to conduct beneficial negotiations for the investor. For instance, holiday promotions with discounts up to 25% indicate how much you can reduce the price of the object by offering 100% payment. However, it is necessary to keep in mind that the owners of high quality real estate won't give a discount of more than 5% while bargaining.
About the possible crisis, caused by the supply-demand inbalance
Articles on the Internet about the real estate market collapse with statistics of the newly-exploited and under construction objects aren't really anything sensational. 60% of the objects under construction, as well as the already built ones, are either situated in illiquid locations or have inadequate quality – hence the price dumping. High-quality objects like Novopechersʹki Lypky do not experience the lack of buyers. Besides, prices are only reduced for the worst apartments.
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Future of the secondary real estate market
At the moment, “Khrushchev-era” apartment in Solomianka district or Saksahanskoho street can be purchased for USD 50000-60000. The price for such apartments, lately labeled as "social", has dropped in the last 5 years by 5% per year in average. It is predicted that fluctuations in the exchange rate and tariff growth will further accelerate the depreciation rate. There's a growing tendency of the social housing areas formation, where prices decline more slowly — for instance, Shevchenkivskii, Podil and Solomianka district.
On the whole, secondary housing is no longer considered an investment, but merely an urgent solution to the housing problem. It isn't profitable in terms of rent, given the sharp increase in the utilities cost, and doesn't meet the norms of energy efficiency. It is likely that in several years Ukraine will follow Britain and implement the law which prohibits rental of real estate with the energy efficiency below C class.
The best objects for investment
Several factors to be taken into account for the best investment in real estate. Firstly, location in the downtown or no more than 5-7 minutes walk from the metro station is always more liquid. Secondly, only high-quality objects are to be considered. Thus, for housing investments, it is better to choose either a house of the pre-revolution era after the major repairs or a new building – no Khrushchev-era or other Soviet period buildings.
As for non-residential investments, a detached building or façade commercial premises are the best option. Small retail premises with display window are always in priority regardless of the type of house in which they are located. Another possible option is non-residential premises in generally illiquid buildings with certain conditions, such a separate entrance or a façade. Prices for purchasing objects like this can be easily reduced, and show good profitability rates in rental.
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Forecast for 2018
Firstly and most importantly, the difference in price between liquid and illiquid objects will grow as both buyers and tenants will pay special attention to the energy efficiency of facilities. Thus, energy inefficient facilities will drop in price. Secondly, rental price will decline on the background of the constant supply growth and rising utilities cost. Prices for rent will decline proportionally to the utility costs growth — owners of the energy inefficient housing need to keep their tenants, who will have an alternative option of renting an apartment in the new buildings with a smaller area and smaller utilities costs. The tendency of supply exceeding demand will continue, especially in the business and elite real estate market.
Finally, office real estate market due to its inertness has completely different trends: vacancy rate is approaching the critical 10%, which will create a rise in rental prices due to the insufficient supply in the next 3 years.
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