What is happening to the Ukrainian real estate market: 3 key trends
24 January 2024 18:02
Viktoriia Bereshchak, property market observer
Despite a full-scale war and a difficult economic situation, the Ukrainian real estate market has withstood the first stage of the test of strength: sales, which fell to zero in 2022 in the primary market, gradually increased to 25-30% of the pre-war level, depending on the segment, and developers with a safety margin have resumed work. However, not all of them have.
So the next stage is a stress test. Only those companies that are ready to demonstrate sufficiently high real construction dynamics and create a liquid product that meets the needs of the audience will survive.
What is the demand for property in Ukraine?
We are currently experiencing a natural decline in activity in the primary and secondary markets, primarily due to the seasonal factor. In fact, December-January is not always a very active period, so it is not surprising that it is during this period that additional discounts, special offers and deals appear on the market to encourage buyers to make a deal. At the same time, in our new reality of war, there is also a psychological factor of fear: winter is perceived in society as a difficult period for the frontline and the energy system. At the same time, the dynamics we have been observing since the end of spring 2023 and beyond already indicate that the market will be able to recover from this period of reduced solvent buyer activity faster and even build up a more noticeable momentum.
Firstly, we as a society have learnt to live in a new reality: market players have come to understand that either you continue to fulfil your obligations and build, and your product (format, concept of the residential complex, its spatial and functional content, infrastructure, apartment layout) is competitive, or you simply should not count on the attention of a buyer with money.
Only those who build steadily and do not stop the processes on the sites survive: at least 6-8% of construction readiness per month or 1 floor of a monolith in the warm season.
Secondly, additional financial instruments that developers are now ready to offer to win the fight for attention also encourage buyers to make a deal. These are long-term instalment programmes for more than 3 years, there are alternatives for 5 and 7 years, and what is important is the fixing of the hryvnia exchange rate for short-term instalments, additional discounts and special conditions not for a limited supply of apartments, but for almost the entire range of real estate in the complex. The buyer sees that we are ready to meet him halfway, so if he has a request and an opportunity, he takes it.
And finally, I think that housing certificates under the new stage of the state programme eRestoration, which can now be used by owners of homes destroyed by the war, have every chance of becoming an additional driver of demand recovery.
I would like to point out that the insufficient volume of effective demand, low construction dynamics in the market as a whole and the war in the country remain the constraints to the recovery of sales in the volumes required by the market.
What kind of apartments did Ukrainians buy during the war and will they buy in the future?
Since the end of spring 2023, demand in the primary market has recovered by 30% of pre-war levels on average. Certain formats and complexes with high construction dynamics could increase their performance even more. Analysing the market, I can note that these are primarily complexes in the comfort segment – a multifunctional cluster/quarter, an eco-cluster, a city within a city, and partly the business segment – a multifunctional complex, a complex with the concept of a 15-minute city, where a good location determines the benefits of the project.
People started buying 2- and 3-room apartments more often because generations are uniting, families are taking their parents and other relatives from the occupied or frontline regions. In terms of size, the most popular apartments were those ranging from 55 to 90 sq m.
The priority is given to European layouts with a large kitchen-living room area of at least 17-20 sq m to ensure that all residents of the home have equal space.
Are investors ready to invest in square metres?
In the structure of demand, the investment share does not exceed 5%, in fact, it is in the range of about 3-4%, concentrated in complex, highly liquid projects with really high construction dynamics. As a rule, these are experienced investors, rarely beginners. They come for three things: construction dynamics, product concept and developer reputation.
But the very fact that since the end of summer, investors have begun to turn towards the primary market is already giving encouraging signals.
