In this article, we’re briefly reviewing the major factors that contributed to the growth of prices in the Ukrainian real estate market, especially in Kyiv. We’re not just analyzing the prices but also giving an insight into major factors
The Ukrainian economy news of the period of governing of Mr. Zelensky isn’t that good if you analyze them without a wow-buzz in the head. We’re looking at the most significant reasons why, despite all possible and potential good economic news and halo surrounding Mr. Zelensky’s presidency, prices for real estate in Ukraine grow in high tempos, making it the only feasible tool for investing in Ukraine so far.
Homes in Ukraine keep growing in 2021 and will do so in 2022
The prices for homes and apartments in some parts of Ukraine have boomed, adding up to 100% in some segments as of September 2021 compared to September 2019. The market of residential housing (apartments and detached homes) in general in the country added around 25% for the past year while commercial properties also rose by 5%-10%-15%, bringing tangible ROIs to their owners. The period of 2020-2021 is, probably, the best period for the past 10 years in Ukraine, when prices keep rising steadily and confidently. And there are several impacting factors here, which we’re considering below.
Factors behind the question of why Ukraine houses keep growing in prices
- From moderate to high inflation rate. While in 2020, the official inflation rate was just 5%, which is unusually low for Ukraine, it returned to a higher 9% annually (expected by the end of 2021). Thus, as bank deposits bring net income on average less than 6% annually and there is no publically available stock or pension fund market in Ukraine, real estate remains the only solid source of preserving capital for many regular people.
- Falling in GDP in 2020 was 5%, while in 2021, it is simply expected to gain it back – pretty much the same compared to how other developing countries in the world are doing.
- Shrinking back the team of reformers, which were first put in place by Mr. Zelensky and then sacked even sooner than in a year.
- Significant alleviating of National Bank of Ukraine’s clever policy of 2014-2020, which allowed lowering inflation and stabilizing Ukrainian Hryvnia. Mr. Zelensky somehow thought that monetary stability in the country was unnecessary and fired everyone in the NBU who was responsible for this good policy. Especially as Hryvnia started to strengthen too much in 2019.
- No real fight with corruption and no real reformation of the juridical system is happening. Since things have stayed as they are and many random people are being hired and fired out of the blue in all branches of various power in Ukraine, such an unpredictable policy leads to the fact that regular people seek the most tangible assets to store their money. Which in Ukraine is, again, only real estate.
- In the upcoming uncertainty with the implementation of the many-layer pension system in Ukraine, many people seek to secure their money, now sacked under the mattresses. And if their pensions aren’t safe anymore after the new many-layer pension system is implemented, at least some saved money can go into something real. And if there is no money paid as state pensions anymore in the near future, then, at least, people might buy places to rent to live.
- The impossibility to earn Hryvnia on UAH/USD and UAH/EUR fluctuations anymore for several consecutive years (as Hryvnia is more than stable and keeps rising) makes people sell their dollars and Euros to seek other ways of preserving and accumulating money. Although, in the long run (like, in 10 or 20 years), the dollar and Euro will return to rise. However, by that time, it is pretty much possible that Ukraine will become a part of the EU. So, those people still expecting to earn in such a long time will be left without currency inflation incomes.
- Since the recently opened land market didn’t boom, while many people expected it should have, a little number of investors today are actually interested in buying land for holding and reselling it. As it brings too little income, if any, again, apartments or detached homes would be a better solution.
- Rent of popular housing options in large cities (regional centers in Ukraine) keeps growing. It happens because more people now work from home (which is their conscious choice, especially of those who are able to work on the Internet). As such people now have higher demands for the quality of their accommodations and comfort, the popularity of well-finished residential places is rising. Consecutively, many owners make good renovations and refurbishing in order to make their places more interesting for potential tenants. Surely, a renovated place is rented for a bigger price.
As the Ukrainian economy is doing very well in returning positions lost during 2020, the back bounce makes more people return to their work and think of the improvement of living conditions. And for you, as for an investor, it is the best time to buy one of the popular types of property in Ukraine now – not only to earn on letting it for rent but also to hold and sell it in 2-3 years.