Keep calm and carry on building

Country focus
The further development of the Ukrainian residential real estate market depends heavily on its regional and other specific characteristics – chiefly, its distance from the front line and the frequency of rocket and drone attacks from the Russian side

According to residential market analysts, it is the western and central regions of the country where the greatest demand can currently be found, while the market has also stabilised in the capital and Odesa. Unfortunately, in the eastern and southern regions there has either been a complete freeze on projects, such as in Kharkiv, or there has been a strong decline in demand and, in turn, construction.

Prices up

The average price for a studio apartment has increased by 12 pct in Lviv, where today such flats cost around USD 58,500; while in Uzhhorod prices have gone up by 7 pct (USD 51,600 for an apartment), in Cherkasy the growth is 10 pct (USD 38,400), in Ivano-Frankivsk the price increase is 18 pct (USD 31,700), and Rivne has seen growth of 8 pct (USD 37,200). The relative stability of the domestic currency has also been having a positive impact in terms of the stabilisation of the market and prices per square metre.

In 2022, developers were only able to resume work on projects that were already at the final stage, but in 2023 work began on sites at earlier stages of construction and new projects were even started. The pace of construction also picked up but was still far from the volumes of 2021. The first three quarters of 2023 saw a 15 pct fall on the same period of 2022 in the volume of housing coming onto the market in the capital, while the Kyiv region witnessed a 35 pct reduction and the drop was as much as 38 pct in Lviv. This could translate into a shortage of new square metres, which is critical for those wishing to take out a preferential 7 pct mortgage (under which the residence can be no more than 3 years old).

Although the purchasing power of buyers has declined and investors have yet to return, developers are nonetheless reporting an increase in the number of sales – in some regions of up to 70–80 pct of the pre-war level, thanks to instalment programmes provided by developers and government financing schemes.

The analysts agree that the eRestoration and eOselya government schemes have had an overall positive impact on the market in all regions, but the rocket attacks, general uncertainty, and the unease across society have also emerged as common factors that are holding back the real estate market in Ukraine as a whole.

Other common trends that are now characteristic across all the regions include:

▪ a gradual recovery in the demand, especially in western and central regions

▪ moderate growth in prices per square metre

▪ the shift in demand towards ready-made housing, including renovated homes

▪ an increased interest in suburban projects, including private housing

Changes have taken place in the structure of the demand and buyers’ preferences as well as in the regional distribution of investors and their requirements when it comes to the quality of residential development. This has led analysts to put buyers into a number of new categories: those who buy homes to live in (young people, internally displaced families), investors who buy housing to preserve and/or increase their funds (mostly local), military personnel, and those taking part in the eOselya state programme.

Safety first

Regardless of the region, buyers are primarily concerned with their safety, which includes both the features of the new building (its location, the construction techniques used and the availability of shelters) as well as their investment security, that is, minimising any risk involved in investing in the property. The price is also one of the main factors that potential buyers are concerned with, especially those purchasing through the above-mentioned state programmes.

The demand for frame-monolithic apartments (pre-fabs) has increased due to their superior resilience compared to brick construction. Residential estates with bomb shelters or underground parking for long-term stays have also become a priority. The pace of construction and the availability of completed sections and other facilities provided by developers have also moved up the list of priorities for buyers since the full-scale invasion.

The demand for rental apartments continues to grow, partly as a result of the increased migration across Ukraine. In fact, August 2023 was a record month in terms of interest in apartment rentals in recorded history.

Kyiv ranks third in terms of the cost of living with the price of a one-bedroom apartment in the city now averaging at USD 328 per month (Lviv – USD 404, Uzhhorod – USD 381). The price of renting a two-room apartment in the capital is equal to that of the most expensive city, Lviv, at USD 454. The situation in Lviv is probably due to there being a smaller stock of small apartments that were handed over in the city in 2022, leaving only more expensive options on the Western Ukraine market.

Analysts are now predicting that under favourable conditions the trends that emerged last year will intensify in 2024. Regional markets are gradually levelling off after the panic-induced price and demand distortions of the first year of the full-scale invasion. External factors will, of course, continue to play a significant role, and so all the current forecasts can only be at best cautiously optimistic.

The article was prepared especially for ‘Eurobuild CEE’ by Property Times in cooperation with the Ukrainian Real Estate Club