- Factors that make Ukrainian real estate attractive to investors
- Financial and political stability
- The stability of the Ukrainian currency
- The Ukrainian development and economic stability
- Access to cheaper property loans
- The growth in housing demand
- The rise in annual interest rates for a square meter of real state
- Few restrictions on foreign investors
Why Invest In Ukrainian Real Estate?
Ukraine has become an attractive destination for real estate investment in recent years. The strengthening of Ukrainian national currency following the 2014 crisis has also contributed to the growth in prices per square meter, particularly in large cities.
Currently, the Ukrainian real estate market offers a return on investment (ROI) at least 3% to 5% higher than ROIs of other countries in the EU region. More specifically, Ukrainian real estate began rising in 2020, with this trend expected to continue. The value for some properties such as detached houses is growing by more than 50% annually, with 10% being the least growth registered.
Factors that make Ukrainian real estate attractive to investors
Several factors make Ukrainian real estate attractive to investors. They are briefly discussed below.
Financial and political stability
The Ukrainian economy has remained relatively stable despite the disruptions caused by the Covid-19. At least, the Ukrainian economy was not majorly affected by Covid-19 disruptions like other developed nations. For instance, the Ukrainian GDP dropped by only an annual rate of 4% following the pandemic, and it has steadily been recovering.
The stability of the Ukrainian currency
The Ukrainian national currency, Hryvnia or UAH, had constantly been dropping between 1996 and 2018. However, it began gaining value in 2019, and this trend has continued ever since, according to Minfin.com.ua. For instance, the cost of UAH in 2021 is the same as it was back in 2016, and this provides assurance to people interested in local property investment opportunities.
The Ukrainian development and economic stability
Another reason why Ukrainian real estate is attractive is the country’s assured development and improvement of economic stability.
The current Ukrainian president has been keen on the country’s economic development, making him achieve more in terms of infrastructural development than all his predecessors combined. Such infrastructural developments have made the country more attractive to real estate investors.
Access to cheaper property loans
The Ukrainian real estate investment is attractive because of the broader access to cheaper property loans by banks. This has made more people and developers focus on the primary housing market. The demand for housing is also expected to modestly grow in the coming years.
Such a trend could be attributed to the rapid growth in household income and the gradual revival in mortgage lending. For example, the Ukrainian government has come up with an affordable mortgage lending program that focuses on simplifying the borrowing criteria and reducing the cost of mortgage loans.
It is offering an interest as low as 7%, which is significantly lower than the average housing loan rate of 12% by June 2021. Such a program could significantly boost demand for mortgages.
The growth in housing demand
The fall in Ukrainian bank deposit rates in recent years has also made real estate more attractive. For years, Ukrainians had enjoyed a period of thriving bank deposit rates, which remained as high as 15% to 25%.
However, these rates have now decreased to between 7% and 10% annually, with taxes eating up to 19.5% of interest income. This has led to a growth in housing demand as the low deposit rates have encouraged those with sufficient savings to venture into real estate as an alternative investment option. It is also worth noting most Ukrainians have no free access to stock trade like people in the EU and USA have.
Even with a stable UAH, it means that most Ukrainians cannot participate in trading with dollars. Therefore, real estate provides the only option for Ukrainians to protect their money from being devoured by inflation.
The rise in annual interest rates for a square meter of real state
The Ukrainian average annual inflation rate between 2000 and 2021 is 11.75%, with 5.2% being the index for the last three years. If the annual deposit interest paid on hand (after taxes or net interest) is 6.84%, it means that capital gains or annual savings in 2019-2021 would only be 1.64%.
However, the annual interest for square meters of real estate in places like Kyiv has remained +430% (from UAH 8,500 per square meter in 2006 to UAH 36,800 per square meter in 2021) for the last 15 years.
Even with all the intermediary ups and downs, this still represents an average annual growth of +28.7%! Such a rate is the most enormous increase ever experienced in any market! For instance, other places such as Slovakian Bratislava have registered an annual increase in property cost of 13%, which is far less than the +28% Ukrainian average.
This also represents an increase in the cost of the rent. A straightforward calculation of this rate reveals that your Ukrainian property (especially in Kyiv) is likely to add 100% to its price within an average of 3 years, while it would take an average of 7 years to achieve the same price growth in Bratislava.
Therefore, if you purchased an apartment in Kyiv for rent, you are likely to generate 100% of ROI in approximately 2 years and 11 months.
Few restrictions on foreign investors
Finally, the Ukrainian real estate market does not have major restrictions on foreigners interested in investing in its property market. Whereas the primary sales are quoted in UAH, they are still paid in US dollars. Moreover, all secondary residential transactions are computed in US dollars, making it easier for foreigners to participate in the Ukrainian market.
So, would you like to invest in Ukrainian real estate before it gets to the high plateau?
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