​Real Estate Industry Is Now More Prepared To Mitigate Another Wave Of Covid-Related Crisis

November 1, 2021, is a black day for many residents of Ukraine. Not only the majority of regions of Ukraine have gone to the ‘red zone’ of quarantine but also it is since that day, all non-vaccinated citizens of Kyiv are forbidden from free movements in the Ukrainian capital. Unvaccinated people can’t use public transportation, malls, publically open venues (like cinemas), or governmental facilities. That dramatically affects business – many small and medium businesses all over the country will have to again consider going bankrupt.

The situation also has an impact on the market of real estate investments in Ukraine. But we can’t call it significant. So, what has changed since the very first wave of lockdowns in Ukraine in 2020? Can Ukraine real estate industry withstand another crisis?

An increasing number of vaccinated people

As of the moment, 10.2 million Ukrainians are vaccinated at least with one dose and 7.5 M are vaccinated with two doses. As the head state’s doctor reassured, the Covid-related limitations would be withdrawn in the country when 20 million are fully vaccinated (48% of the total population). In the primal Covid lockdown wave in 2020, this number was way lower, forcing more people to sit at homes, which lowered property investment opportunities. Now, as several hundred thousand people are vaccinated in Ukraine every day, it should take 6-12 months to reach the number of 20 million so as to return to previous life and business activity.

More processes online

Before 2020, going online was more like a declarative thing for many businesses. In 2020-2021, nearly all of them had to readjust to working online.

Developers and other participants of the market made it possible for people to become acquainted with the characteristics and prices of real estate objects online, without the need to visit an office or see it with eyes. Thanks to a legal opportunity of signing documents with a digital signature, the conclusion of a bigger number of contracts in the real estate market can be done fully remotely, the same as making payments for them.

Changes mostly concern the primary market (objects directly from developers) but the secondary market (used objects) is also catching up, although at a slower pace.

Ongoing state support for mortgage lending

Investment opportunities of natural persons and private entrepreneurs are still being protected by the government. Recently, President Zelensky signed another law, which broadens the opportunities of private entrepreneurs to access a beneficial-interest mortgage. Now, the threshold of their yearly income is increased to UAH 50 million a year (approx. USD 2 million). We remind our readers that the state program makes lending yearly interest equal to 5%, 7%, or 9% (depending on certain conditions), which is significantly lower than previous market interest rates between 15% and 20% annual. Over $2 billion were already lent within this state program.

Shifting construction deadlines

Some companies cannot make sure that the construction process goes the same well and uninterrupted, as it was before the introduction of another lockdown. That includes disruptions in the supply chains and manpower. Since some personnel officially cannot get to the workplaces or work per se without a vaccination certificate, there will be shifts in the deadlines of finishing and commissioning of ongoing objects.

Developers go for such a step, as there exist gaps in the building legislation about the responsibility of developers for shifting terms – basically, they don’t pay any fines to anybody. So if you’re a client of one of the developers (you’ve bought a property in the primary market in Ukraine), you shall be aware that term shifting is something real.

Surely, this risk does not exist in the secondary market. So if you’re financially able to diversify your portfolio with objects of a secondary market, this will make you mitigate the risks of not meeting the planned cash flow.

The prices won’t decrease

It is possible to say with full assuredness now that by the end of 2021, real estate market prices won’t go down because of the enacted lockdown. The strategy of “wait and see” that’s been active in Ukraine for the past decades, still remains one of the strongest market forces. When sales drop as business activity declines for whatever reason, it is preferential for both developers and secondary owners to halt sales and wait rather than to decrease prices to sell.

It works always but the war. But since the East of Ukraine has another frozen Russian-triggered conflict (as many other countries surrounding Russia have today), the war is not hot anymore, so there will also be no war-caused prices deflation, as it was in 2014 in Donbas and Crimea.

Conclusion

The last in 2021 Covid-related lockdown in Ukraine shan’t drive prices lower. Developers and other owners are full of desire to “sit and wait”. There are no major factors, which could drive the market prices down from their pre-heated condition. Also, more people become vaccinated and the state support of lending is ongoing – which will soon make the economy alive again.

So we conclude that it is still a good time for investors to step into the Ukrainian real estate market, as it won’t shrink.