The Boom Of Prices In Ukraine Of The Latest Years Is Explained With Influencing Factors
Ukraine has one of the most corrupt economies in the world. Based on various estimates, from third to half of the Ukrainian economy is in shadow, which is caused by corruption, unclear laws, and an unripe taxation system. These result in underperformance in tax collection, economic growth, and the absence of many investment tools. So, as of 2021, only two real investment opportunities are available to Ukrainians and investors from abroad: bank deposits and real estate.
To compare the tempos of GDP per capita, which is the most important indicator of the health and size of the economy of any country, 1992 to 2019, the numbers are follows:
- Poland: $2,459 vs. $15,695 (+538%)
- Russia: $3,099 vs. $11,585 (+273%)
- Ukraine: $1,418 vs. $3,659 (just +158%).
The lag of Ukraine behind is huge! But, at the same time, it also means amazing capabilities for future growth, which makes the market of real estate boom in 2020 & 2021. Bank deposits, unfortunately, are no longer a tangible investment opportunity in Ukraine since they are being low in income from 2018 and further on, giving a 1-digit profit while real estate gives a 2-number one.
Current state of prices for homes and apartments in Ukraine
Based on the most recent price and market analysis for Ukraine, prices for all types of property rose in 2020 and 2021. The good economic news for investors is that the trend will strongly continue through the entire 2022 (and there are visible reserves for 2023). At the same time, prices for 1 sq. m in Ukraine and even its capital are very low compared to many other countries. Let’s look at the stats for apartments in many-story homes:
- In entire Ukraine, for sale: $906.2 for 1 sq. m (on the secondary market, 1-bedroom apartments cost between $863 and $930, 2-bedroom cost $860, and 3+ bedroom options cost $1,206). The average price for Kyiv for all types of apts. is $1787.4.
- In entire Ukraine, for rent: $8.9 for 1 sq. m (on the secondary market, 1-bedroom apartments cost between $8 and $8.4, 2-bedroom cost $10.2, and 3+ bedroom options cost $18). The average price for Kyiv for all types of apts. is $14.7. This makes rental ROI for Ukraine equal to 11.78% annual and 9.9% for Kyiv (for all types of dwelling).
Now the numbers of sales of detached homes (unfortunately, there is no reliable statistic for their rent):
- In entire Ukraine, for sale: $504.8 for 1 sq. m (on all markets, houses up to 100 sq. m cost $339, 100-300 sq. m. cost $632, 300-600 sq.m. cost $1,037, and 600+ sq.m. cost $1,659 for 1 meter). The average price for Kyiv for all types of detached homes is $1,388.6 for 1 sq.m.
The YoY growth of prices 2021/2020 of residential real estate in Ukraine is from 12.4% to 25% (depending on what source to use for analysis) but even that looks underestimated. The real numbers, according to market participants, are 30%-50%. Just to compare the official stats with other countries (YoY 2021/2020):
- Australia: +7.5%
- Austria: -10.7%
- Belarus: -2.4%
- Brazil: +4.4%
- Canada: +11.9%
- Chile: +10.7%
- China: -8.5%
- Croatia: -1.2%
- Cyprus: +0.9%
- Czech Republic: +8.9%
- France: -5.4%
- The EU in general: +5.7%.
Factors behind the growth of prices of Ukraine houses
Current Ukrainian economy news for several years that make an influence on the market prices, indicate such strong factors of growth:
- Very good infrastructure in Ukraine, which is developing at a high pace. Most importantly, new roads are being built and the old ones improved to better connect cities and villages. Efficient public transportation is also expanding.
- IT market is booming, with over a third of all self-employed people in Ukraine working in this sector. Also, the growth rate of the IT sector is the highest in the world today compared to all countries, even to the US. You might have heard of several super-successful Ukrainian IT startups, which are already worth over $1 billion.
- Many objects of new residential property are constantly being built. For 6 months of 2021 alone, there were 4,797,200 new square meters commissioned throughout Ukraine, which is +29.5% in the volume compared to the first 6 months of 2020.
- Stubborn movement of Ukraine towards NATO and the EU. If Russia won’t attack Kyiv directly with tanks and nuclear bombs, Ukraine will be a member of those unions by 2030 (or 2040 at most). A strong expectation of this happening makes local and foreign investors very assured in the further price growth.
On one side, Ukraine is very corrupt and majorly underperforming in GDP per capita. On another side, it has an amazing infrastructure and great desire to move ahead, away from its hideous communist past. COVID-19 pandemic has corrected prices in Ukraine significantly, making them ascend greater than in most parts of the world. So, picking a direction for your investments today, pay the closest attention to Ukraine, and jump in the local market before prices become too high to steal the colossal ROI.
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More about DGY
DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.
Investment advice and recommendations
DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.
In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.
DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.
Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.
Real estate investment opportunities in Ukraine
When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.
Properties for investments in Ukraine
Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $85k only.
How to invest in Ukrainian Real Estate
In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.