Why prices for real estate are growing up in Ukraine

In 2021, the real estate market of Ukraine noticeably revived.

There is a boom in the real estate market in Ukraine. This applies to both new buildings and secondary housing.
In the spring of 2020, during a tough lockdown, the real estate market, especially the primary one, froze, while the demand for housing fell by almost 50%.

After the abolition of severe restrictions, the market began to revive little by little, but no significant growth in property prices was observed.

The situation changed in 2021. Literally from its first months, square meters began to rise in price at an outstripping pace.

Stable growth

The demand for residential real estate in Ukraine has been growing over the past few years, and potential buyers prefer new homes over old housing stock.

“People prefer new homes over the old houses. Because of that, developers are not able to satisfy the demand and prices for desirable properties are growing up”.

In 2021 real estate prices are growing in hryvnia equivalent by about 20%, and in foreign currency, for the past five years, there has been a stable growth at the level of 10-15% per year.

Also there is no particular alternative of real estate investment – bank deposits are not risky and not interesting, so the local investment option is real estate. Given that, if there was an opportunity to buy some shares, the investors would leave the real estate, because it is not always so profitable.

High cost of construction

There are other factors, which cause price growth. Thus, the cost of construction increased due to the increase in gas and electricity tariffs, as well as the minimum wage.

In addition to this, construction materials have significantly increased in price in Ukraine recently.

The fact that building materials price went up is quite understandable. World prices had been falling for several years. But with the end of the acute phase of the pandemic, rapid economic growth began, primarily in China. The US and Europe have also begun to emerge from the recession, and the demand for raw materials has also increased there, which pushed prices up.

This is not to say that in 2020 prices for building materials did not grow at all. In particular, the price for concrete increased by an average of 20% last year. But the rise in price was more of a point rather than massive. For example, prices for bricks have remained virtually unchanged over the past year.

But in 2021 everything became more expensive. Prices for metal have increased 2-2.5 times, and for timber – 4-5 times.

In Ukraine, metal products are mainly of domestic origin, with about 85% of them being exported. And the good world situation only contributes to its export abroad.

However, the global markets are already gradually cooling down, which means that one can hope that metal prices, including in Ukraine, will stabilize in the near future.

The same cannot be said about wood, the prices for which do not even think to stop.

What about 2022?

As for 2022, it is extremely difficult to predict something here. “We do not know what will happen before the end of this year. If there are no serious bankruptcies of developers, if energy resources do not rise in price, the dollar rate does not grow strongly, the market will continue to grow slowly, ” – the expert noted.

Other experts are convinced that real estate prices will grow, at least until 2023 – unless, of course, there is a systemic crisis of the global or Ukrainian economy.

“The market is far from saturation point – the demand for apartments is high as in the quality of investment assets and to improve their own living conditions ”.

At the same time, an unpredictable state policy, in particular, related to the introduction of new taxes, can help reduce the volume of construction, and then prices will rise even faster than now.

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