Kyiv Real Estate – January 2020

It was another month of gains for January 2020 in the Kyiv real estate market, marking the 21st consecutive increase since the bottom in June 2018. The year over year (January 2019-January 2020) gain stands at a healthy +15.7%.

Looking ot across Europe, only Prague and Bratislava are seeing numbers comparable to Kyiv. But with annual rental yields in Kyiv ranging from 9%-18%, Kyiv’s European counterparts really can’t compare when bringing in their average of 3%-4% per annum. Ridiculously cheap and available credit is such that every uber driver in Prague will now gladly boast of his/her vast real estate holdings (leveraged to the moon with several adjustable rate mortgages). This is the opposite situation we have here in Kyiv where only 5% of purchases last year were made utilizing a mortgage. Kyiv is still, largely a cash market.

Pricing

January price came in at $1443/m2 and up +1% from the previous month. City center continued to be the best performer for foreigners and expats as many units are being purchased for subsequent remodel and daily rental. This daily rent market has seen a price increase of +13%/year, every year since 2015 and if other European cities are any guide, this trend should continue for a number of years to come. Underlying purchase price should in turn continue responding with its own increase.

Kyiv real estate market, cost per meter

Inventory

Inventory finally caught a breather this month from it’s unrelenting evaporation. January was the first month in which Kyiv added units in two years. I wrote about this here last month.

Kyiv property inventory

Last month’s (December 2019) market update here

Likely the investment of the decade – Ukrainian Real Estate

A perfect storm appears to be developing in the Ukrainian economy and from the angle of foreign investors, specifically the Ukrainian property market. Last week’s inflation numbers are showing that the Central Bank has finally put the nail in that coffin and economists are predicting that the upcoming January 30th interest rate decision will be radical cuts of around 300bps. Yes, these numbers are huge and the implications for the overall economy are as well but this is merely one of the positives coinciding in what could be a perfect storm developing in the Ukrainian property market.

Lack of Bank Credit (about to change)

In 2014, Consumer credit largely collapsed in the fallout of the revolution that ousted Kremlin-backed quasi dictator Yanukovych and the subsequent Russian invasion of Eastern Ukraine. Still today only around 5% of property purchases are done utilizing bank credit. These are cash deals. Lets imagine that the percentage of buyers accessing newly available credit eventually returns to market averages we’ve seen in other emerging Eastern European countries or even back to the 2007 Ukrainian average of 70%. The Zelensky government is currently implementing programs to do exactly this in both business and consumer credit. With rental yields (10%-15%) already on par with mortgage rates, a further drop in cost should find ready customers.

Vanishing inventory

In the capital city of Kyiv, inventory for sale on the secondary market has been cut from the low 2 years ago at 22,000 to the current 10,300. The rate of evaporation has been accelerating of late with the past year coming in at -37%. Here’s an inventory chart from last week’s article .

December 2019 Property Inventory (secondary market)

The +16% price gains we saw in 2019 will likely be dwarved by what we see in 2020 and likely 2021 as all these factors coincide. We’ll know more on January 30th as NBU meets.

Kyiv Property Market Inventory continues to Vanish

December 2019 was another month of vanishing inventory and rising prices in the Kyiv secondary market. Denominated in US Dollars, the city’s average square meter came in at $1430 with city center meters at $2120. Overall 2019 saw a gain of +16%. With city center annual rental yields averaging 10%-18%, the Kyiv property market is proving itself to be one of the top performers of the year globally in terms of net returns.

But the real story continues to be evaporating inventory now sitting at 10,300 units and showing a year-over-year draw down of -37%. This is a far cry from the 22,000 we saw only 2 years ago. A continuation of this trend should have a more pronounced positive impact on price into 2020. The special city center properties (penthouses, park views etc) we saw in 2017 going for -50% of their 2007 highs are mostly gone and those who were lucky enough to pick them up will likely be rewarded with spectacular gains.

Last month’s Kyiv property market update (November 2018 data)

Kyiv Property Market Update – December 2019

Kyiv Real Estate Prices Continues Upward

This article will focus on the secondary market rather than the new construction projects which rely on a number of supply/demand factors that aren’t as indicative of the overall economic picture.

November 2019 brought another advance in property prices in Kyiv as the general economic situation continued to improve. On a per meter basis, in US Dollars, prices now are back to where they were in April of 2016 ($1411/m²). This marks the 15th consecutive month of higher prices.

City center has seen the highest growth over the past year now reaching an average cost of $2110/m².

Kyiv property market average price – November 2018-November 2019 in USD

INVENTORY

For November we again see that the real story is inventory which continues to evaporate, having been cut in half over the past 18 months and by -37% in just the past 12 months. The current inventory of 10538 units is the lowest within available records that date back to 2010. Just 16 months ago we are at 22,000.

When buying again picks up later in the year we could see the lack of available properties really begin to effect prices to the upside.

Previous month’s Kyiv Property market update can be found here

How to Buy Real Estate in Ukraine

The process for non-residents to buy property in Ukraine is easier than any other country in Europe and MUCH easier than in North America. Here is a simple step by step guide.

#1 Choose a Broker

Unless you’re going direct to seller, you’ll need a real estate agent to show you several properties. Assuming here that you are in either Kyiv or Odessa there are basically 4 reputable agencies. All these will charge a commission as a percentage of sales price. Standard is 5% but this can usually be negotiated down to 3-4%.

Kyiv

Blagovist www.blagovist.com/en – Blagovist has about 50% overall market share, hundreds of agents and offices located throughout the city. They have English speakers on staff.

Park Lane https://parklane.ua/eng – Owned now by Blagovist, offices throughout city, also with English speakers on staff.

Aim Realty https://www.aimrealtykiev.com/ – Small company but specializing in expat market.

Odessa

Atlanta https://www.atlanta.ua/ – Largest agency in Odessa. Odessa can be a little wild unlike Kyiv, so it’s best to stick with a larger company/reputation.

#2 Obtain Tax ID and Open Bank Account

After you’ve found the property you wish to buy, you’ll need to get a tax ID and open a bank account. This takes about 3 days and only needs to be done once.

Tax ID office for Kyiv is located at Leskova 4, in city center. Hours are Monday-Thursday 09:00-18:00 and Friday 09:00-16:00.

http://kyiv.sfs.gov.ua/okremi-storinki/tsentri-obslugovuvannya-platnikiv-poda/69655.html

Bring passport, notarized copy of your passport which can be had at any notary for about $10, proof of address in Ukraine which is simply a letter from your hotel or AirBnB stating that you have accommodation.

Wait 3-4 days and you will be given a tax identification document. Take this to a large bank of your choice and open an account. To do this you’ll again need passport, notarized copy of passport and the same accommodation letter you used previously for the tax ID. Send your purchase funds to this account from abroad.

#3 The Purchase

The day of the purchase you will meet the real estate agent, seller and notary at your bank. You’ll either transfer funds to sellers bank account as documents are signed or most commonly the seller will prefer cash on site.

Taxes and fees are minimal in comparison to Western countries. There is a 1% pension fund tax, paid by seller and a 1.5% military tax. Normally these are split between buyer and seller. They might try to stick you with the whole thing assuming your ignorant of this fact. Don’t let that happen. The notary will need about $100-200 depending on purchase price. Your name is then registered into the registration database and you leave with your documents.

That’s it.

Recurring annual taxes are minimal and apply only if you own combined over 60 meters across as many properties that you may own, around $1.50/year per meter.

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Kyiv property market continues to tighten

Things in the secondary market are getting interesting.
The drop in secondary market inventory for Kyiv residential apartments continues to show in prices which are currently up +15.2% YOY. With current inventory of listings down another -37% this trend will likely only increase in severity, continuing to push prices up.

Down from a peak of over 22,400 in March 2017, we are now sitting at 10,860 active listings with this year’s average monthly reduction being 516 units. If this trajectory continues, we are looking at a -50% inventory reduction for 2020. This can only be very price positive.