In 2021, Ukrainians actively bought housing even despite the price fever, the state sold large state-owned enterprises, and commercial real estate kept afloat by opening new facilities.
1. Sale of Bolshevik plant
The number-one event was a high-profile auction for the sale of the abandoned Bolshevik plant (First Kyiv Machine-Building Plant). At least because for 16 years after the re-privatization of the large state-owned enterprise Kryvorizhstal, not a single large facility was sold.
However, 35 hectares of the Bolshevik plant were bought in less than 10 minutes. And not for 3 billion, as predicted by experts and market participants, but for 1.429 billion UAH. The cost was only 2% higher than the starting price.
The proceeds have already been transferred to the budget, although the Antimonopoly Committee of Ukraine allowed the purchase of Bolshevik only on December 30.
The new owners—a consortium of investors, including Oleksiy Baranov, the owner of A-Development, and the company UPD associated with the UFuture group of Vasyl Khmelnytsky, have already announced that they will build a new residential complex with a lake and a park on the site of the plant. According to the experts, it is possible to build a complex for 5,000 apartments worth more than 20 billion UAH.
2. SIUP instead of SACI
The event of the year was the liquidation of the notorious State Architectural and Construction Inspectorate (SACI) and the establishment of the State Inspectorate of Urban Planning (SIUP). The licensing system really rotted through: according to the market experts, the potential amount of corruption in SACI reached about 10 billion UAH annually. In September 2021, the era of the corruption giant SACI ended and a new "digital" era began.
With the SIUP establishment, one could feel by touch what the reform of urban planning could be. For three working months, the system processed 14,000 reports on the start of construction, 1,800 applications for obtaining permission to perform construction work, and 10,000 declarations and certificates for accepting facilities into operation.
However, during this period, even the digital SIUP missed several times. The media have already noticed scandals related to the developers who have obtained a certificate of readiness for commissioning a facility that was nor ready at all.
3. Rapid increase in construction and housing prices
The volume of housing construction in Ukraine in January-November 2021 compared to the same period last year increased by 17.9%. In particular, housing construction increased by 3.5% in November, which is much lower than in October, when there was an increase of 29.1%.
During the year, the price per square meter in new residential complexes in Kyiv increased by an average of 20%, in some segments even up to 30%. According to the analysts at M4U, the price increases were in all classes of real estate, but the business class showed the fastest increase in prices. There the cost increased by 22.1% since the beginning of the year. The square meter in the comfort class increased by 19.7%.
Eventually, after the price dizziness in October, prices began to recover—the market is still experiencing a sharp drop in demand for apartments in all segments.
4. Launching 7% mortgage
In March, the program Affordable 7% Mortgage 7% was launched in 25 regions of the country. For the period up to December 30, the authorized banks signed 1,320 loan agreements totaling 1.145 billion UAH.
According to the applications submitted by citizens for obtaining loans, Kyiv region—31.3% and Kyiv—31.1% are leading among the regions. Lviv region—6.4%, Kharkiv region—5.7%, and Volyn were active as well. In total, 1,865 applications for participation in the program for the total amount of 1.614 billion UAH were received. Of these, 23.3% related to the primary market and 76.7%—the secondary market.
However, due to the specific restrictions, mortgages have not yet become a massive investment instrument. At the moment, the level of lending in Ukraine is 30 times lower than in neighboring Poland.
5.Opening of giant SEC Respublika Park
In difficult times of pandemic and restrictions the opening of each mall is an event. In the case with Respublika Park, this was a double win, given that the frozen facility had been idle for 9 years under the open sky (the project was supposed to be commissioned in 2014). Several years ago, the mall received new investors (investment fund Cascade Invest) and changed its concept and name.
The largest SEC in Eastern Europe with a total area of 300,000 square meters (rental area—135,000 square meters) will accomodate 500 tenants. The country's first indoor amusement park, a digital amusement park, and the country's first 20-meter wind tunnel are built here. The main feature of the giant is a unique living park under the roof—the space called Oasis where the rare plants grow.
6.Opening of the first IKEA store in Ukraine
Before 2021, the Swedish furniture and decor giant IKEA tried to enter the Ukrainian market several times, but each time it stumbled over bureaucratic obstacles. After launching an online store in 2020, a year later, the first offline store appeared in the Blockbuster Mall. Today it presents more than 5,000 products, mainly furniture and kitchen utensils.
The company’s results showed the prospects of the Ukrainian market: after all, Ukrainians have a great need for creative solutions for storing things due to the limited living space.
7. Half the kingdom for warehouses. Opening of warehouse complex Almazny
An important event for the warehouse segment was the opening of a new Class A administrative and logistics complex Almazny in the fall. It has an area of 13,000 sq. m. Due to the large shortage of modern warehouse space, its meters were rented long before the opening—under a preliminary agreement. But the most important thing is that in many years, the first modern logistics complex has opened within the capital, and not in its outskirts.
8. Legislative changes and new taxes
One of the most notorious laws passed this political season—№5600—impacted the real estate market as well. Initially, the bill proposed taxing value-added deals on the sale of newly built apartments or houses to eliminate the developers' tax evasion scheme.
In the final version, the norm for the real estate sale remained: the sale of the third and the next apartment within one year will amount to 18% of the net income—that is, from the difference between the sale price and the previous purchase price of the property.
So far, the question about the bill №5655 on the principles of urban planning reform, where architects demand to return their supervision copyright, remains open. Even the International Union of Architects (IUA) called on the Verkhovna Rada to finalize the document and settle the issues of the architects’ copyright, otherwise the law would contradict European legislation.
9. "Construction amnesty"
In 2021, the Cabinet of Ministers launched a simplified procedure for accepting into operation individual houses, garden, country houses (up to 300 square meters), outbuildings and facilities, as well as buildings and facilities for agricultural purposes (CC1), built without permits in the period 1992-2015.
Thus, the Ukrainians were able to register houses and summer houses built without permits.
10. Fever on suburban real estate market
In 2021, the suburban housing market grew by 50% in the Kyiv region. The demand for different formats of such housing (cottages, townhouses, and low-rise residential complexes) and land plots for private construction (up to 10 acres) increased depending on the area from 30% to 50%. Therefore, the cost per square meter also increased—up to 40%.
This segment, of course, is greatly impacted by the pandemic that has changed the attitude of Ukrainians to living conditions. Now the clients are not satisfied with just a cozy house outside the city; they are interested in modern facilities with a non-standard design and convenient infrastructure.
A lot of Kyiv citizens began to lean towards the option of moving out of town. In 2021, the housing market in Kyiv grew by 25%, conceptual projects in the capital—by an average of 35-40%, suburban housing format—by 30%, and conceptual projects outside the city—by 50%.
The lockdown turned our idea of residential real estate upside down: people began to think about the quality of housing, closeness to nature, and the possibility of expanding personal space for the family. The key trends in construction are the availability of infrastructure, apartments with terraces, cottage construction, and suburban real estate. And the market was able to quickly adapt to the new conditions.
Residential construction has become a leader in the growth rate of the construction industry and exceeded the results of the last year by almost 20%. In general, prices in Ukraine increased by an average of 20% in the secondary housing market and by 20-30% in the primary market.
Growth in 2021 was driven by several factors:
1) higher prices for building materials and labor,
2) falling rates on loans and deposits,
3) the uncertainty factor related to the pandemic.
In such conditions, people are actively investing in residential real estate. For example, the demand for new business class buildings has grown by 27.8% over the year, and the comfort class—by 18%.
With regard to legislative changes, we expect the completion of the architectural and construction system reform. The liquidation of SACI, which was a state monopoly and was considered one of the most corrupted bodies, can be considered a great victory of the year.
The establishment of a new institute—the State Inspectorate of Urban Planning (SIUP)—provides for a fundamentally new model of urban planning control.
Full digitalization, transfer of control functions to individuals, and increased responsibility of all participants in the construction process are three main aspects of the new reform.
The digitalization of the process of obtaining permits and control functions implies that decisions will be made by the system, and not by an official, as before.
This will eliminate the human factor impact and abolish corruption risks. The reform will provide new fair rules of the game in the market. The industry is going digital and transparent. Relations in the field of raising funds from individuals and legal entities will be settled.
Former Deputy Minister of Regional Development, President of the Confederation of Builders of Ukraine (CBU)
"2021 became a year of changes. The liquidation of the SACI alone is worth a lot. All market players complained about its work. Unreasonable delay in issuing permits, corruption—this is an incomplete list of complaints about the work of a government agency.
SIUP, which began working in September, is favourably received by the stakeholders and allows us to affirm with optimism that we are moving towards overcoming the corruption component in the construction industry.
The changes took place in the legislative environment as well. Several significant bills were adopted at once, and another part is being prepared for adoption in the second reading. It is important that at last compromise solutions regarding bill No. 5655 were found.
A compromise regarding bill No. 5600 was also reached. Its original version provided for an excessive tax burden on transactions related to the purchase and sale of primary real estate. Eventually, the parliamentarians listened to the opinion of the expert community and amended the bill to the second reading.
I hope that the reform of urban planning will not slow down either the quality or the pace in 2022. The industry needs digitalization and deregulation in order to finally get rid of corruption that hinders both honest business and the citizens of Ukraine."