In nine months of 2021, the average cost per square meter in new buildings in Kyiv increased by 14.2% and by the end of the period amounted to 40,795 UAH or $1,517. Compared to the same period last year, the average cost per square meter increased by 19.5%.
The data of the company M4U, a proptech startup specializing in intelligent solutions in the field of real estate development, illustrate this point.
According to analysts' estimates, price increases are observed in all classes of real estate, but with different dynamics. The fastest price increase is the business class, where the average price since the beginning of the year has grown by 22.1%. The price per square meter in the comfort class has increased by 19.7%.
"Over the past year and a half, the priorities of real estate buyers in the primary market have changed. Increasingly, they prefer comfort and business class facilities that have a high-quality concept and modern public spaces, as well as offer additional services for residents," Volodymyr Danylenko, the founder of M4U, says. "The demand for such properties ensures that their prices rise at a level significantly higher than the market average."
Economy class real estate has risen in price by only 9.6% in 9 months, and that of the elite class—by 4.6% in hryvnia. The cost of elite-class real estate is often determined in US dollars, therefore, the strengthening of the hryvnia has a direct impact on the price dynamics. The price of elite class apartments in dollar terms has increased by 10% since the beginning of the year.
The key factors provoking an increase in real estate prices in the primary market are the imbalance of supply and demand, an increase in construction costs due to the rise in prices for raw materials, construction materials and works, as well as an increase in investment demand due to the absence or significantly lower profitability of the alternative tools. "Investments in real estate provide significantly higher profitability than deposits," Volodymyr Danylenko explains.
"The incorrect functioning of the permitting system over the past two years, when permits for new construction were almost not issued, amid the growing demand, has led to the fact that an average of 68% of apartments are sold in the facilities for sale or those being actively constructed. At the beginning of the year, this figure was 57%. This stimulates an increase in prices for the remaining apartments and, accordingly, for new projects that enter the market," the M4U founder stresses.
According to the analysts, the upward trend in prices is expected to continue until the end of the year, as these factors continue to impact the market. On the other hand, there is a decrease in demand: the total number of square meters sold in 2021 will be 5% less than in 2020, while their total cost will be about 10-12% higher than the total cost of apartments sold last year.