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Light at the end of the tunnel: Apartment prices will stabilize by the end of the year—experts

Photo: Ferenc Keresi/Pixabay

Photo: Ferenc Keresi/Pixabay

In the second half of September the market began to decline.

The peak of activity in selling and purchasing apartments usually occurs in the autumn months. But this year, in the second half of September, the market, on the contrary, began to sink. According to experts, this will significantly affect prices.

Soviet apartments: Sales come to a halt

In the second half of September, a decrease in activity was recorded in the secondary housing market in comparison with the summer period, after which experts predict a price lull.

According to the Association of Real Estate Specialists (Realtors) of Ukraine, sales in the secondary housing market in Kншv, Lvшv, Odesa, Dnipro, and Kharkiv decreased by almost 5-10%.

According to Yuriy Pita, the president of the association, by the end of October, lull will cover the rest of the regional centers, and that will lead to the stabilization of prices throughout the country. Slight price fluctuations are possible, but that will not affect the overall figures.

In particular, in September in Kyiv, Odesa, Dnipro, Lviv, and Kharkiv, the average increase in the cost of housing did not exceed 1.5-2%. In other cities in comparison with August, prices remained practically unchanged.

The expert says that the reasons for the price slowdown are the population impoverishment and the reorientation to cheaper housing: "There is a buyer, but they are looking for cheaper offers. Thus, the rise in prices observed in the first half of the year has already "leaped" the expectations and buyers’ financial capabilities."

In his opinion, one should hardly expect any significant price changes over the next three months.

Quote"At the end of September, there were extremely insignificant fluctuations, mainly for the most demanded small-sized apartments in good condition and in successful locations with an area of up to 50 square meters. According to the ARES, prices increased only in 10% of the apartments for sale and only in certain locations of the largest cities," the expert believes.

Will new buildings become closer to the people?

Pricing in the primary market depends on many factors: on the cost of building materials and construction and installation work with existing demand, the location of facilities, the development of mortgages and urban planning reform.

In this segment, since the beginning of the year, the weighted average cost per square meter in the primary housing market has grown by 19% in hryvnia, or 5,300 UAH/sq. m and by 27% in dollars, or $260/sq. m.

According to real estate expert Victoria Bereshchak, liquid formats of the "comfort +" category (multifunctional district or quarter, eco-clusters, mini-city, wellness-quarter), business class (multifunctional residential complex, service complexes) have grown significantly in price over 9 months of the year. Since the beginning of the year, the average growth meridian in "comfort +" has made 20-22%, in business class—24%.

This is related to an increase in the cost of construction (by 20—30%), as well as a high level of investment for the purpose of resale (up to 60% of all transactions). At the same time, the structure of demand for new buildings also includes a large part of the mass market, which allows the developer to make super discounts and hidden discounts, even higher than market ones.

Quote"In addition, the market is fueled by the lack of investment alternatives in the country. Rates on deposits in banks are falling rapidly month-on-month, and dynamic prices per square meter demonstrate good potential for earning on construction readiness: 25—35% in the "comfort +" segment and 35 —40% in the business class," Bereshchak noted.

At the same time, the inadequate level of the population's capacity to pay remains a restraining factor in the price increase. It is associated with both the growth of unemployment and the decrease in real incomes of the population.

According to the expert's forecasts, we are expecting a further moderate increase in the cost per square meter with a noticeable imbalance between the weighted average price of a square meter on the market and the cost in liquid housing estates due to the increased attention of a solvent client and higher dynamics of construction.

Quote"It is likely that prices will rise by another 10-15% by January. But then a slight lull awaits us, if the level of effective demand decreases slightly," Bereshchak noted.

Even smaller price fluctuations in new buildings are predicted by ARES analysts. According to the Lviv branch of ARES, in September the number of transactions with some developers in Lviv decreased by 12—20%. The same tendencies are observed in other large regional centers: in Kyiv, Odesa, and Kharkiv the decrease in buyers is about 10%, in Dnipro—7—10%.

According to the president of the ARES, this means that the developers have received an eloquent signal: so far, the demand has been almost completely realized.

Quote"Until the end of the year, average prices for new buildings may increase on average by only 2—3%. An increase in prices in the range of 3—5% is expected only in 20—30% of those being built. The developers are well aware that the "detachment" of prices from real demand will affect the further decrease in the number of transactions," Yuriy Pita noted.

In the end, in his opinion, in the case of a decrease in demand in order not to lose a buyer, construction companies will most likely have to resort to hidden discounts in the form of discounts per square meter—sometimes reducing the price by 10—15%.

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