Outlook for for apartments prices in Kyiv in the summer of 2021: what will happen to the housing cost

Author

Victoria Bereshchak

The accelerated inflation in the spring, as well as the growth of prime cost, in particular of labor and basic building materials, are the main factors affecting the rise in prices for apartments in new buildings.

The primary market shows a stable rise in the cost housing, but the prices for the secondary housing do not lag behind, although for completely different reasons. About how much apartments in Kyiv cost and what is the outlook for real estate prices in the summer of 2021—read in the article of .

It’s all about demand and prime cost: how much is a square meter in Kyiv

The average cost per square meter in new buildings in Kyiv in May 2021 was 29.5 UAH/sq. m, adding 1,000 UAH for a month at once, or 3.5%. In dollars, the cost of apartments in the residential complex is on average $1050/sq. m, and that is $20, or 1.9% higher than in April. Since the beginning of the year, the cost of apartments on the primary market in hryvnia has increased by 1,800 UAH or 6.5%. In US currency, the growth amounted to $60, or 6.1%.

The main factors behind the price growth, according to the interviewed market players and experts, were the increase in prime cost, the inflation accelerated to 8.5% that exceeds all forecasts, as well as the hryvnia volatility.

An additional incentive for the growth of real estate prices in new buildings was the reduction in new liquid supply and an increase in construction readiness in popular complexes in the comfort+ and business class categories.

The collapse in the work of licensing authorities in 2020, related to the failed SACI reform, led to a 30% reduction in new supply compared to 2019. And the situation with coronavirus added fuel to the fire.

Developers, when faced with the problem of obtaining building permits and certificates for the commissioning of the built in operation, have postponed many projects until better times. New projects start much less frequently, and the price per square meter in liquid housing complexes already familiar to the buyer grows with the construction readiness.

Depending on the level of demand, the concept quality, infrastructure solutions and the format of the new building, the increase in cost with the transition to each new construction stage is on average up to 7%. It is not surprising that in many new buildings prices are slightly higher than the market average.

However, the average cost of apartments in Kyiv rocketed due to growing construction costs. Construction materials, depending on the category, have risen in price since the beginning of the year by 7-9%, and certain components, such as concrete, reinforcement, high-quality insulation, and ceramic blocks, have increased in price even more due to inflation.

The jump in prices for metal structures recorded in early May is likely to lead to further growth in prime cost. And the growing inflationary fears around the world will snowball the rise in the cost of components, as well as the qualified workforce.

The more the dollar depreciates, the more expensive commodities become. In addition, there are certain problems with raw materials (supply restrictions, for instance, or feverish demand)—this also drives up the cost. The outlook of growth in prices for apartments in new buildings in the next quarter on average in the market is 5—7%.

Restraining factors of the abrupt growth in real estate prices in new buildings in Kyiv will be limited effective demand and the still large number of illiquid mass-market housing (over 50% in the total supply structure).

It is likely that in pursuit of a buyer, the mass market will be forced to significantly dump, thereby reducing the rate of growth in real estate prices at the primary market. But nowadays popular live&work&play formats, "city within a city", service and multifunctional residential complexes have nothing to fear: there is a client and there is construction dynamics—there is a legitimate chance to raise the price. Therefore, the growth rate may be higher than the general market rate.

How much is an apartment on the secondary housing market in Kyiv: outlook for the summer-2021

Apartments are gradually becoming more expensive not only in the primary market, but also in the secondary market. However, the former is doing much better with the buyer. The growth in demand for new housing can be explained by several nuances at once. Firstly, the quality of construction, the applied energy-efficient solutions (therefore, less resource consumption and lower utility bills), the concept of the complex, infrastructure, modern well-thought-out apartment layout, and a unified social environment.

Secondly, there is a chance to purchase a new apartment in a modern conceptual complex at quite affordable prices at the start of the project or during the initial construction period. However, fears after the bankruptcy of Arkada Bank and the situation with Ukrbud make the buyer much more selective and cautious in matters of economy.

People pay more and more attention to the study of legal purity and verification of the new building and the developer, as well as monitor the construction dynamics and construction experience of company’s previous residential complexes.

Nevertheless, it is in the primary market that the buyer has a chance to purchase a dream apartment in installments from the developer for a period of 3, 5, and even 7 years, to receive a favorable discount on average up to 10% when paying 100% of the price, and sometimes even up to 15%, as well as take advantage of the new program "Affordable mortgage 7%".

But homeowners in already built houses are much less accommodating, and that works against them. The reluctance to make concessions and offer discounts to interested buyers often becomes a stumbling block. The exposure period of apartments in the secondary housing has significantly increased over the past year and now ranges from 2—3 months to 6 months, even for liquid layouts in the fresh secondary housing (houses built after 2000).

Since the beginning of the year, the cost of apartments in the secondary housing in Kyiv has grown on average within 1—3%, depending on the district and area. In the summer of 2021, if the situation is stable, secondary housing has a chance to grow in price by the same amount, but not more.