"The market is frozen up": How real estate reacts to external threat from Russia

Author

Lesia Solovchuk

The real estate market reacts to the news of tense negotiations and the military threat from the Russian Federation with a complete lull.

In the first month of the year, the market's business activity usually decreases. But in January, the miniscule number of buyers is impressive even compared to the same period of previous years. And this is especially acute after the almost record-breaking dynamics of 2021. interviewed experts about how the situation impacts real estate and what the market participants are waiting for.

As real estate expert Yurii Ulanov notes, "everything has grown quiet on the market, the market has frozen up." Most people who were planning to buy a flat for themselves are now trying to postpone this matter. As well as the investors who are calmer about the situation but still postpone the point of purchase.

"It feels like the time of the first lockdown, when everyone was closed—and this caused a similar situation in the market: people are not buying anything. But later, when everyone realized that there was no mortal threat, everyone rushed to buy. Alternatively, this will be the case this year as well. Another scenario for the course of events is more pessimistic," the expert says.

According to him, the market participants are counting on the revival of the situation in March. It is the data for March that will make it clear whether the drop in demand is an economic or emotional factor, when people rush to invest again as soon as the situation stabilizes.

"The developers are also sensitive. If nothing happens for a month or two, it is possible that they will have to lower the price," the specialist believes.

«Застройщики тоже чувствительны. Если месяц-другой ничего не будет происходить, не исключено, что им придется снижать цену», — считает специалист.

"Of course, the market is sensitive to such threats. After all, buying housing in Ukraine is also a method of investing. A lot of people invest what they have saved up, not trusting other ways of keeping their money, some invest the last money they have.

Those who buy a flat for living are unlikely to postpone the deal, the situation here will not impact the decision.

But those who invest in real estate, in a second or third flat, are more likely to postpone the purchase. Who wants to buy property in a war-torn country?

In addition, we have been in this state for the eighth year already. Therefore, we need to stay calm, stay optimistic and believe that we will be able to achieve political stability as soon as possible.

I am sure that in the next week the situation will clear up and the market will calm down."

Lev Partskhaladze

Former Deputy Minister of Regional Development, President of the Confederation of Builders of Ukraine (CBU)

Lev Partskhaladze

Former Deputy Minister of Regional Development, President of the Confederation of Builders of Ukraine (CBU)

"Most experts record a decrease in demand for primary real estate in late 2021 and early 2022. Many attribute this situation to a significant increase in the cost of the square meters. Flat prices in Kyiv increased by about 40% over the previous year, so it is fair that some buyers abandoned investing in real estate because of the high cost.

However, since November 2021, the information space has been actively discussing the escalation of the situation on the eastern borders of Ukraine.

The risks of a possible all-out war are deterring some investors. It is difficult to say what percentage of demand was deferred due to the military threat. But it definitely exists.

The greatest decline in demand due to the geopolitical crisis was experienced by developers with properties in the East and South of the country—in Kharkiv, Dnipro, etc. A lot of migrants from Donetsk and Luhansk regions live there who fled from the hostilities 8 years ago and were forced to leave their property in the occupied territories.

The closeness of the border and the fear that history may repeat itself is deterring buyers who are waiting for the situation to stabilize."