The expiring year was full of suddenesses and surprises: the coronavirus epidemic, quarantine, affordable mortgages at 10%, the collapse in State Architectural and Construction Inspection (SACI) with regards to issuing building permits and commissioning certificates, changing purchasing trends and development models. Read about the main events on the primary real estate market in 2020 in review.
After successful January—February 2020, when top players in the comfort+ and business class segments recorded a 10-15% increase in sales compared to the same period in 2019, the coronavirus March came and a large-scale spring lockdown occurred.
Housing sales in new buildings fell by 80-90%, the housing in the economy segment was affected the most. The real estate developers had to quickly learn to live and work in new realities including offering to buy an apartment in a new building online.
Some companies offered the market anti-crisis financial instruments. For example, the fixed hryvnia exchange rate that was noticeably lower than the official one: while the dollar cost 28.5 hryvnia in exchange offices, you could buy an apartment in a new building for 25.5 hryvnia/$. Deferred installment payments and increased discounts for 100% payment for an apartment were also used. The following system developers offered anti-crisis measures in their projects: the group of companies DIM, Intergal-Bud, KAN Development, Edelburg Development.
Not all developers could afford it, but only those who had sufficient financial resources and continued to work on the sites even during the period of absolutely no demand. It became clear that the model of cross-financing, the leading one among many developers, has outlived its usefulness.
Each project should have its own bank of money, moreover, the developer should rely on his own financial capabilities, and not rely only on the buyer's money.
The situation with the coronavirus very quickly showed who has a stable financial model and who is mired down in lack of money due to sagging demand. This immediately affected the construction dynamics.
It is curious that in the spring, in addition to the coronavirus, two other significant events took place for the real estate market—the subsequently failed SACI reform and talks about the launch of a massive affordable mortgage at 10% per annum.
Summer 2020 is a thaw time for the Ukrainian residential real estate market. Along with the removal of severe restrictions and acceptance of the coronavirus situation, more or less understanding of how events unfold came.
The deferred demand in the real estate market began to show activity little by little: the buyer was coming back, was looking at the construction dynamics, was studying the developers’ offers, and was resuming more active communication with the sales departments’ managers.
During this period, those developers who continued to build, confidently restored large volumes of effective demand every week by closing contracts of sale.
Several banks offered the market loans for housing at 10% per annum and also developed programs with even lower mortgage rates for a limited period. In fact, the number of mortgage borrowers has not increased, although borrowing has increased. But it is too early to talk about a truly massive mortgage.
The fact is that reduced rates are valid for a limited period of time. As a rule, for the first year or several years, then the mortgage rate is floating. At the same time, the initial payment for an apartment is still too unaffordable for many buyers and reaches 30-40% of the housing cost. And the bank requirements for checking official income are high: you must have an official income that will allow you to service a home loan.
The beginning of autumn was very successful for systemic and stable players who continued to build. At the same time, it was during this period that the market first spoke out loud about the scale of the problem related to the State Architectural and Construction Inspection’s reform.
The problem is not only in artificially delaying checks and approvals. Several developers at once announced that they received various kinds of offers to solve their problems for a small fee. Moreover, the prices previously known on the market at the level of $5/sq. m. rose to $10-15/sq. m.
The SACI reform issue is still not closed—it is still in full spate, although the inspection leadership has already been changed several times. But developers are still unlucky with permits, so many apartment owners have to wait for the objects to be put into operation in order to obtain official ownership.
A separate episode of autumn is the aggravated situation with the bankruptcy of a large developer, Bank Arcada. First of all, it is about the completion of the large residential complexes "Patriotic" and "Eureka" construction. The situation with investors is still in limbo despite the previously conducted audit of the Bank Arcada problematic objects. According to that audit 7 billion UAH is required for their completion. Only it is not clear who and with what money will complete the problematic objects.
It turns out that the residential real estate market of Ukraine takes at least three problems with it in 2021: the SACI issue, the problems of Bank Arcada investors, and the coronavirus consequences, although the last point is not the most significant.
On the positive side there are the increased buyers’ requirements to the quality characteristics of new buildings and increased attention to the developer’s reputation, the construction dynamics, the portfolio of previous projects.
The investor is increasingly looking at the apartment planning ergonomics, landscaping, increased infrastructure functionality and life safety.