21 December 2021 14:22

Real estate

News

Apartment sellers heat up prices artificially—expert study

Author

Lesia Solovchuk

From October to November, the average cost of apartments for sale in the secondary market of Ukraine increased by 9.6%. However, according to the experts, this growth is unreasonable.

According to the results of a market research in Ukraine, conducted by the Association of Real Estate Specialists (Realtors) of Ukraine (ARESU) together with the Geoinformation portal Uvekon, prices for the last two months were as follows:

1-room apartments have increased in price by an average of 5.3% (from $951 to $1001 sq. m),
2-room apartments—by 7.3% (from $860 to $923 sq. m),
3-room apartments—by 10.2% (from $879 to $968 sq. m),
4-room apartments have increased by 12.8% (from $1,227 to $1,308 sq. m).

During this period, a similar trend was in the regional centers of the country. In October-November compared to September, the average cost of apartments in regional centers increased by 8.7%—from $1,123 to $1,223 per sq. m.

In the last two months, the largest price increase was recorded in Kyiv: the cost of apartments increased by 13.2%. By the end of November, the average cost of a square meter exceeded $2,100.

But the increase in prices in other cities with a population of over one million was not so rapid. In Dnipro, prices for "secondary housing" for the last 2 months have increased by 4.1%, prices in Lviv—by 5.3%, prices in Odesa—2.1%, and in Kharkiv—4.7%. The price growth rates in other regional centers did not exceed 5%, in some cities they were practically zero (Kropyvnytskyi—0.1% and Chernivtsi—0.2%).

Therefore, the experts came to the conclusion that since a high rise in prices was recorded only in Kyiv, this may indicate the local and temporary nature of the price environment.

According to Volodymyr Shalaiev, the General Director of the group of companies Uvekon, the price growth rates in the secondary housing market in all regions of Ukraine, except Kyiv, were lower than the profit from alternative sources of investment, such as the purchase of domestic government bonds and the percentage of bank deposits.

"The population and business have an alternative for investments, the income from which will cover investment risks. In addition, the liquidity of investing in bonds and deposits is higher than investing in housing. Therefore, the number of those wishing to buy housing as an investment in the current economic conditions grows fewer," the expert says.

At the same time, in his opinion, there are many more buyers who want to sell their apartments at the price peak.

"The upcoming price dynamics in the housing market will depend on the economic and political situation in Ukraine. Considering the existing risks, it is possible to predict the price stabilization in the housing market of Ukraine," Shalaiev summarizes.

Yuriy Pita, the President of the Association of Real Estate Specialists (Realtors) also stresses that the rise in prices for apartments for sale is not justified. He recalls that from January to September, the cost of housing on the secondary market in the largest cities increased by 15-17% and reached a maximum, which corresponds to the effective demand.

"The selling price of apartments is on average 10-12% lower than the price claimed by the sellers. Accordingly, in order to sell an apartment, the owner will either have to significantly reduce his "appetite" for profit or wait for better times when citizens' incomes will increase significantly and, accordingly, the level of demand will increase," the expert believes.

The rise in the cost of housing in the secondary market, according to the expert, is explained by the pulling up of the prices to the cost of the apartments in the primary market. However, the rise in the cost of a square meter in the primary market can be explained at least by an increase in the construction prime cost.

"Unlike the primary market, the factor of the apartment prime cost is not at all a criterion for assessing the housing real price. Therefore, "pulling up" prices for apartments in new housing estates should always be based on real demand. At the same time, an incorrect assessment of an object put up for sale can mislead both sellers and buyers," he said.

According to Pita, in the next 3-4 months, most sellers will be forced to reduce the cost of apartments for sale.

"The demand in the secondary market is significantly limited. Accordingly, the buyers will look for apartments, taking into account not only the purely technical characteristics of the property, but to a greater extent their cost. People will look for housing at an affordable price for them, or they will be forced to postpone the purchase for an indefinite period," Yuriy Pita says.

Analysis of the housing cost in the secondary market in the regional centers of Ukraine

In Vinnytsia, prices for October-November increased by an average of 3% (from $843 to $868 per sq. m):

1-room apartments rose in price by 1.9% (from $893 to $910 sq. m),
2-room apartments—by 5.7% (from $816 to $862 sq. m),
3-room apartments decreased by 7.7% (from $825 to $762 per sq.m.).

In Dnipro during this period, prices increased by 4.1% (from $955 to $994 per sq. m):

1-room apartments rose in price by 3.5% (from $993 to $1,027 per sq. m),
2-room apartments grew in price by 4.5% (from $980 to $1,024 per sq. m),
3-room apartments—by 6.6% (from $882 to $940 per sq. m).

In Zhytomyr, prices increased by an average of 4.3% (from $731 to $763 per sq. m):

1-room apartments—by 3.7% (from $820 to $850 per sq. m),
2-room apartments—by 5.1% (from $747 to $785 per sq. m),
3-room apartments by 3.8% (from $686 to $712 per sq. m).

In Zaporizhzhia, prices increased by an average of 2.1% (from $649 to $663 per sq. m):

1-room apartments—by 1.7% (from $697 to $709 per sq. m),
2-room apartments—by 3.5% (from $644 to $666 per sq. m),
3-room apartments—by 0.7% (from $635 to $639 per sq. m).

In Ivano-Frankivsk, prices increased by an average of 2.9% (from $541 to $557 per sq. m):

1-room apartments—by 1.6% (from $553 to $562 per sq. m),
2-room apartments increased in price by 3.2% (from $535 to $552 per sq. m),
3-room apartments rose in price by 3.9% (from $537 to $558 per sq. m).

Apartment prices in Kyiv showed an average growth of 13.2% (from $1,871 to $2,017 per sq. m):

1-room apartments—by 11.4% (from $1,770 to $1,972 per sq. m),
2-room apartments—by 12.6% (from $1,759 to $1,981 per sq. m),
3-room apartments—by 13.3% (from $1,803 to $2,044 per sq. m).

In Kropyvnytskyi, the average price for housing remained unchanged: the rise in prices did not exceed 0.1% (from $607.5 to $608).

In Lutsk, the cost of apartments increased by an average of 4% (from $724 to $753 per sq. m):

1-room apartments added 1.8% in price (from $795 to $809 per sq. m),
2-room apartments have risen in price by 5% (from $734 to $770 per sq. m),
3-room apartments have grown by 3.5% (from $674 to $697 per sq. m).

In Lviv, the cost of apartments increased by 5.3% (from $1,107 per sq. m to $1,166 per sq. m):

1-room apartments have risen in price by 5.6% (from $1,159 to $1,225 per sq. m,
2-room apartments—by 4.4% (from $1,114 to $1,163 per sq. m),
3-room apartments—by 5.9% (from $1,050 to $1,113 per sq. m).

In Mykolaiv, prices increased by an average of 1.6% (from $669 to $679 per sq. m):

1-room apartments rose in price by 4% (from $689 to $717 per sq. m),
2-room apartments—by 1.7% (from $669 to $680 per sq. m),
3-room apartments—by 1.2% (from $656 to $664 per sq. m).

In Odesa, prices increased by 2.1% (from $1,031 to $1,053 per sq. m):

1-room apartments have risen in price by 2.1% (from $1,048 to $1,069 per sq. m),
2-room apartments—by 1.7% (from $1,011 to $1,027 per sq. m),
3-room apartments—by 2.7% (from $1,014 to $1,041 per sq. m).

In Poltava, the cost of housing increased by an average of 2.3% (from $805 to $823 per sq. m):

1-room apartments rose in price by 3.2% (from $838 to $865 per sq. m),
2-room apartments—by 2.1% (from $824 to $841 per sq. m),
3-room apartments grew by 1.1% (from $752 to $760 per sq. m).

In Rivne, prices increased by an average of 3.6% (from $737 to $763 per sq. m):

1-room apartments—by 5% (from $780 to $819 per sq. m),
2-room apartments—by 3.2% (from $752 to $775 per sq. m),
3-room apartments—by 1.6% (from $686 to $697 per sq. m).

In Sumy, prices increased by an average of 3.1% (from $645 to $665 per sq. m):

1-room apartments—by 6.8% (from $683 to $729 per sq. m),
2-room apartments—by 0.1% (from $658.6 to $659.4 per sq. m),
3-room apartments—by 3.4% (from $598 to $618 per sq. m).

In Ternopil, prices increased by an average of 1% (from $710 per sq. m to $717 per sq. m):

1-room apartments—by 0.9% (from $744 to $750 per sq. m),
2-room apartments—by 0.8% (from $ 718 to $724 per sq. m),
3-room apartments—by 0.7% (from $691 to $696 per sq. m).

In Kharkiv, prices increased by an average of 4.7% (from $917 to $960 per sq. m):

1-room apartments have risen in price by 4.5% (from $905 to $945 per sq. m),
2-room apartments—by 3.8% (from $912 to $947 per sq. m),
3-room apartments have grown in price by 6.1% (from $917 to $974 per sq. m).

In Kherson, the cost of housing increased by an average of 1.7% (from $690 to $701 per sq. m):

1-room apartments increased by 1.8% (from $732 to $745 sq. m),
2-room apartments—by 1.5% (from $ 705 to $716 per sq.m),
3-room apartments have grown in price by 0.8% (from $668 to $674 per sq.m).

In Khmelnitskyi, apartment prices increased by 1.7% (from $646 to $657 per sq. m):

1-room apartments increased by 1.7% (from $686 to $697 per sq. m),
2-room apartments—by 2.1% (from $649 to $663 per sq. m),
3-room apartments—by 3.1% (from $593 to $611 per sq. m).

In Cherkasy, prices increased by 4.7% (from $722 to $756 per sq.m):

1-room apartments rose in price by 5.4% (from $780 to $823 per sq. m),
2-room apartments—by 5% (from $728 to $764 per sq. m),
3-room apartments increased in price by 4.1% (from $676 to $704 per sq. m),

In Chernivtsi, prices increased by an average of 0.2% (from $768 to $770 per sq. m):

1-room apartments fell in price by 2.4% (from $807 to $787 per sq. m),
2-room apartments increased in price by 0.1% (from $773 to $774 per sq. m),
3-room apartments rose in price by 2.4% (from $749 to $767 per sq. m),

In Chernihiv, prices increased by 2.9% (from $694 to $714 per sq. m):

1-room apartments rose in price by 0.8% (from $770 to $776 sq. m),
2-room apartments grew by 3.2% (from $689 to $712 per sq.m),
3-room apartments dropped by 0.3% (from $649 to $651 per sq.m).

In Uzhhorod, prices decreased by 1.7% (from $763 to $780 per sq. m):

1-room apartments have risen in price by 1.1% (from $822 to $825 per sq.m.),
2-room apartments—by 1% (from $770 to $786 per sq. m),
3-room apartments—by 4.4% (from $700 to $746 per sq. m).

The study of the secondary market carried out by the ARESU and the Geoinformation portal Uvekon covers the whole of Ukraine and separately regional centers (except for Luhansk, Donetsk, and Simferopol). Data is compiled for the period October-November 2021 (based on published sales announcements).

During this period, more than 260,000 apartments with a total area of about 17 million sq. m were put up for sale every month in Ukraine.