It’s a buyer’s market when it comes to residential property in Kyiv, particularly in the elite segment, where a storm of troubles has sent high-end developers scrambling for new sales ideas.
On any given day, Kyiv’s elite housing market has around 10,000 units for sale, according to real estate information-analytical portal Stolichnaya Nedvizhimosti, with a minimum starting price of $300,000 per unit. The majority of these properties are located in the center of Kyiv, especially in the most prestigious Lypky and Pechersk sub-districts, and in the northern Obolon district close to the Dnipro River. This accounts for less than 10 percent of the total housing stock available, including single-family homes.
An estimated 12 percent of new construction falls into the elite category.
However, while Kyiv can boast an impressive array of existing and upcoming high-end residences, the demand is pitifully low. In fact, demand for fancy abodes is at its lowest ebb since the post-Soviet hyperinflationary period of the mid-1990s.
“Even in the wake of the 2008 financial crash, elite property was still selling, although at a far slower pace than the preceding boom time,” explains industry analyst Serhiy Kostetsky of the real estate consultancy SV Development. “Now, there is almost no demand.”
Developers have introduced a number of measures to attract the shrinking pool of well-heeled buyers. American investment company Amstar’s Skyline Residences in the Pechersk district, which is slated to open early next year, will take cash from customers only after the doors are officially open in order to “remove all doubt” about potential fraud. The customary practice for new property is for buyers to pay before the last brick is laid. Prestige Hall residential complex, located in the center, in July-August offered fixed purchase prices at a rate of Hr 10 to the dollar. Meanwhile, Obolon Residences proposes a fixed purchase rate of Hr 11 over two years with a 30 percent down payment.
While properties are listed in the national currency, developers calculate their costs in dollars. This benefits the buyer, who should have a big pile of hryvnia to buy an elite property.
Other developers and agencies are offering extended payment plans, free kitchen or bathroom installation, outright discounts, and “loyalty club” cards for assorted freebies, says senior analyst Kostyantyn Oliynyk of the strategic consultancy UTG.
Experts said that too many uncertain factors are in play to expect any sort of revival on the high-end market. The serious economic contraction since the EuroMaidan Revolution began late last year coupled with the Russian trade embargo against Ukrainian goods and war in the Donbas, where many of the nation’s rich sourced their wealth, has greatly reduced the financial worth of potential buyers, explains SV Development’s Kostetsky.
Refugees from the war-torn Donbas region provided some market relief in the summer, when the few remaining super-wealthy packed up and fled to the capital, but the mini-boom was short-lived.
After prices dropped 22 percent in the first six months in U.S.-dollar terms, they grew 10.9 percent in hryvnia terms in July-August, said Yaroslava Chapko, director of City Development Solutions, an industry consultancy. “Developers sell just one to three premium class apartments per property per month,” she noted.
This 20-25 percent drop for high-end digs far exceeds the market average of around 12 percent, according to price aggregator domik.ua. Early this year, retail prices for premium class apartments had already dropped to around $5,000 per square meter, says Kostetsky, “but now these same places are going for $4,000, and still they have trouble finding buyers.”
Developers admit that some their marketing strategies have not been as effective as they would have liked. Site manager of Prestige Hall Vladislav Mishuk and sales head of Skyline Residences Maksym Dorovsky both said that they are reviewing their strategies in light of the underwhelming sales performance of their elite properties this year. “The competition is heavy,” said Dorovsky, “and so instead of the usual advertising we plan to conduct a series of sales events in order to specifically target our potential clientele.”
The war in particular, Mishuk explained, has brought the market to a standstill.
In addition, elite residences are no longer the high-return investment potential they once were. In most real estate markets, luxury property is a safe financial bet because their narrow segment and high markup price create an effective hedge against market fluctuations, explains head consultant Kyryl Havryntsev of the law firm Turiy and Partners. No more. “Now, with rising building costs associated with the decline of the hryvnia and the massive drop in prices, elite properties no longer have any significant investment potential,” argues Kostetsky, “and no one expects this to change soon.”
The small number of mortgage loan programs and their prohibitively high interest rates add to the market’s depression. Banks are offering mortgages at 16-26 percent in hryvnia. Meanwhile, the value of the hryvnia relative to the dollar has declined by around 40 percent since January.
“Purification” of the market for elite homes is putting yet more pressure on retail prices. Short-term investors wanting to flip properties have mostly disappeared because of the lack of financing and poor return, argues Turiy and Partners’ Havryntsev.
But the situation is not all doom and gloom. The real estate agency Park Lane, which deals in all segments of the market, announced on Oct. 15 that it was expecting good prospects in suburban private home sales, said general director Victoria Barabash.
What is elite property?
Premium and deluxe property segments
Price 3-5 times more than the economy class equivalent by layout and area
Location in prestigious district, excellent view, green space nearby
Living area is no less than 80 m2 (premium), 130 m2 (deluxe)
Underground parking spaces (2 for deluxe)
Extensive in-house service infrastructure (shops, playroom, salon, swimming pool, etc.)
Heavy security
Single class of tenants (face control, no riff-raff)
30-100 units in a single block
Unique style and architecture, full range of modern amenities
Source: Ukrainian Builders Association
Kyiv Post business journalist Evan Ostryzniuk can be reached at [email protected].
