You're reading: It’s a buyer’s market for those who can pay cash

Property prices in Ukraine fell along with the hryvnia at the beginning of the year. Ukraine is now one of the cheapest markets in the world, according to the Global House Price Index by international real estate agent Knight Frank.

“Prices have dropped by around 40 percent,” said Katrina Bankova, an estate agent at the largest real estate agency in Kyiv. Rental prices have dropped even further in some cases.

“Rents for elite properties have dropped by 20 to 25 percent. Properties which went for up to $3,000 a month have dropped by 50 percent,” said Tim Louzonis, co-founder of AIM Realty Kiev, which specializes in properties for expats.

Buyers now have unprecedented bargaining power compared to the previous 15 years, making it an attractive proposition for investors.

“There is no market price. Before you used to be able to say a square meter here cost X but now it’s a market of bargaining…The last apartment I sold was going for $120,000, but they sold it for $100,000. Sometimes people go down by $40-50,000,” said Bankova.

The current economic crisis means that people are more desperate to sell or rent their apartments simply because they need the money. On the other hand, buyers and renters want to get the best possible real estate for their money.

“The clients have changed. They’ve become more picky. The competition for agents is enormous,” said Alexandr Laznenko, an agent at one of Kyiv’s largest real estate firms. “People don’t want what’s on the market. They want to find a bargain every time.”

Even the most desirable areas in Kyiv have not been immune. For instance, according to Laznenko, a two-room apartment in the historic city center can be bought for just $100,000.

“It’s not going to be the most chic (apartment) but the option exists,” said Laznenko.

And there is a chance it could get cheaper. Property professionals in Kyiv are still divided on whether the market has reached its lowest point.

Some believe that prices could fall but there will be no more big drops.

“They could drop by a further 10 to 15 percent but this will happen over time, not suddenly,“ said Bankova.

Louzonis of AIM Realty was more cautious: “They could drift down a bit but there will be no more big drops. It could go sideways.”

Terry Pickard, the director of Pickard Real Estate who has been working in the market for over 23 years, thinks that recovery is already in sight.

“It looks very much like it has reached the bottom and there are signs that it will pick up in the spring. (Russian President Vladimir) Putin seems to have given up and is not going to march on Kyiv. The European Union trade agreement has been signed and the International Monetary Fund is carrying on with pushing anti-corruption reforms. There is an air of optimism,” said Pickard.

Early investors with foreign currency are increasingly entering the market.

“There are more and more early stage investors. They tend to have experience in other ex-Soviet countries or the Balkans and are not scared off by the current situation,” said Louzonis.

Investors are looking to buy and then rent. This is the best way for them to get a return on their investment, according to Louzonis.

“It’s the most popular thing to do at the moment. They just need a minimum of 10 percent so that they can earn their money back in 10 years,” said Bankova.

“Pickard Homes is doing quite well. Foreign investors have invested in an apartment complex: One Canadian and one French, one of whom is new to Ukraine,” said Pickard.

Bankova told the Kyiv Post it is an advantageous time to buy but there are many nuances concerning the government-imposed currency controls that were introduced when the hryvnia devaluated.

Sellers want the money in hard currency and in cash. This is due to the lack of faith Ukrainians have in the banking system, Bankova said.

At present, only €10,000 in cash can be brought into Ukraine in one go. Either the buyer has to make several trips to Europe or withdraw the money in hryvnia over several days and convert it into hard currency.

“People bring suitcases of money to close deals…It’s normal,” said Bankova.

This factor puts off some investors. However, those with more experience in the region see it as part of the reason to invest now, said Louzonis.

“They know when things get easier, it won’t be as attractive an investment,” he said.

Kyiv Post Staff writer Isobel Koshiw can be reached at [email protected].