When Igor Rubinstein moved to Kyiv six years ago, he had big problems finding an apartment. He realized that there were no agents or brokers able to offer the kind of high-quality help that he had come to expect when living in Western Europe. So he decided to set up his own agency to fill that gap in the market.
What’s more, Rubinstein saw that alongside information technology and agriculture, property ranks as one of the economic sectors of Ukraine with the potential to prosper. One of the telltale signs, which can often seem puzzling to outsiders, is the high price of property relative to average incomes.
“There aren’t any investment vehicles apart from real estate and keeping money under the mattress,” he told the Kyiv Post in an interview. “Banks fold, savings deposits can be withheld, the hryvnia gets devalued. So essentially the only safe haven is putting money abroad, or, for the general population who don’t have investment vehicles for that, it’s real estate.”
Rental income
Rubinstein says that for the uninitiated it is crucial to know that in the Kyiv property market things move fast, because the vast majority of deals are made with cash, without the need for mortgages.
Local investors — who typically own several properties — know well the going prices and are quick to pounce on anything that looks like a good deal.
“The way it works here is a little tricky, it can be difficult for people to understand,” he said. “We’re a cash-driven gray economy. There’s never a lack of cash or financing. If something is priced below the market, by say, 15 percent, it gets snatched up straight away.”
Over the years, Rubinstein has seen that in Kyiv trying to make quick money by “flipping” a property through buying it, renovating it, then quickly selling it is the domain of domestic investors, who better understand the tastes of local buyers. Foreigners, meanwhile, are better off holding on to apartments for longer periods in order to get rental income out of them and long-term capital appreciation.
The agency director says the advantages of Ukrainian real estate are especially pronounced for mid-level investors who don’t have sufficient capital to put into projects in places like Dubai or London, where property prices can be three or four times higher per square meter.
“When they come to Kyiv they can use their purchasing power to afford something they couldn’t find elsewhere,” he said.
Different risks
The risks, says Rubinstein, tend to come in two forms: the macro and the micro.
Among the macro risks he counts political and economic instability in recent years, which has meant that, since 2011, property prices in Ukraine have decreased by about 30 percent.
In the micro category, there are issues like lack of a publicly accessible database containing historical information on property sales and prices, meaning that, without expert help, it can be difficult to know if you’re getting a good deal.
“When you purchase something, you get an evaluation done,” said Rubinstein.
“But the evaluation can be decreased or increased based on the taxes involved in a transaction. The evaluation can be as low as $30,000 and as high as $150,000 for the exact same property.”
Whatever the potential pitfalls, Rubinstein believes that, as with other emerging market economies, Ukraine can be a relatively attractive place to invest, especially when annual returns regularly reach 8 to 10 percent.
“If you have $100,000 in the developed world, what can you do with it? Nothing. You can put it in a bank in Switzerland and get interest of 0.5 percent or something miniscule,” he said. “What this market has to offer an investor who has a lot of cash is the ability to invest it and catch capital appreciation and instant yield. I wouldn’t say it’s more or less risky. Just different.”
