For the past year, the demand for primary housing market has been more than tripled. According to SV Development, in September 2011, the people of Kiev bought 733 apartments in unfinished buildings. A year ago for the first month of autumn, the number of transactions on the primary market of the capital has amounted to 228.
"Apartments costing up to $ 100 thousand are best sold. Small one-bedroom in new buildings of economy class are in great demand", - says Anatoly Shakhnovsky, the president of IDC, "Cascade".
Public confidence in the primary market has increased. The developers offer buyers the apartments in ready houses, or houses close to completion. The number of banks - primary lenders - is increasing. However, the rates are still high - 16.7% in local currency. The developers say that in order to restore demand for housing, bank interest should not exceed 10%. "In the country, there is no cheap hryvnia resource, and the interest rates on mortgages offered by the banks, are not interesting for the buyers", - says Alexey Hovorun, the deputy director of construction company "TMM". The level of sales has not been increased because of the loans but due to the installments, which the developer provides to the customers, said Inna Brechko, the director of the development company "BildGrupp-Management".
The total number of mortgage deals remains low, as lending conditions for most citizens are too burdensome. According to the company "Ukrainian Trade Guild," they do not buy more than 1% of apartments in the primary market with the assistance of loans. In early September this year, public debt for mortgage loans decreased by USD 4.5 billion - up to UAH 77.5 billion as compared to January of 2011, summarize the NBU.
The main reason for low demand for mortgages, according to the experts Prostobank CONSULTING, is inflated housing prices. To purchase a two-bedroom apartment with a total area of 75 square meters, an average Ukrainian has to work for 20 to 30 years, according to the data from the National Institute of Strategic Studies under the President of Ukraine. Now the housing loan in the amount of UAH 250 thousand (the missing funds to purchase) for a period of 25 years will force the Ukrainian family to pay the bank every month from 4375 USD (for the first year) up to UAH 845 (for the last year), on average - 3594 USD per month. Moreover, interest payments will amount to UAH 828 thousand. To get a credit, the borrower's total monthly income must be at least UAH 12 thousand.
According to the forecasts of Kyiv city administration, this year the capital could put into operation 1.4 million sq. m. of housing. This is a rather bold prediction, given that in the first half of 2011, 532.7 thousand square meters were put into operation in Kiev, but usually in the second half this figure is greater than in the first. Therefore, it is likely that the figure should reach at least 1.1-1.2 million square meters.
In general, in Ukraine in January-June, 2.73 million square meters of housing were put into operation - by 16% less compared with the same period last year. The State Statistics Committee say, that the decline in these figures is a consequence of the termination of the interim order of acceptance of private dwellings in the operation (Cabinet Resolution № 1035 of September 9, 2009). The document allowed the legalization of unauthorized buildings. After that,it becamepopularto use the technologyas aprefab metal building. Excluding the latter, the pace of construction in January-June of 2011 with respect of corresponding period of 2010 would amount to 33.3%, not to 16%.
Freedom without choice
There is a paradoxical situation on the real estate market.
Builders finish building facilities, frozen in a crisis, without mortgaging any new houses. Moreover, they are completing the construction of houses with apartments which were 90% sold to the end customers before the crisis. Until 2009, the Ukrainians have invested in buildings under construction at the stage of excavation. And that's what happens: no more than twenty new apartments are now released to the market from each such facility, and they are immediately sold out due to growing demand. "For the previous two or three years, there are few residential units the construction of which has just begun. On the other hand, the construction of houses, which are now being put in operation or already put, has begun before the crisis, and for these few years, the apartment have been sold there. As a result, the supply of housing in the primary market for a consumer is reduced", - says Alexey Hovorun.
Today, medium and small developers do not start new projects. "This year, Ukraine will build more housing in comparison with the crisis of 2009-2010. But the problem is that all developers are putting deferred projects in operation, those that should have been built a year ago or two. And if these figures are divided into several years, you will see there are few of them", - says Dmitry Shostya, the chief investment officer of the company "NSC". Even if at the end of this year, the construction companies will develop new projects, these project will be finished not earlier than in 2013. "There is no great choice right now, and it will only decrease", - Alex Hovorun forecasts.
What does this lead to?
It is unlikely that prices should rise sharply, otherwise increased demand will rollback to the pre-crisis level. The main factors affecting the cost of the primary real estate may be the degree of completion of a house or campaigns, says Anatoly Shakhnovsky. "Until the end of the year, the rise of the primary housing in price in Kiev, is unlikely, too much competition," - adds Inna Brechko.
Most likely, since 2012 housing choice in the primary market will shrink considerably. This trend can last several years.
Ukraine (Ukrainian: Україна, transliterated: Ukrayina) is a country in Eastern Europe. It is bordered by Russia to the east; Belarus to the north; Poland, Slovakia, and Hungary to the west; Romania and Moldova to the southwest; and the Black Sea and Sea of Azov to the south. The city of Kiev (Kyiv) is both the capital and the largest city of Ukraine.