After several years of decline, the Ukrainian construction market has revived and has shown growth

  • 24/02/2017

The housing construction market has pushed off the bottom and is ready to set the first record since 2008 - in 2017, builders promise to surrender more than 3 million square meters in Kiev  only. According to the State Statistics Service, this is two times more than in the last three years.

The greatest activity of builders is observed in the metropolitan region. For the first time in many years, Kiev Oblast took the lead. Last year over 2 million square meters of housing was commissioned here. Kiev with 1.3 million square meters dropped to second place. In third place was Lviv with an indicator of 895 thousand square meters.

Why Kiev is in the lead is understandable. Construction goes because there is a demand. After all, very many compatriots want to buy an apartment in the capital with money from different parts of the country. In addition, due to the ongoing war in the Donbass, the metropolitan area was replenished with a large number of immigrants. And they, as analysts believe, contribute to the activity of the market.

True, if prices for an apartment in Kiev bite, then the suburb can help out. But there is still a very important reason for the construction boom - in the Kiev region it is much easier to get a building plot, less potential social risks and less hassle with conditions and restrictions, which is typical of a multimillion city. For the third place, two regional centers — Lviv and Odessa — have fought for several years in a row (for now, Lviv is winning). The reason for this is also high demand due to the attractiveness of these cities for life. They, like Kiev, are business and cultural centers of Ukraine.

Whose contribution is greater

The increase in the pace of construction is indicated by the number of permits issued. According to the National Bank, in the first half of 2016 alone, 685 permits for the construction of apartment buildings were issued in Ukraine, which is 54% more than in the same period of 2015 (information on the results of 2016 has not yet been made public).

The company "Intergal-Bud" plans to commission about 250 thousand square meters of residential real estate. Consequently, it is already safe to say now that this year will be a breakthrough, because a large number of projects started in previous years will be completed, and the amount of space planned for delivery claims a record.

Hope for demand

Builders have intensified, relying on growth in demand. Statistics support their expectations. Thus, in Kiev last year, according to estimates by ARPA Real Estate, 9.5 thousand transactions of purchase and sale of residential real estate were concluded. This is quite a lot and indicates that the market comes to life. If to compare with 2015, the figure is 16% more, but 32% less than in 2014. According to forecasts of experts and market participants, this trend will continue this year. In addition, the reduction in prices from developers, in the first place, stimulates buyers to invest in the primary real estate market.In the consulting company UTG believe that the pricing policy has allowed to implement pent-up demand.

“At the moment, in the primary housing market, pent-up demand is being realized, formed at the expense of potential buyers, who simply did not decide to buy an apartment, for a long time accumulating the necessary funds. They are the most active buyers now, ”Olesya Skrinnik, director of UTG Residence, explained the situation.

According to one of the leading developers - the company "Intergal-Bud", preference is given to 100% payment, or registration of installments from the developer.

“From the beginning of the launch of the long-term installment plan, the company benefited about 25-30% of apartment buyers from "Intergal-Bud", made 100% payment - about 60-70%,” said Anna Laevskaya, Deputy Commercial Director of Intergal-Bud.Of course, such a high percentage of those who deposit the entire amount at once indicates the presence of money “on hand”. The main deterrent to the acquisition of new housing is low purchasing power. For example, to buy a one-room apartment of 40 square meters. m worth 670 thousand UAH, the average Ukrainian will need 20 years to raise funds. And this is on condition that he will set aside 3 thousand UAH per month.

But it is unlikely that such savings are possible for most of the population. Especially, given the price of rental housing, utilities and the cost of living in general.

What will happen to prices

Most experts believe that the existing, albeit minimal, but stable demand for housing will allow builders to speculate a little on prices. However, if cost growth is possible, it is insignificant. But the fall in prices should not count. After all, many developers and so included all their reserves and save, on what is possible. For example, install cheap doors and windows, because of which cases of claims of home buyers to construction firms have recently become more frequent.

Companies as an exit from the current situation are increasingly focused on the construction of small apartments of economy class.

Regarding one of the "know-how" of last year, the so-called smart apartments, the forecast for 2017 is not so rosy. These apartments are 15‒20 square meters designed for budget buyers, but they are unlikely to find special demand in the market for several reasons. “The total cost of a smart apartment is $ 900 per square meter and above, and this is a completely non-competitive price with ordinary one-room apartments, in which a “square” can cost from $ 600. In addition, smart apartments do not always meet state building standards, and, accordingly, cannot be automatically entered into a residential fund. This pulls a series of problems.

Such as utility billing at commercial rates, which is much higher, as well as difficulties with registration.

Power going to meet?

Problems exist in the area of ​​reforming the construction market. The interaction of government and business for many years has been opaque and regulated. However, in 2017, the prerequisites for improving the situation appeared. Thus, the Ministry of Regional Development and Housing and Communal Services began work on improving state building codes and creating a unified town-planning code.

And the deputy head of department, Lev Partskhaladze, announced his intention to simplify the procedure for extending the lease agreement for buildings that were commissioned and to enable the city administration to enter into agreements. Time will show how it will be, but some improvements have already taken place. In the capital, there are positive developments for the business environment. The city council decided to reduce the share for builders to 2%. This will allow developers, especially small ones, to breathe easier - no need to shift the load to the buyer and raise prices.In general, in 2017 we can expect growth in real estate investments from both private investors and institutional players.

In addition, this year may be a record for commissioned housing and demonstrate real market demand. If the sales dynamics will be low, then new interesting offers from developers are possible, which will stimulate sales.

Source: Unian