Is Real Estate Investment Safety In Ukraine Good Enough To Consider Investing?
The Ukrainian real estate market dropped in 2014 by around 75% compared to the previous year due to the Russian war in Ukraine. And it shrank again in 2020 due to Covid-demics. But in 2021, it has a large development momentum – both in prices of a square meter and in a flat hire rate.
What is the capital of Ukraine?
Kyiv (a.k.a. Kiev) is the capital of Ukraine, one of the biggest by land post-USSR countries, with an official estimation of population of 3.0 million in 2020 (although it is believed that the real number of all population, constant and changing, is close to 5 million). The city is one of the oldest in the world, with the date of foundation 482 AD, so in 2021, it celebrates 1,539 years of age. For centuries, Kyiv was the capital of Kievan Rus. Today, it has an area of 839 sq. k. (324 sq. mi.) and it is one of the fastest-growing capitals of the world, with over 10 million people living in a 100-kilometer area from city limits.
A fast-growing real estate market in Kyiv is primarily made of apartments in many-story houses, with little to no private houses in the capital’s area (they are widely distributed in Ukraine capital’s suburbs).
Review of current political and economical situation
There is still ongoing Russian war in Ukraine – in Donetsk, Lugansk, and Crimea regions. But as it chills out and people gradually got used to it, markets revive.
Positive factors that contribute to the market growth are:
- Reducing the level of corruption
- Transforming state’s processes and procedures to make them transparent, remove redundancy and corruptive factor, and shift them to online to minimize the administrative influence on decisions and outcomes
- Decreasing inflation, bank deposit rates, and mortgage rates
- Launching a special state program for mortgage rate compensation
- The arrival of more people from regions under war to the capital, Kyiv
- High yields, about 7-10% annual.
Negative factors that restrain the market are:
- High fluctuation of Ukrainian Hryvnia (UAH) although the major part of all sale prices is given in dollars or Euros
- Uncertainty about the end of the war – whether and when
- High rent prices compared to other European capitals
- From mid to high taxation of foreigners and tough capital movement regulations
- Growing prices, which went up in 2021, reaching now $1,000 per sq. meter (10.76 square feet) in Kyiv outside the city center and $2,000 in the capital’s center on average.
Comparing Ukrainian capital to other European capitals in terms of real estate prices
Looking at the prices in the city center and outside of it, it is clear that in the first, Kyiv is more expensive than Tbilisi, Yerevan, and Baku. Looking at the center, Kyiv is more expensive than these mentioned and Sofia. Athens, Riga, and Bucharest are compared to Kyiv at the city center’s price, and such 5 capitals as Belgrade, Zagreb, Tallinn, Budapest, and Warsaw are from 30 to 80 percent more expensive in the center’s prices and from 40% to 120% more expensive in the square meter outside the center.
Houses for sale in Ukraine
The biggest part of Ukraine homes in Kyiv is made of apartments located in new, old, and historical buildings. Some part of apartments located on the first floor on old buildings is being revamped to serve as commercial premises, while almost all new buildings are built today to give the first floors to commercial real estate.
Ukraine is traditionally a country with high demand for real estate as a means of investing due to a large distrust of locals to banks. Now, as the profitability of deposits swiftly decreases (falling from an amazing 20% in 2014 to a disappointing 6% in 2021), people tend to invest more in real estate of all sorts. The demand is high and the supply is too – only in 2020, 18,500 new apartments were commissioned in Kyiv.
Costs and taxes for foreigners
When buying real estate in Ukraine, a foreigner has to pay 1% state duty + 1% to the pension fund. If they sell it within 3 years after the purchase, there will be 18% income tax + 1.5% military tax.
Agency fees are about 3%-5% of the cost of a deal. When you let the property to anyone, you should also pay 18% income tax + 1.5% military tax from the sum of earning and you can’t operate on your own behalf if you’re not a tax resident of Ukraine (do not live here at least 6 months during a calendar (tax) year) – only through an agent.
When a foreigner inherits Ukrainian real estate from a foreigner, they pay 30% duty. If from a Ukrainian citizen, then 18% income tax + 1.5% military tax.
To make any real estate transaction, one must have a local bank account, which is opened only with a local Tax ID, which is received in 1-2 weeks through any local tax administration for little cost and pretty easily. All bank transaction fees for foreigners will be anywhere from 0.5% to 3% of the sum. If you wish to withdraw money from Ukraine received from a property sale, you should do it only with papers supporting that you sell the same property you previously bought or inherited.
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More about DGY
DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.
Investment advice and recommendations
DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.
In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.
DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.
Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.
Real estate investment opportunities in Ukraine
When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.
Properties for investments in Ukraine
Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $80k only.
How to invest in Ukrainian Real Estate
In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.