The Boom Of Prices In Ukraine Of The Latest Years Is Explained With Influencing Factors

Ukraine has one of the most corrupt economies in the world. Based on various estimates, from third to half of the Ukrainian economy is in shadow, which is caused by corruption, unclear laws, and an unripe taxation system. These result in underperformance in tax collection, economic growth, and the absence of many investment tools. So, as of 2021, only two real investment opportunities are available to Ukrainians and investors from abroad: bank deposits and real estate.

To compare the tempos of GDP per capita, which is the most important indicator of the health and size of the economy of any country, 1992 to 2019, the numbers are follows:

• Poland: $2,459 vs. $15,695 (+538%)
• Russia: $3,099 vs. $11,585 (+273%)
• Ukraine: $1,418 vs. $3,659 (just +158%).

The lag of Ukraine behind is huge! But, at the same time, it also means amazing capabilities for future growth, which makes the market of real estate boom in 2020 & 2021. Bank deposits, unfortunately, are no longer a tangible investment opportunity in Ukraine since they are being low in income from 2018 and further on, giving a 1-digit profit while real estate gives a 2-number one.

Current state of prices for homes and apartments in Ukraine

Based on the most recent price and market analysis for Ukraine, prices for all types of property rose in 2020 and 2021. The good economic news for investors is that the trend will strongly continue through the entire 2022 (and there are visible reserves for 2023). At the same time, prices for 1 sq. m in Ukraine and even its capital are very low compared to many other countries. Let’s look at the stats for apartments in many-story homes:

• In entire Ukraine, for sale: $906.2 for 1 sq. m (on the secondary market, 1-bedroom apartments cost between $863 and $930, 2-bedroom cost $860, and 3+ bedroom options cost $1,206). The average price for Kyiv for all types of apts. is $1787.4.
• In entire Ukraine, for rent: $8.9 for 1 sq. m (on the secondary market, 1-bedroom apartments cost between $8 and $8.4, 2-bedroom cost $10.2, and 3+ bedroom options cost $18). The average price for Kyiv for all types of apts. is $14.7. This makes rental ROI for Ukraine equal to 11.78% annual and 9.9% for Kyiv (for all types of dwelling).

Now the numbers of sales of detached homes (unfortunately, there is no reliable statistic for their rent):

• In entire Ukraine, for sale: $504.8 for 1 sq. m (on all markets, houses up to 100 sq. m cost $339, 100-300 sq. m. cost $632, 300-600 sq.m. cost $1,037, and 600+ sq.m. cost $1,659 for 1 meter). The average price for Kyiv for all types of detached homes is $1,388.6 for 1 sq.m.

The YoY growth of prices 2021/2020 of residential real estate in Ukraine is from 12.4% to 25% (depending on what source to use for analysis) but even that looks underestimated. The real numbers, according to market participants, are 30%-50%. Just to compare the official stats with other countries (YoY 2021/2020):

• Australia: +7.5%
• Austria: -10.7%
• Belarus: -2.4%
• Brazil: +4.4%
• Canada: +11.9%
• Chile: +10.7%
• China: -8.5%
• Croatia: -1.2%
• Cyprus: +0.9%
• Czech Republic: +8.9%
• France: -5.4%
• The EU in general: +5.7%.

Factors behind the growth of prices of Ukraine houses

Current Ukrainian economy news for several years that make an influence on the market prices, indicate such strong factors of growth:

1. Very good infrastructure in Ukraine, which is developing at a high pace. Most importantly, new roads are being built and the old ones improved to better connect cities and villages. Efficient public transportation is also expanding.
2. IT market is booming, with over a third of all self-employed people in Ukraine working in this sector. Also, the growth rate of the IT sector is the highest in the world today compared to all countries, even to the US. You might have heard of several super-successful Ukrainian IT startups, which are already worth over $1 billion.
3. Many objects of new residential property are constantly being built. For 6 months of 2021 alone, there were 4,797,200 new square meters commissioned throughout Ukraine, which is +29.5% in the volume compared to the first 6 months of 2020.
4. Stubborn movement of Ukraine towards NATO and the EU. If Russia won’t attack Kyiv directly with tanks and nuclear bombs, Ukraine will be a member of those unions by 2030 (or 2040 at most). A strong expectation of this happening makes local and foreign investors very assured in the further price growth.

Conclusion

On one side, Ukraine is very corrupt and majorly underperforming in GDP per capita. On another side, it has an amazing infrastructure and great desire to move ahead, away from its hideous communist past. COVID-19 pandemic has corrected prices in Ukraine significantly, making them ascend greater than in most parts of the world. So, picking a direction for your investments today, pay the closest attention to Ukraine, and jump in the local market before prices become too high to steal the colossal ROI.