Brave new world: Kyiv’s Post-Covid-19 Real Estate Market
As we begin to see the light at the end of the proverbial tunnel, it is time to consider what the residential real estate market in the historical center of Kyiv will look like after things return to normal after the disastrous effects Covid-19 virus has had on the economy.
But first it would be helpful to understood what the impact has been thus far.
With almost no new expats arriving due to closed borders, and with many locals afraid of moving during the quarantine, the market was effectively dead for the first 6 weeks or so. However, in the last few weeks Vestor.Estate team has started to see some movement, but the only deals that have been closing are where owners have been willing to drop their prices 30-50% from where they were just a couple of months ago.
Interestingly, with the lack of expat clients it has been local clients coming in to swoop up these properties, indicating that locals also strongly prefer highly central locations, albeit at a lower price point than expats.
Whereas some properties were vacated by expats who had to leave the country, and mostly rented back out at significant discounts, other properties have remained fully occupied. And as a testament to the tenants not wanting to lose their prime properties, knowing that such gems are hard to find, the ones who have remained have mostly refrained from trying to negotiate the price.
While the process has been a bit slower, it has indeed still been possible to buy/sell a property in Kyiv, as the banks and notaries have been functioning with modified rules during the whole quarantine period.
We ourselves, as a small boutique agency, have helped 3 of our clients buy properties during this period. As for prices, while there have been a handful of one-off discounted sales, the vast majority of sellers are seeing this for what it is, a temporary roadblock, and we have not seen a drop in sale prices across the board.
This is perhaps the sphere least affected by the quarantine rules. With the major shops that sell construction supplies remaining open, and the construction work largely conducive to minimizing contact with people and wearing masks, the work has contributed unabated and maybe even picked up a bit as the opportunity costs of having a property under renovation (i.e. losing rental income) were greatly reduced.
This service has proved itself to be instrumental in allowing foreigners to be able to buy a property in Kyiv during the quarantine period.
Whereas in normal times it serves its purpose as a matter of convenience (i.e. a buyer would prefer to close the deal without having to fly into Kyiv, for any number of personal reasons), during a quarantine or other time when normal travel is heavily disrupted, the escrow service is an absolute lifeline. This not only allows the sale to go forward at all, but it also allows the buyers to even use the disruption as an excuse to get the price down even further.
Two of our three deals during the quarantine were via escrow, and in one of the deals we were able to get the owner down another 5% off the already negotiated price.
As for the future
We expect that the rental market will take 2-3 months from the end of the quarantine to fully recover, as the many owners who did not want to rent their places at discounts will still be part of a small glut of empty apartments all remaining on the market. As the flow of expats returns, which we expect to be in full swing by August, these apartments will be snatched up and the shard lack of good supply of European-level apartments in Kyiv will be evident yet again. After this 3-months or so, we expect to see the same prices that we saw before the Covid-19 crisis.
While never coming to a standstill, we expect the sales market to pick back up, with prices remaining steady until the end of the year, as opposed to a slow and steady increase in prices that we have seen over the last 12-18 months.
One major factor that is preventing many potential sellers from giving up and selling “for cheap” is the expectation of mortgages coming on the market at some point in the next year. With the National Bank dropping the key interest rate to 8% in April, credit in the form of mortgages, which are the lifeblood of any normal real estate market, would mean a huge boost to prices.
With prices in Kyiv 30-50% lower than prices in comparable Eastern European cities like Warsaw, Prague, and Budapest, credit on the market next year could result in a sharp uptick in prices, which could bring them back up to the level of 2013, before the Revolution of Dignity and following war in the East of the country.