Distinguishing Features of Kyiv’s Real Estate Market Every Investor Should Know
If you are a foreigner who decides to invest in Kyiv’s real estate market, you will make the right decision as you will get quite high returns. However, you can’t simply copy and paste a working strategy from countries where this market is developed. It is necessary to discard all the stereotypes about Ukraine and use different approaches than you may have practiced abroad.
Analyzing all the advantages and weak sides here, we highlighted five distinguishing features of Kyiv property market and its economic peculiarities to maximize potential investors’ chances for accomplishment.
1. Certain Segments Guarantee The Higher Returns
Kyiv is emerging from the “down cycle’ after the consequences of the 2008 Global Financial Crisis and Post-Maidan 2015 Crisis. Therefore, there is enough time until the prices return to the ones before Crisis. Also, it is necessary to take into consideration that it is still possible to achieve gross annual yields of 10-15% investing in property in the city center, unlike the booming real estate markets in Europe and the USA.
2. Cash, Not Credits
The interest rates on mortgages are more than 20% in Ukraine, and the terms of the loans are impractical for buyers. Nor will you find seller financing in Ukraine. According to some of the bankers, mortgage financing may return to the Ukrainian market, but for now, investors should play to pay in full with cash, even though it ids jot possible to imagine European or American markets without credits.
3. Homeownership Rates Are High
The homeownership rate is over 90% in Ukraine, which is much higher than the European and US average (about 69% and 65% correspondingly). Because of Post-soviet culture, people in Ukraine prefer to own instead of renting no matter what conditions or locations are offered. Moreover, high rise buildings with rental apartments don’t exist in Kyiv. So if you’re an investor who’s interested in rentals, you need to target the market of tenants from abroad, who prefer to live in older historical buildings downtown with European-standard renovations.
4. Carrying Costs Are Low
Carrying costs for property investors are quite low in Ukraine. Additionally, property taxes are quite insignificant. Tenants usually pay the utility fee and standard charges themselves. In case you decide to renovate your property, maintenance expenses, the labor costs are also lower than in countries with well-developed real estate markets. Moreover, debt service will not be a part of your carrying costs.
5. There Is No Significant Difference Between Local And Foreign Buyers
It is a common thing in overheated markets to implement additional fees and taxed to avoid too many investments from abroad. Unlike countries with such markets, Ukraine has a few special rules for foreign investors. The only restriction for foreigners is that it is prohibited for them to purchase land that is designated as agricultural land. Ukraine has taxes for all buyers who sell more than one property in a calendar year or sell after holding their properties for less than three years. For foreign buyers, there are also extra 18% taxes if they sell the property after holding it for one year or less and 5% if selling it within 1 to 3 years after buying it. But if you have owned your property for three years or more, then taxes are only 1% of the sales price.
Taking all these peculiarities into consideration, it will not be superfluous to say that investment strategy is necessary, and it must be adapted to Ukrainian market realities as wishful thinking “there’s no place like home” will not work with property investments for sure.