Now that the war has, for better or worse, fallen into some recognizable rhythm, I thought it was time to give an update on Kyiv real estate market for those interested. Most of us from the West and other countries have never experienced a war, so we tend to think that everything stands still. But this is the second time my adopted country has been invaded in the last eight years, and I thought I would share some similarities and some differences so far.

2014 vs 2022

In 2014, like in 2022, the market basically froze as fear and uncertainty shot through the roof. For several months in 2014, there was almost no movement on the market. Once the wealthier people of Donbas realized it was going to get ugly many of them started to migrate to Kyiv with their expensive cars and bags full of money (literally). Typically, in more sophisticated markets, there is a rush to liquidity (cash) in times of uncertainty, but this is not really the case in Ukraine. So what happened was all these wealthy people threw their mass amounts of cash into Kyiv real estate, thus giving a significant bump to the market for luxury houses and new construction apartments. People in Ukraine don’t trust banks in general, so bricks and mortar are seen as better stores of value. In addition, a lot of these Donbas migrants had earned this cash off the books, and they were worried about arrests and seizures by crooked police and prosecutors because this was all before the extensive reforms in those sectors.

Dollar and corruption

Besides the Donbas bump, not much else was going on for quite a while except for the occasional opportunistic sale. However, the pressure on owners greatly increased with time. Not only did the currency devalue from the fixed rate of 8 UAH per USD to 40, but there was a general economic crisis caused by many years of government corruption and economic mismanagement. And unlike nowadays, Ukraine did not yet have international partners with deep pockets willing and able to step in to soften the crash. The pain ran deep and long, and despite the Ukrainians being as resilient as anyone in the world, prices started to drop in 2015 and into 2016 when they bottomed out and stayed flat for around two years. Prices in the historical center in solid buildings were about $1500-2000 during that time. You could take your time negotiating and closing because you didn’t have to worry about much competition from other buyers.

Hope

Gradually, the thoughts of the war faded into the background as Ukraine saw numerous reforms and impressive economic growth, driven by diverse industries and increasing interest from international companies. At the same time, local buyers who only looked at new construction also got interested in “our” bread-and-butter—the historical center. All these factors combined to push prices for unrenovated apartments up to the $2500-3000 per m2 range, which was where they were in 2013 before the Maidan protests that led to Yanukovych departing for Russia. Considering that these are nominal prices, it implied a 40-50% discount. The remaining future growth will be aided by the increasing access to credit and the other trends mentioned above.

Invasion in Ukraine 2022

Enter the full-scale invasion of Ukraine by Russia in February, massive temporary emigration, and the UAH that has slid from 25 per USD down to 40, and what do we have? Prices have not changed one bit in the historical center. Maybe some sellers have quietly dumped their apartments without going onto the market. Still, from checking all the advertising and talking to brokers, it seems, just like in 2014, that everyone is holding tight to their properties. Besides the infamous Ukrainian resiliency, massive assistance from international partners, and general optimism that this war can be won. I think in the mind of many owners, there is one thing that looms as a huge carrot—the prospect of full EU membership. I understand the mentality of Ukrainian owners pretty well, and one thing I know is that they tend to think that the future “potential” price ought to sometimes dictate the current price. So I guess many current owners are not interested in lowering their prices. They expect the future value to be Paris prices since they are not currently feeling the economic pinch; they are holding tight.

Forecast

All this brings us to the main point—what will happen from here? Well, for the time being, I think prices will remain at pre-invasion levels, at least until the fall. Even if Ukraine continues to show some successes at slowing, stopping, or even reversing the Russian invasion, energy and heating costs might put pressure on some less wealthy owners once the weather gets cold. And for those owners abroad in Europe living off of savings or significantly reduced real income. Prolonged war might start to empty their bank accounts for each day that it continues, especially if their host countries become less generous with subsidies and financial support, pushing the family budgets to the breaking point. Additionally, many Ukrainians might realize that they have settled in decently in their new homes with kids in schools, etc., making them much more likely to part with their properties back in Ukraine.

Conclusion

But even if all these things happen, I still don’t think we will see some massive drop in prices beyond the bottom that we saw in 2016-18. We have had plenty of potential buyers contact us wanting to buy properties in the $800-1000/m2 range. After telling them that Ukrainian owners are almost as resilient as its soldiers, I tell them that the only place I have heard of deals in the $1000/m2 range was in Bucha… I still believe that our niche in the historical center of Kyiv is a viable business. That’s why I never even considered selling my place there, and why I think those looking for total fire sales will be out of luck. For some perspective, Reitarska Street, where our office is located, has been around for more than 1000 years, and it’s not going anywhere anytime soon.