There’s a common maxim in real estate investing that says “you make money when you buy.” This is usually understood to mean that a buyer should hunt for good deals and buy a property that is lower than the “market price.” In addition to being easier said than done, this interpretation is usually a big hindrance for buyers because they fail to understand how to properly identify where the value is trapped and what it takes to unlock it.

They are trying to compare one property’s price to other sale prices on the same street or in the same neighborhood, but most fail to realize that Kyiv’s historical center as a whole is undervalued, and some coordinated action is required to increase the value up to the level that reflects its true value. When we compare prices in Kyiv to comparable historical centers in the capitals of Eastern and Central European countries, prices here are lower by anywhere from 30-60%, despite Ukraine being a very large country. Why is that?

What is Suppressing Values?

The main thing holding down prices in Kyiv’s historical center is the lack of maintenance and repairs for the facades and common areas of the buildings in these districts. You don’t even have to visit an apartment or even step inside the entrance of the buildings to see how dilapidated and unorganized things are.

The first thing that many people notice is the eclectic mix of balcony sizes, designs, and styles that adorn what are otherwise beautiful buildings. Some owners leave the balconies open, as they were built to be, but most Ukrainians prefer to enclose them with glass for extra insulation from the cold and also to use as storage. Some even go as far as to enlarge and incorporate the balconies into the interior of the apartment itself, by adding heating and insulation.

While many locals pride themselves on this exhibition of their personality, and some feel quite smart that they have added a couple of meters to the apartment size, thus increasing the value. However, the fact is that by having this chaotic presentation of the building, they are reducing the value of the apartments in the building. The location might be the most important factor in real estate, but aesthetics are a close second.

Besides the balconies, upwards of 90% of historical buildings need a paint job or refreshing of the crumbling stucco work on the facades. The stucco work would be labor-intensive, but in theory, the numerous apartment owners could contribute funds to cover the cost and thus share the burden. However, the reality is that the overwhelming majority of owners of these apartments are “property rich and cash poor,” so probably only 10-20% would be in a position to contribute funds, and it is far from certain that they would be willing to pick up the slack for their less wealthy neighbors.

When it comes to even something as simple as refreshing the paint on the facade, for most historical buildings there are protections in place that can make it very onerous to receive the necessary approvals, ostensibly to ensure that the shade of paint exactly matches the historical one and other such tedious details. And this is in addition to the same funding conundrum mentioned above.

The tragedy of the Common Areas

Those who enter these “charming” historical buildings for the first time are often shocked, if not horrified, by the condition of the entrances, lifts, and stairwells. These bad first impressions are caused by minimal lighting (sometimes in the form of a single dangling light bulb), moisture-damaged walls, dozens of wires running along the walls, cracked and broken steps, loose or splintered handrails, noisy and slow lifts, years-old dust that can even block sunlight from entering through the windows, and so on. 

None of these issues is unresolvable, and indeed most are simple fixes, but it is clear that the Soviet legacy system of housing management companies has decayed to a point where they are almost completely useless.

 

Each apartment owner must pay a monthly fee to these organizations, which should theoretically pay for regular cleanings and repairs, but in reality, the money just disappears and if you want the housing management company to do any actual work you will likely have to pay some additional “fee” out of your pocket. But at the end of the day, the monthly fees are so low that the overwhelming majority of property owners have resigned themselves to paying almost nothing and receiving the same in return.

Hope for the Future

While some might be resigned to accepting the current look of the historical center, there is no reason to think that the future must resemble the past.

Right now we are in the early stages of rejuvenation of Kyiv’s historical center, driven by purchases of many dilapidated apartments by a younger generation of Ukrainian and foreign buyers.

While the process of gentrification is sometimes seen as a huge negative, the reality is that the 30+ years of neglect and lack of investment has left a large swath of Kyiv’s priceless historical center in such a condition that it can not be left to rot any further.

In fact, anyone walking down Yaroslaviv Val can stop by building #15b to see what can happen when things are neglected for too long. This building is known as the Sikorsky House, named after possibly the most well-known Ukrainian around the world. He is considered one of the main drivers of helicopter flight, with the company bearing his name still producing aircraft to this day. Yet the house where he once lived with his wealthy family has degraded to the point of almost needing to be demolished, and indeed some walls have already collapsed.

Steps for Improvement

While coordinated action is always tricky and might take time to implement, there are some practical steps that current owners and future buyers can take to slowly improve the overall environment while also increasing the value of their apartments.

If a few people in each entrance make 1 or 2 of these changes themselves without waiting for everyone else, then the effect will be noticeable not only in each building but also throughout the historical center. And none of these changes should be prohibitively expensive for those who are considering investing tens of thousands of dollars into a new apartment for themselves.

If anything, it only makes more sense to brighten the overall property so as not to have a shining jewel surrounded by dirt and darkness.

Here is a list of things that any owner can do:

• Change or fix the main entrance door, and clean off graffiti
• Install adequate lighting inside the entrance
• Paint walls in the entrance and on the floor of your apartment
• Remove obsolete wires and cables, and place others inside conduits
• Fix lighting in the lift, remove graffiti, and fix anything that makes extra noise
• Remove dust and grime from cage surrounding lift shaft
• Install lighting above your apartment with a motion sensor
• Install similar numbering for your and neighboring flats
• Remove glass windows or other decorations from the balcony
• Select neutral railing for the balcony that matches others in the building
• Place air conditioner units on the backside of the building or balcony
• Repair underside of balconies to prevent falling stones
• Fix gutter system to prevent the formation of large icicles in winter
• Ensure the gutter system does not drain directly onto the sidewalk below
• Do not install wires, satellites dishes, etc, on the building facade

While it might seem strange to think that one must spend time and money on something that should be covered by all, this is not all that unusual in Ukraine. In a country where many institutions either do not function at all or are completely corrupted, there are many cases where more informal ways of living have been incorporated into society. But what is certain is that if everyone just waits for things to be perfect, nothing will improve anytime soon.

The time for starting the process of rejuvenating the historical center is now, and the ones who are most capable of bringing about this change are the same people with the most to gain from this, and likely the most means to do this – the property owners.

If you want to join the residents of cozy downtown, Vestor.Estate can help you with property purchase, renovation, and all subsequent processes. Open the real value of the unique architecture and atmosphere of the great city. Fill out the form, and we will contact you as soon as possible.