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The Speculative Boom May be at Its End in Ukraine – and We Enter Into the Basement Phase of Property Investment in Ukraine
Author: Stig Kristoffersen  | Posted: 02-05-2008 | Comments: 0 | Views: 10 | Rating: (135)  (?) 
 Ukraine's property prices have come to a halt. Prices decreased by around 5-8% during the second quarter of 2007, in the used market. Opposed to the used market the new apartment market was still in positive, with small increase in prices on of around 5% in the second quarter of 2007.
In 2006 the house prices in Kiev rose by around 70%, compared to 65% in 2005. These numbers are according to Kiev real estate agents “In Real”. Compared to 2004 where the prices rose with 30%, and 35% price increases in 2003.
Strong economic growth is taking place, partly due to the pegged currency system. The initial under-valuation of the hryvnia six years ago fuelled strong economic growth and strong price rises. Because interest rates have been held down to sustain the peg, the price rises have fuelled a borrowing boom which has been channeled into the housing markets, which anyway face severe supply constraints. However, the mortgage market in Ukraine is under developed, and still there are investments made by speculators and not people buying to live in the accommodations purchased.
All secondary property transactions are made in US dollars, while primary sales are in executed in the local currency hryvnia.
At the moment there are no restrictions on foreigners buying property in Ukraine, apart from on agricultural properties. However the problem with the existing market is that there is a dominance of foreigners and wealthy Ukrainians speculating in the market and not the locals with a bank system with a lending structure backing them.
We therefore assume that the Ukrainian property market at the moment will go from the speculative phase of property market and into the basement phase. We may see that the property market will enter into the emerging property market phase during the latter part of 2008. This will make the market to exhibit a slow growth again, but not with the large margins seen in the latter 3 years in Ukraine, but with a moderate 5-15% increase in property values for a period of time (maybe seen in Kiev already as we observe 7.5-10.2% increase in values these days).
Whether we will see a property market into the strong developing market phase remains to be seen. We strongly believe that there must be some fundamentals present in Ukrainian macro economy before this phase will enter the property market in Ukraine. At the moment we see Warsaw and Prague in this phase, and the property market begins to be dominated by the evolving middle class in those countries and not only the speculators.
We can provide a more detailed analysis of the market in our market research reports available in http://www.ec-ba.com
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About the Author:He has a background as civil engineer and geoscientist. He has worked mainly within the oil and gas industry from the mid 1980s. He has written some few fictional novels as well as author of some professional litterature within oil and gas sector, he is now an editor of some web sites, mainly within the travel business.
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