After years of relentless price growth on the market, the last half year on the secondary residential market in Kyiv has seen a sudden trend reversal
After years of relentless price growth on the Ukrainian commercial and residential real estate markets, the last half year
on the secondary residential market in the capital Kyiv saw a sudden reversal of the trend, as a growing number of homebuyers have refused to enter the market due to what they view as over-inflated prices, according to experts.
Data combining the price-growth dynamics of the primary and secondary real estate markets in Kyiv from the domik.net website (operated by the Planeta Obolon real estate agency) show prices at well below $500 per square meter at the beginning of 2001. Prices steadily pushed their way upward since then, until finally topping off at around $2,900 per square meter at the end of winter/beginning of spring this year. Experts say a downward correction to surging prices could be underway, as homebuyers entering the market have dropped off dramatically, expecting prices to fall, and making housing options on the secondary real estate market more affordable.
A notable dip in prices clearly spelling out a correction on the Kyiv residential market, however, has not been detected. Sellers were still asking for prices hovering at around $2,860-2,870 per square meter in late spring/early summer.
According to statistics posted on the website of real estate consulting agency Kanzas, which specializes in the secondary real estate market, prices increased on that market in Kyiv by 120 percent in 2005-2006, peaking in April of this year and then falling by an average of $25 over the next two months to $2,432 per square meter.
Some market insiders, who characterize the fall in secondary market prices as a momentary correction, say that demand for housing will begin to pick up again in September, with prices rising again in response. They say the number of real estate purchases in Kyiv has seen more than a twofold decrease in the last two months due to inflated prices on the secondary market, which were already approaching prices on the primary residential market.
Insiders are also generally predicting slower year-on-year growth in prices when the rate of apartment purchases begins to pick up again this fall compared with the last several years, as well as price-growth stabilization on both the secondary and primary residential real estate markets.
Ilya Rodionov, the director of Real Estate Department consulting company (RED), said the price correction occurred due to the lack of demand caused by inflated prices on Kyiv’s secondary real estate market. Rodionov said, however, that he does not expect the price decrease to continue.
“It’s possible that with September the price growth trend will return. We, however, do not expect there will be that rate of price increase that we had for the past two or three years,” he added.
According to Rodionov, the annual price rise of more than 50 percent destabilized the market, and following the correction, prices will begin to increase again at an annual rate of about 15 percent.
With respect to the primary residential market, Rodionov said that prices on brand new residential space have also not fallen despite a decrease in demand similar to that felt by the secondary market.
“Rising prices for construction materials and the cost of works and land in Kyiv will keep the prices on the new residential premises market from falling,” he added.
The rate of price growth on the primary market would also stabilize and remain at a level of around 15 percent during the next several years, according to Rodionov.
Oleksiy Kotenko, executive director of the Planeta Obolon, said that the slowdown in real estate sales that began with the start of 2007 turned into stagnation this summer. Kotenko characterized the summer period as traditionally the least dynamic period for the real estate market.
He described the recession in prices as a correction of an overheated secondary residential market.
“We see the so-called syndrome of suspended demand, when people understand the situation is unfavorable for purchases and prefer to rent an apartment and wait for a price correction rather than buying on an overpriced secondary market,” he added.
Kotenko expects residential real estate sales to pick up again following the summer with a slight price correction.
“A stagnation period typically lasts from six to nine month. We are at the end of the nine-month period now. And today we can already see an increase in activity,” he added.
