In a real estate industry still in the doldrums, one hopeful trend is becoming clear: More and more Kyivans are opting to ditch cramped Soviet-era dwellings and purchase modern, roomier apartments.
Last year, for the first time in Ukraine’s modern history, the number of deals on the primary market came close to the number of flats sold on the secondary market. Real estate consultancy SV Development last year counted 19,500 deals in Kyiv involving apartments in old buildings compared to 14,000 for homes in new apartment buildings. Experts predict that if this trend continues, the primary market could catch up to the secondary market in the number of sales as soon as 2015.
“The primary housing market has been developing very actively,” said Serhiy Kostetsky, analyst at SV Development. “All construction projects that were launched after the crisis go on. Competition is very tough.”
The post-crisis fight for financially viable clients has spurred developers to meet customer needs. As a result, they have begun to offer apartments that people want and can afford.
“Developers used to build three- to five-room apartments because they were cheaper to build,” Kostetsky said. “Now they construct mostly one- and two-room flats and pay more attention to quality and design.”
As the number of good flats on the secondary market gradually decreases, customers are demanding better quality new housing.
“For the last five years customers changed their preferences and values,” said Oleksiy Govorun, deputy chief executive at Frankfurt-listed TMM development company. “Their attitude towards the secondary housing market became secondary, literally and figuratively.”
To attract clients, developers have begun to offer different payment-installment plans and loyalty programs. They agree to share financial risks with clients, encouraging banks to give mortgage loans for flats in buildings that were just built more eagerly than for flats in old buildings. They also offer better interests rates for the primary market: 16 percent in contrast to 25 percent for the secondary market.
As a result, up to 10 percent of all deals on the primary housing market in 2012 were made with mortgage loans in contrast to only one percent for the secondary market, Kostetsky said.
Price is another attraction for new flats.
In March, the average one-square meter price in an apartment in Kyiv’s cheapest district Desniansky was $1,410 for the primary market in contrast to $1,553 for the secondary market, according to SV Development. In the most expensive district, Pechersky, one square meter on the primary market costs $2,589, compared to $3,012 for the secondary market.
Better prices could be also found in multiple housing complexes that are being built near Kyiv. Such complexes are located 100 meters to five kilometers from Kyiv’s ring road but the price for one square meter there is on average $300 lower than prices for apartments on the outskirts of Kyiv.
But for the housing market to really take off, both the primary and secondary markets need buyers who can get affordable mortgage loans.
“The main driver for the housing market is the wide availability of mortgages,” Govorun said.
According to Govorun, affordable mortgages include 5-8 percent interest rates, up to 10 percent down payments and a lending term not less than 20 years. Now banks offer 16-25 percent interest rates, and a down payment of 30-50 percent with a maximum 20-year term.
Kyiv Post staff writer Oksana Faryna can be reached at [email protected].
