DIM Group built more than 45 thousand square meters in 2023 and plans to commission approximately 100 thousand square meters of real estate, said Daria Bedia, Marketing Director.
“This year we have built more than 45 thousand square meters. We expect to receive certificates in two of our projects in the near future: the eco-city of Lucky Land and the multifunctional cluster of Park Lake City. Next year, we plan to commission about 100 thousand square meters. We are preparing several new projects to be launched, which we want to present to the market,” Bedia told Interfax-Ukraine.
She stated that since the spring of 2023, the company has been recording a steady increase in demand in the range of 5-6% per month in comfort+ and business class projects.
“In total, we managed to return more than 45% of the pre-war demand. And this is high-quality demand that is converted into real transactions. This is very important, as it indicates the liquidity of the product (concept, format, quality characteristics of the residential complex) and the high pace of construction,” Bedia said.
At the same time, the weighted average growth in construction costs for the year was almost 45% due to higher prices for construction and installation works due to inflation, lack of qualified personnel, and indexation of builders’ salaries. In addition, this was caused by the rise in the cost of construction materials due to the lengthening and changing of supply chains, rising prices for raw materials, and the loss of production capacity in the eastern and southern regions.
According to her, the level of demand is directly influenced by the project itself and its concept, as well as the stage of construction and whether active construction work is underway at the site. Buyers are ready to enter the project not at the stage of the pit, but at least with a readiness of 30-40%.
“Important criteria are the developer’s reputation, ability to keep their word in terms of terms and promises, as well as flexible purchase terms for both 100% payment and installment payments. According to our observations, the demand for long-term installments of more than 3 years has increased by a third in just one year,” Bedia said.
She noted that the key factors in the choice are the type and quality of materials: brick or ceramic block, noise-absorbing windows with magnetropic coating, high-speed elevators from the best manufacturers. Much attention is paid to the service company, spatial zoning of the territory, landscape design, security and concierge service.
A diverse multifunctional infrastructure that reflects the expectations of the target groups of buyers, a well-thought-out apartment layout and a variable range of planning solutions, and the energy independence of the complex, in particular, the availability of alternative power sources for water supply or power for elevator equipment, are mandatory.
According to Bedi, most buyers in the comfort+ segment are interested in one-bedroom apartments of 40-47 sq. m. with a kitchen-living room of 20 sq. m. and a separate bedroom with a dressing room. The top two-room apartments are 68 to 75 sq. m. with two separate bedrooms, a kitchen-living room of 20 sq. m., and three-room apartments are 85-90 sq. m. with three separate bedrooms, one of which is a master bedroom with its own bathroom and wardrobe, a large kitchen-living room is also a priority.
“The area of 1-room apartments, which are most often bought in the business segment, reaches 50-55 sq. m., 2-room apartments – 75-80 sq. m., 3-room apartments – 100-120 sq. m. The mandatory attributes of such apartments are a large living area with panoramic windows of 30 sq. m. or more, a master bedroom with a dressing area and a separate bathroom of 20 sq. m., a children’s room of 25 sq. m. or more with a wardrobe,” the expert said.
DIM Group was founded in 2014 and consists of six companies covering all stages of construction. To date, it has commissioned 12 houses in six residential complexes with a total living area of more than 218 thousand square meters. Six residential complexes of “comfort+” and “business class” categories are under construction: “New Autograph, Metropolis, Park Lake City, Lucky Land, etc.
Alyona Piskunova, conceptologist at DIM Group of Companies
Three things that really help developers sell apartments in new buildings today
Since the beginning of the full-scale war, Ukrainian developers in the primary real estate market have faced two extremely difficult challenges. The first was to survive and maintain their positions, i.e. the team, to support those who went to the army to defend the country, to defrost the sites in time and not to lose the pace of construction. The second is to survive in conditions of limited demand, and in particularly difficult periods of almost zero interest in buying apartments.
We all remember well the first half of 2022, then the period of massive rocket attacks in the fall and winter of last year – when the volume of demand fell significantly, and the number of transactions was measured in units, at best dozens of apartments, provided that you build liquid projects on time and quickly and the concepts of the residential complex fully satisfy the buyer’s request today.
Fortunately, since the spring of 2023, to be precise, since the end of May, after the end of the missile terror on the capital, the capital’s real estate market has been experiencing a period of restrained optimism: sales in the comfort+ segment, provided that the project is actively under construction, are growing by 5-6% per month. For example, we have managed to return more than 40% of the pre-war sales volumes.
However, there are three things behind these figures. First of all, there is noticeable construction activity on the sites, which is now one of the priority selection criteria. Over 95% of buyers, according to our observations, over the past six months, have cited construction activity and the developer’s reputation as important for making their final choice.
The second key point is the liquidity of the format and complex. It is important for people to see not imaginary renders, but the concept of living space, where zoning and filling the territory with functions and infrastructure meets all their everyday needs, and planning solutions are ergonomic and comfortable for life.
The most liquid formats are multifunctional cluster, eco-city and multifunctional complex with the concept of a 15-minute city. The most popular are the European layouts from 45 to 85 sq.m., necessarily a large kitchen-living room of 20 sq.m., isolated bedrooms, and two bathrooms for 2-3-bedroom apartments.
And the third point that contributes to the gradual recovery in demand is the company’s willingness to make concessions and offer flexible purchase terms. In fact, today, sales are sufficiently high for those who, thanks to a sustainable financial model, can offer a long-term installment program of 3 years or more.
Understanding the request for financial leverage from the developer, we have developed an installment program for 7 years at 0%. At the same time, the so-called “stability year” with fixed minimum payments ($300/month for 1K apartments;
400$/month – for 2K apartments; 600$/month – for 3K apartments), and then installments without overpayments for up to 4 years. Down payment from 30%.
Such programs are becoming a financial incentive to buy today and increase the volume of effective demand. For the buyer, this is also a signal that the developer’s financial model is stable enough for the company to be ready to share the burden with him. After all, it is clear that it is more profitable to sell for 100% payment and receive funds here and now. However, challenging times require difficult but significant decisions: today it is extremely important to support each other and be in partnership with the buyer.
The transition to a regime of managed exchange rate flexibility has not yet affected housing prices in the primary market, but it may change the behavior of potential buyers, and the rise in the dollar in the future may affect construction costs, according to Ukrainian developers interviewed by Interfax-Ukraine.
“We do not expect any sharp price fluctuations in the primary market. Pegging to the current US dollar exchange rate is a standard practice among developers. That is, in case of a significant depreciation of the hryvnia against the dollar, prices for square meters in the national currency equivalent will indeed increase. However, we do not see any reasons for this at the moment,” Anna Laevska, Commercial Director of Intergal-Bud, told the agency.
According to her, in the short term, the cost per square meter will be mainly influenced by the dynamics of real demand and the cost of construction.
At the same time, the rise in the dollar may lead to higher prices for contractors’ services and construction materials, said Dmytro Novikov, marketing director of City One Development.
“At present, we do not see any prerequisites for a rapid rise in prices in the primary real estate market. Even if the dollar rises in value, there will be no significant changes in the primary market in the near future. But it may have an impact in the future: if the cost of construction materials, which are directly tied to the currency, rises, the cost of construction will certainly increase,” he said.
Daria Bedia, Marketing Director of DIM Group, expressed a similar opinion.
“The pricing policy in the primary market is always closely linked to exchange rate fluctuations, as a large percentage of contractor services and the cost of construction materials, for example, are tied to the US currency. If the exchange rate rises significantly, it will create an additional burden on the cost of construction, which will push the price up,” the expert said.
At the same time, the rhetoric about the “rise in prices” against the background of a flexible exchange rate is nothing more than a marketing ploy and an attempt to persuade buyers to buy, she noted.
“There will be no rapid growth in this case, taking into account the constraining factors,” Bedia believes.
In case of a dollar appreciation, developers will be able to slow down the growth of costs only with the help of previously purchased stock of building materials, said Irina Mikhaleva, marketing director of Alliance Novobud.
“We can say for sure that with the further growth of the dollar, the cost of primary materials will also increase, primarily in hryvnia equivalent. The cost of construction will also increase, as manufacturers and suppliers of services and building materials will raise prices. The only way to slow down the growth of costs may be the stocks of building materials that were purchased earlier and are now at the disposal of builders,” she said.
Ms. Mikhaleva noted that the market reaction can be predicted only if the dollar gradually rises, without sharp jumps.
For their part, KAN Development believes that even a sharp fluctuation in the exchange rate will have a minor impact on the housing market.
“Even a sharp fluctuation in the exchange rate, if it affects the cost of real estate, will not significantly affect the housing market. If the hryvnia drops by 10%, it will strengthen later. Government mortgage programs will not be suspended and will continue to be issued in hryvnia. As for new housing, developers will continue to adjust to the market price in dollars. So far, we do not see any factors that could sharply collapse the hryvnia,” the developer commented.
According to the Kovalska Group’s press office, the transition to exchange rate flexibility may have an indirect impact on demand and may slow down the pace of recovery in the real estate market amid a general decline in purchasing power.
“For example, buyers who have savings in another currency and are ready to buy today may postpone their purchase decisions until the exchange rate is “better”, and buyers who are considering purchasing under government and partner programs such as eOselya, preferential mortgages, etc. may go to the secondary market in search of cheaper housing due to “uncertainty”,” the developer noted.
Susanna Karakhanyan, Head of Sales at Greenville Group, also spoke about the likelihood of changing the behavior of potential buyers.
“For those who are now thinking about buying a home, a window of opportunity is opening to invest before the exchange rate gains speed and starts to grow after the commercial one. This situation is likely to accelerate investors who are ready to pay the full price immediately,” the expert told the agency.
In addition, the situation has become unpredictable for those who planned to take out a long installment plan to buy a home.
“While the NBU exchange rate was unchanged for more than a year, investors could clearly calculate their payments. Now the situation will be unpredictable. Therefore, developers will try to take control of the situation: for example, to fix the exchange rate for a certain period in order not to lose a buyer and demonstrate loyalty,” Karakhanyan said.
As reported, on October 3, the National Bank of Ukraine switched to a regime of managed exchange rate flexibility.
