The cost of square meter of housing in new buildings in Ukraine in January-June 2021 grew by 10-20% depending on the readiness of the facility and the region, Director General of the Financial and Investment Management Association (FIMA) Viktoria Volkovska has told Interfax-Ukraine.
“We have analyzed dozens of housing facilities throughout Ukraine that work with construction financing funds. The overwhelming majority indicate an increase in the cost of square meter. At the same time, we have a situation where the cost of housing is growing faster than the price,” she said.
According to a survey conducted by FIMA, 76.9% of respondents reported an increase in the cost of square meter by 10-20%, and 7.7% told about an increase of more than 20%. Only 15.4% of respondents said that the cost of housing has not changed significantly.
In addition, only 10% of respondents reported a decrease in the volume of construction work, while 40% reported an increase of more than 20%, 10% – a 20% increase, and 20% – a 10% increase.
The FIMA study is based on an online survey of construction finance fund managers conducted following the results of the first half of 2021.
The Financial and Investment Management Association (FIMA) was established in May 2020 in connection with the entry into force of the law on amendments to certain legislative acts concerning improving the functions of public administration of financial services markets. It unites 41 financial companies that manage FFS funds in Kyiv, Lviv, Odesa, Dnipropetrovsk and Kharkiv.
The cost of housing in Kiev and the purchasing power of the population are growing at a commensurate pace, and the ratio of price to annual income is at the lowest level over the past 10 years, according to the Financial Stability Report of the National Bank of Ukraine (NBU).
“Although the cost of housing is growing, it still remains affordable in terms of relative indicators. Prices and incomes of the population are growing commensurately. In the first quarter of 2021, purchasing activity in the housing market was almost a tenth higher than the five-year average for the first quarter,” the NBU said in the report.
According to the forecast, the growth of household incomes, the gradual recovery of mortgages and a decrease in the profitability of deposits will stimulate the growth of demand for housing. At the same time, the long-term implementation of the reform of urban planning control can reduce the number of new supply, which, in turn, affects the rise in prices: in April 2021, the growth of prices in Kiev exceeded 10% per year.
According to the NBU, in January-May 2021, Ukraine issued 213 building permits and 253 certificates for the commissioning of new apartment buildings. In addition, over the past year, only half of the permit applications have been approved.
“The average annual ratio between permits and certificates is about 3 to 4, which is a rather low indicator in comparison with the international level and may indicate a slow pace of new housing construction in the future,” the National Bank said.
Commissioning of housing in Ukraine in January-March 2021 increased by 20.5% compared to the same period in 2020, to 2.306 million square meters, the State Statistics Service has reported.
At the same time, it is clarified that the data are given taking into account the housing introduced in accordance with the temporary procedure for the acceptance into operation of houses built without permission to perform construction work.
According to the report, since the beginning of the year, 1.609 million square meters have been commissioned in cities (70% of the total), 697,600 square meters in rural areas. At the same time, 43% of the total volume of housing was commissioned in single-family houses, 56.6% – in houses with two or more apartments, 0.4% – in dormitories.
In general, during the reporting period, 30,371 apartments were commissioned, while in cities – 24,100 apartments, in villages – 6,200 apartments.
The average apartment area was 75.6 square meter, while in single-family houses – 158 sq m, in multi-apartment buildings – 54.2 sq m.
In Kyiv, Lviv, Kharkiv, Odesa and Ivano-Frankovsk regions, according to the results of the first quarter, 56% of the total housing volume was commissioned. Moreover, in Kyiv – 145,000 square meters (6.3%).
According to statistics, a decrease in the volume of housing commissioned was recorded in Sumy, Rivne, Kyiv, Ivano-Frankivsk and Volyn regions.
The average price of apartments in the primary housing market of Kyiv may grow by 15-20% and reach $1,300 per square meter already in 2021, and by the end of 2023 it may reach $2,000 per square meter, Director General of Kovalska Group Serhiy Pylypenko has said.
“The trend continues, and this year we expect housing prices to rise no lower than last year by 15-20%. This is the minimum level of increase. The market is very active, not overheated, demand is stable. Amid rising prices for construction materials, inflationary processes, lower interest rates, affordable mortgages and other factors, we expect a rise in prices. My expectations: already this year, the average price in Kyiv may reach $1,300 per square meter, and by the end of 2023 – already $2,000 per square meter,” Pylypenko said during the discussion panel “Post-Quarantine Development” hosted by the Confederation of Builders of Ukraine in Kyiv on Wednesday.
According to him, the growing shortage of high-quality land sites for construction in the Ukrainian capital also influences the rise in housing prices.
“The old General Plan has lost its relevance, the new one has not yet been adopted, so in the next one or two years it will not be easy to find a site which is intended for residential construction, and this will create a certain shortage of sites for future development, which will also influence the rise in prices,” he said.
In addition, the expert predicts an increase in prices for construction materials on average within 15-20% during the year. According to him, this trend forces developers to take this into account at different phases of the construction.
“All developers have experienced an increase in the cost of basic construction materials, in particular metal, which has grown by 30-40%, and other materials are also growing in price. This year, I expect that the prices for basic construction materials and construction costs may rise by 15-20%. This should to be taken into account in pricing,” he said.
According to the forecast of Pylypenko, the rise in housing prices will lead to an enlargement of the development market and displace unreliable developers.
Kovalska industrial and construction group has been operating in the construction market of Ukraine since 1956. It is a leading manufacturer of construction materials, developer and builder of the country.
The volume of housing construction in Ukraine depending on the region for the first quarter of 2021 increased by 10-20% compared to the fourth quarter of 2020, General Director of the Finance and Investment Management Association (FIMA) Viktoria Volkovska has told Interfax-Ukraine.
“We have analyzed dozens of housing objects working with the Construction Financing Funds. There is an increase in activity in all regions, the most noticeable in Lviv region, where the volume of construction work increased by more than 20%,” she said.
The FIMA study is based on an online survey of managers of Construction Financing Funds conducted in the first decade of April.
According to Volkovska, despite concerns, the New Year holidays, adaptive quarantine and, finally, lockdown did not have a significant negative impact on the construction and sales of housing in the country.
According to the survey, 40% of respondents reported an increase in the volume of construction work of more than 20%, some 10% of respondents noted 20% growth, and 20% – about 10% growth. Only 10% of respondents reported a drop to 10%.
“The level of sales in general did not change, although in some regions it showed an increase of 10%,” Volkovska said.
The Finance and Investment Management Association (FIMA) was established in May 2020 in connection with the entry into force of the law on amendments to certain legislative acts to improve the functions of public administration of financial services markets. It unites 37 companies-managers of Construction Financing Funds in Kyiv, Lviv, Odesa, Dnipro and Kharkiv.
President of Ukraine Volodymyr Zelensky has said that he welcomes the signing of an intergovernmental agreement between Ukraine and Turkey on housing construction for Crimean Tatars, which will allow the construction of about 500 residential apartments, including for internally displaced persons.
“I welcome the signing of an intergovernmental agreement between Ukraine and Turkey on cooperation in the field of housing construction. This makes it possible to build about 500 apartments for representatives of the Crimean Tatar people and other internally displaced persons. This is a very important humanitarian project that will bring the peoples of Ukraine and Turkey closer together,” Zelensky said at the ceremony of signing Ukrainian-Turkish documents with Turkish President Recep Tayyip Erdogan.
In addition, according to Zelensky, “further liberalization of trade and economic relations between Ukraine and Turkey is important.”
“The signing of a bilateral free trade area agreement will be able to significantly increase the momentum of cooperation,” Zelensky said.
“This is a very important step that must be taken in accordance with the national interests of each of the countries, because we agreed with the President of Turkey that the relevant institutions of our countries will conduct a very substantive audit of all controversial issues and find a mutual compromise that will open the way to signing of this important document,” the president added.
The presidents also discussed the prospects for Turkish investments in Ukraine, in particular “opportunities for large-scale privatization in the field of investments in seaports, as well as cooperation in the energy and military spheres, including aircraft construction.”
“Our goal is the implementation of specific projects, the creation of joint ventures, the exchange of experience and technologies,” the President of Ukraine said.
