House prices in Kiev, Ukraine’s capital, rose sharply during the year to April 2012. But market experts doubt this can be sustained, with the economy slowing, and a political crisis over the incarceration of former prime minister Yulia Tymoshenko.
The average price of apartments in Kiev was up 28.9% from last year to US$2,970 per square metre (sq. m.), but still down 30% from the housing boom’s price peak in August 2008, according to Blagovest
This can be compared to what happened in Nov 2011, when house prices rose by a surprising 25.7% y-o-y, after almost three years of declines. However house prices dropped back again in the following months.
Ukraine’s housing boom (2005-2008) was fueled partly by foreign buyers, but also by strong economic growth (average GDP growth of 8% per annum from 2000 to 2007) and interest rate differentials. The boom was encouraged by pro-west President Victor Yushchenko’s ‘Orange Revolution’ electoral victory.
House prices skyrocketed by more than 1,000% from Q2 2000 to Q2 2008.
A significant number of buyers were British, with some Americans, Emiratis, Cypriots, Kiwis and Canadians. Ukraine’s wealthy elite also joined in the buying frenzy, pushing prices way beyond the means of the average Ukrainian.
However in late 2008, foreign demand plunged, as US and UK homebuyers struggled with the global crisis. Then domestic Ukrainian demand plummeted, due to a collapse in demand for Ukraine’s main product, steel. Ukraine’s GDP contracted 15% in 2009. Though the economy expanded by 4.1% in 2010 and 5.2% in 2011, house prices in Kiev continued to fall.
- In 2009, the average price of flats in Kiev plunged by 26.5%
- In 2010, the apartment prices in Kiev fell by 14.6%
- In 2011, the average price of flats in the capital dropped by 4.4%
The Ukrainian economy is expected to slow in 2012, with real GDP growth projected to be 3%, as exports slow amidst the eurozone debt crisis. The current account deficit is expected to widen to 5.9% of GDP in 2012, up from 5.6% last year.
tPolitical tension has exacerbated the situation. The incarceration of former PM Yulia Tymoshenko, heroine of the 2004 Orange Revolution, by current President Viktor Yanukovych, is widely viewed as motivated by political revenge. European leaders have threatened to boycott the Euro 2012 soccer championships which run from June 8th to July 1st, 2012, co-hosted by Ukraine, alongside Poland.
There are no major restrictions on foreigners buying property in Ukraine. All secondary residential transactions (i.e., resales) are in US dollars, while primary sales are quoted in hryvnia, but still paid in dollars.