Buying one-bedroom apartments may be an option for investment and passive income in a crisis, however, few Ukrainians can afford to buy a property
Now, almost two months Ukraine is sitting in quarantine. Of course, mass insulation does not go unnoticed and affects all the spheres of life. A serious blow fell on the economy and business. However, earlier we mentioned that this situation influenced the real estate market. Participants of the market assume that after the end of the quarantine Ukrainians will actively buy apartment, including for investment purposes. However, economic experts point out that in a crisis, the purchase of real estate is not affordable for many. The website “Today” to find out what will happen to the real estate market.
The real estate market after the quarantine
During the quarantine, the demand for housing has decreased on average by 50%.
Angelica Sahakian, Director of marketing for POLARIS multifunction LCD Home&Plaza, says that to “quarantine” the crisis, more than 70% of total demand accounted for objects new quality formats housing with a high liquidity of investments. The difference in cost of such apartments in the pit and at the stage of putting the object into operation reaches 30-50% of the initial investment amount.
“Hard quarantine conditions do not allow many to buy. Very many planned deals were postponed accordingly increased so-called pent-up demand. After 1 week of quarantine 1 sold apartment had 6-7 delayed. Probably until the end of the quarantine, the number of pending purchases may increase up to 10-15 one sold the apartment (that is, pent-up demand for the entire period of quarantine will increase by almost 2 times)”, – predicts Sahakyan.
Alexander Azarov, project Manager RUSANIV RESIDENCE, said that the migration of customers from more cheap segments in higher quality on all counts was supposed to be one of the trends 2020.
“Of course, quarantine will end. The developers aimed that this will happen in may. At least it will be cancelled the hard conditions that will allow the buyer to return to the market. After the quarantine is to wait for a short-term surge in sales. It is obvious that the demand, as in the beginning of the year, will focus on quality projects such formats as the “city within a city”, IFC, eco-complexes, live-work-play. According to my projections, in the first month after the end/weakening of quarantine is the difference between supply and demand can be reduced by 10% to 30%. While 4/5 of the buyers will be focused on the objects of the new formats,” says Azarov.
He added that developers are interested in price stability, knowing that the sharp price spikes will force investors to look for cheaper options, ignoring the qualitative characteristics of the LCD. Much will depend on the manufacturers of building materials if their prices will remain stable, the estimated cost of construction will remain at the same level.
The quarantine has hit the construction sites: what will happen to real estate prices
What kind of housing will be in demand after quarantine
Azarov predicts that after the quarantine, the demand will concentrate on the objects of the new formats, and one-bedroom apartments.
“It is expected that more than 70% of all sales will be in the 1-bedroom apartments with area of 50 m2. Location: to date the main conditions for the successful location is considered good transport links and the opportunity for a minimum period of time to get to the city centre. Also the presence of already established infrastructure in the building site and, of course, recreation features: LCD close proximity to parks, rivers, lakes, forests will be most in demand among buyers,” says Azarov.
Angelica Sahakian adds that after the end of the quarantine during the month will see a gradual increase in sales.
“Presumably, up to 50% of all purchased apartments will be an investment transaction with the purpose to save money. That is, the particular buyer’s attention will be focused on the objects of new formats in the initial stages of construction, when the starting price is the most acceptable and promises the buyer’s income to 25% per year. If we talk about what will be bought, first of all, this is a Studio apartment with an area of 35-46 m2. This one-bedroom apartments are the most sought-after commodity, – said Sahakyan.
Why people are thinking about buying a home in the midst of crisis
Often Ukrainians buy real estate to secure permanent passive income. Quarantine showed that many can suddenly left without a job and a livelihood, so other sources of income have become particularly in demand.
Alexander Azarov assumes that the number of people acquiring an apartment for yourself, will be reduced from 45% to 30% of the total sales. The purchase of housing will delay that category of people who are already affected by the crisis who do not know what will happen to their job or business. In this situation, their refusal are reasonable. But, most likely, the number of investment purchases will increase to 50%.
“The NBU said that in the first 2 weeks quarantine people massively withdrew their money from banks. The outflow of capital was estimated at almost UAH 4 billion and $ 12 million. More than 50-70% of these funds can be invested in the primary housing market, as the only acceptable way to save money,” says Azarov.
Sahakyan also said that at the moment people are trying to save their money, including investing in real estate.
“There are 3 aspects in which you can draw conclusions whether the construction of the crisis. First, it is reducing the number of buyers, and second, stop is under construction, and the third inflation, which increases the cost of construction and increase of UAH prices. Remember that the primary housing market, the market for building materials tied tightly to the dollar. But now force majeure. It is too early to talk about what will happen to the economy. All markets are paused. I think that after the end of the quarantine within 1-1,5 months it will become clear what will happen next,” concluded Sahakyan.
However, economists are not as positive and noted that after the quarantine, many just would not have money for purchase of apartments. Alexander Chmielewski, independent expert and candidate of economic Sciences, said that the quarantine has already caused the global economic crisis, which hurt the economy of Ukraine and will significantly reduce the living standards of the people. Already lost their jobs, according to various estimates, about three million people, went bankrupt thousands of businesses, in particular, will especially hurt small business.
How Ukraine will come out of the crisis: an expert forecast
“A significant part of their savings, the population will spend during the stay in quarantine for consumer goods. So most people will be left without money to purchase real estate. The exit from the crisis will be long. <…> So do not expect recovery of the real estate market before the end of 2021 and the beginning of 2022. Companies that are engaged in the sale of real estate, his statements about the rapid growth of the demand trying to increase sales and convince buyers that prices have bottomed and everything will go up. But the real situation disproves their statements,” notes Chmielewski.
Maxim Orasac, analyst of “Center for exchange of technology,” says that the demand for real estate in Ukraine will moderate, as their savings will be enough for mass buying of apartments, and representatives of the construction sector are unlikely to be willing to sell the property at a loss. To sell for less than they spent on the project is not a realistic scenario for the real estate market in Ukraine.
“Please note that for the period from 6 to 17 April 2020 the volume of fixed-term hryvnia deposits and savings certificates in banks with foreign capital decreased by UAH 800 million. If since the beginning of 2020, the Deposit portfolio of foreign banks in the national currency grew, after March, the NBU recorded a sharp drop. Given the timing of the beginning of the quarantine, it is clear that people do not have enough funds to exist without cash deposits from work. So, the longer the period of quarantine, the longer the period of isolation, the greater the destruction of not only the economy and the banking sector, but also for saving each individual family. If during the period of self-isolation and lack of business activity in the country, the population will have elementary to spend all their savings, something about the pent-up demand for real estate is out of question”, – explained Orasac.
He added that in General, the Ukrainian economy this year will fall by 7.7%. This is a negative Outlook compared to neighboring countries: in Poland – 4,6%, in Romania was 4.9%, for example. In addition, the pre-economists expect the pace of recovery at all will be greater than in Ukraine. Given the inflow of workers into the labour market of the country, we understand that wages grow too will not be. Talk about fabulous savings of workers is not necessary, as the majority of those who worked abroad, sent money to the families to Ukraine.
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