residential property 2012 year results kiev. ukrainian trade guild © 2013 key events verkhovna...
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Residential property
2012 Year results
Kiev
Ukrainian Trade Guild © 2013
Key Events
Verkhovna Rada of Ukraine adopted the Law on the implementation of social initiatives of the President of Ukraine concerning the reduction of the cost of hypothec loans. The law stipulates that the State Budget of Ukraine for 2013 and subsequent years, provides compensation of interest paid to banks and / or other financial institutions for loans obtained by citizens for construction (reconstruction) or purchase.
The President of Ukraine signed the Law under which notary offices starting from January 1, 2013 can perform state registration of property rights, other proprietary rights and their encumbrances for registered real estate objects with the entering of the relevant information into the National Register.
The state mortgage institution launches a program of housing rent with the right of redemption by 3% per annum. The program is coordinated in all profile ministries. It is expected to be approved by the Cabinet of Ministers.
From January 1, 2013 a new type of a local tax of the Ukrainian tax system shall come into force - tax on real estate property other than the land. The apartments which area exceeds 120 sq.m and houses over 250 sq.m. are subject to the taxation.
Tendencies
The renewed interest of developers to the development of the residential facilities. In 2012, the developers launched a number of significant projects in all segments different from those already existing in the market with more rational planning and improved infrastructure.
A distinctive feature of the new proposals in 2012 is to reduce the flat area, so that the budget of buying an apartment in a new building could be comparable with the same purchase on the secondary market.
High construction activity of the primary market of residential property in the course of 2012, the result of which was the putting into operation of a number of residential complexes in all segments of the market.
The development of large-scale projects, both by land area and quantity of apartments.
Downward adjustment of the average price to 4% per year, caused by changes in the supply pattern in the primary market in connection with the release of new objects at the early stages of construction.
Reorientation of demand for primary segment combined with high construction activity of developers, provoked an increase in sales by 25%.
Implementation by developers of their own credit programs and loans had a positive effect on the number of transactions.
Start of sales of apartments in new facilities with 30% and higher of building readiness. Increased buyer’s interest to such projects was observed in case if a large company acted as a developer with a good showing in the market, and having active construction work at site.
Residential property
Kiev
The structure of the real estate market in Kiev, $ / sq.m.
Volume of the new housing in Kiev, thousands sq.m.
RC Boulevard Fontanov
2005 2006 2007 2008 2009 2010 2011 2012
0
400
800
1200
1600
12011301
1401 1430
9481012
1501
1300
61%
39% primary market
secondary market
Ukrainian Trade Guild © 2013
Proposal
By December 2012 the amount of the primary real estate market in Kiev was about 13.5 thousand apartments. Secondary segment of residential real estate was about 8.5 thousand suggestions.
Reduction in the volume of apartments' supply (2.3%) was caused by the increase of sales in the secondary and primary market segments, as well as traditional reduction of the volumes of the secondary segment at the end of the year.
Stabilization at the real estate market during 2011-2012 led to progressive renewal of interest in development of residential properties. Thus, at year-end of 2012 the primary real estate market was replenished by a number of significant projects in all segments. Released positive trend is the growing compliance with the requirements of buyers and their financial resources.
By December 2012 proposal in segment of real estate includes 16 residential objects (about 1750 apartments excluding absorption) that are in various stages of readiness. During 2012 proposal for luxury housing increased by 264 apartments owing to the sales in new housing estates – “H Tower”, “Zverinetskyi”, “Chelsea Tower”. The unique concept of “H-Tower” is to provide a better service to the future inhabitants of the world hotel operator “Hilton”.
Object Address Class Developer Apt., qty Startup
“H-Tower” 28-30, Shevchenko blrd.
Elite St.Sophia Homes
98 2012
“Zverinetskyi” 47, Zverinetskaya str.
Elite Iton Group 78 1 quarter 2013
Chelsea Tower 2, Dimitrova str. Elite Geos 88 2 quarter 2013
Park Stone 2-B, Heroes of Stalingrad av.
Business Metal –Service 560 3 quarter 2013
Fountain Boulevard 6/1, Lymymby str.
Business UDP 811 2 quarter 2013*
Venice Lomonosova str. Business Liko-Holding 4 quarter 2013*
Novopecherskiy yard 2-A, Dragomanova str.
Business Ukraziabud 399 4 quarter 2013
Gelios 5, Zadorojhny provylok
Business Miskjhutlobyd 56 3 quarter 2013
Yaskravy 1, Degtyarenka str.
Economy Intergalbyd 1675 3 quarter 2013*
Vіdpochinok 9-A, Otdykha str. Economy Stolitsa Group 1562 2 quarter 2013*Yuvіleyny Bajhana av. Economy Kovalskaya
Group264 3 quarter 2013
residential complex on Glushkov Av.
92-B, Glyshkova av.
Economy KievGorstroy 855 2 quarter 2013
residential complex on Bogatyrskaya
Bogaturskaya str. Economy Stolitsa group 288 4 quarter 2013
Significant objects entered the primary real estate market in 2012
*startup of 1st
stage
Residential property
Kiev
Ukrainian Trade Guild © 2013
At the end of 2012 club house in Michurin street (7 apartments),residential complex “ Dimond Hill” (131 apartments) and two buildings in residential area "Vozdvizhenka" (12 apartments) were put into operation in the luxury segment .
Stable demand at primary real estate business class stipulates the launching of new projects in the segment. Key characteristics of opened objects during 2012 (Park Stone, Boulevard fountains, Novopecherskiy Dvor, Gelios) are the supply pattern shift to two-bedroom apartments with small footage and effective planning solutions. Also in 2012, the sales of the 2nd stage of the residential complex Novopecherskie Lypky (419 apartments) started.
By December 2012 the proposition in segment is formed by about 35 business class residential complexes.
At the end of 2012 the segment was characterized by high construction activity, which led to the entering into operation of new stages of residential complexes, such as Novopecherskie Lipky (623 apartments), Perstizh Hall (151 apartment), Park Avenue (215 apartments), Parkove misto (490 apartments), River Stone (428 apartments), Elegant.
The segment of the primary real estate economy class in 2012 showed high activity. Due to entrance of new residential complexes to the market, supply volume increased by more than 4.5 thousand flats. In addition economy class offer grew due to sales of the second stage housing complexes Comfort Town (600 apartments), Ministerial (850 apartments), Sonyachna Brama (311 apartments), Parkove misto (342 apartments).
The positive features of the new housing proposition at the economy segment are the reduction of square meters. Thus, the objects appeared on the market, where min. footage of 1-bedroom apartments starts from 34 sq. m. (residential complex on Bogatyrskaya str.). Besides, the proposition pattern changed significantly : among the objects the market share of 1 - and 2-bedroom apartments reaches 90%.
Activation in housing economy class segment was caused by the developer’s observance of terms of commissioning. Primary housing from the leading real estate companies became a virtually risk-free asset. Instability in the financial sector of Ukraine (waiting for the introduction of a tax on currency exchange and devaluation of hryvna, the risk of non-return of bank deposits) gradually return the buyers to the primary real estate market. New proposition in economy class creates the background for further development of the segment, which corresponds to the current demand.
According to year results major objects of economy class segment entered into operation with a total of more than five thousand apartments.
On December 2012, about 60 residential complexes were made the proposition in economy-class.
Objects Developer Apartments qty.
Parkjvyi, 3rd sectionAve. L. Kurbasa
NBK 90
Residential complex on Perova blrd
Keivgorstroy 168
Ministerskiy, 1st stage, Kondratiuka str.
Energopol Ukraine 540
Harkovye ozera, 1st stage, Voskresenskaya str.
InterGalbud 544
Residential complex on tymaniana str.
Stolitsa Group 432
Lipinka 1st stage, Zamkovetskaya str.
Stolitsa Group 254
Comfort Town 1st stage, Regeneratornaya str.
K.A.N. Development 2500
Residential complex on Urlovskaya str.
Kievgorstroy n/d
Residential complex on Akhmatovoy str.
Kievgorstroy n/d
Residential complex on Grigorenko str.
Kievgorstroy n/d
Major economy class objects were entered into operation, 2012
The structure of the primary real estate market in Kiev,% from the
total number of apartments
Residential property
Kiev
4%
36%
60%
elite
business
economy
Ukrainian Trade Guild © 2013
Costs & Prices
The average price of supply in the market of new buildings of Kiev as of December 2012, amounted to $1939/sq. meters. Decline in average prices by 4% at the year-end is due to changes in the structure of supply of the primary market.
By the class of primary real estate average prices in December 2012 were as follows: in economy class - $ 1316/ sq. m., in business class - $ 2191/ sq. m., in elites - $ 7429/ sq. m. Decreasing in average prices to index in December 2011, correspondingly was -1.3%, (economy class), -9.5% (business class), -2.2% (elites).
Primary market of residential real estate at economy class segment was characterized as stable during 2012.
A little decrease of an average price was caused by the sales in the new complexes at a price below the market price. But, there was a planned price increase of some already built objects with a higher level of readiness. Changes in prices depend on the level of readiness, so it reaches 15-30%.
Also in the sector, there is a huge difference in the price offer of the leading real estate developers and construction companies with weaker positions. The gap goes up to $ 300 / sq.m. at a comparable quality characteristics of the object.
Average market price of the primary real estate at business class showed the largest decline of the year.
In spite of 9% fall, direct reduction in price has not been fixed. Descending price dynamics is caused by structural changes: in 2012, the market slowly left those apartments which were in finished objects or were at the final stages of construction. Thus, the main volume of demand is concentrated in the segment of flats to 50-70% readiness, and their costs are 10-20% lower than of those put into operation.
Price reduction at elite class, by the results of the year, occurred under the influence of new objects, released at the early stages of construction. Thus, start of sales in Chelsea Tower happened at the stage of foundation. Also, because of unsaturation of primary real estate market, the main effect on cost and prices render an overstated price expectations of developers. As a result, prices for luxury apartments are within a rather wide range from $ 3200 to $ 15000.
Negative price dynamics of primary residential property, fixed in December in all segments of the housing market was caused by discounts provided by the developers in the New Year holiday’s period. The volume of discounts was 3-10%, but the least liquid apartments it reached 17%.
Generally, during 2012, the total state of the primary market in Kiev remained fairly stable.
2004 2006 2008 2009 2010 2011 2012
970
2324
3015
2048
1959
2020
1939
The cost of housing in the primary market in Kiev, $/sq.m.
2004 2006 2008 2009 2010 2011 2012
1040
2850
3480
2120
2046
1977
2023
The cost of housing in the secondary market in Kiev, $/sq.m.
The cost of housing in the primary market in Kiev by classes, $/sq.m.
2010 2011 2012
0
2000
4000
6000
8000 7462 7603 7429
2463 2421 21911274 1334 1316
elite business economy
Residential property
Kiev
Ukrainian Trade Guild © 2013
Demand
Distinctive feature of 2012 was the gradual increase in the share of primary residence in the pattern of demand. This situation became possible due to creation of the product, comparable to its consumer characteristics at the secondary market. This is a small area apartments, situated in a newly created infrastructure and being on locations available to transport.
The main volume of demand in the primary segment was concentrated in the field of residential complexes that meet the above parameters. These objects showed good sales figures: in the period of seasonal activity in the market the number of transactions were 20 apartments per month, meanwhile average market index was 5.51 apartments per month.
The main volume of demand in the primary segment was concentrated in the segment of economy class (up to 80% from the total number of transactions). In this case, the smallest apartments were sold foremost. Thus, in many objects under construction 1-room apartments up to 40 sq.m. are fully realized, meanwhile , the apartments up to 45-47 sq.m. were less interesting to the buyers.
Performing more efficient planning has provoked a significant increase in demand for two-bedroom apartments in the segments of the economy and business class of primary real estate, because of area reduction of apartment. But the main demand for primary housing still remains for one-bedroom apartments.
The cost of housing in the primary market in Kiev by classes, $/sq.m., 2012
Source: UTG
Residential property
Kiev
Ukrainian Trade Guild © 2013
The maximum buyers’ activity was observed in spring (March-April) and New Year (November-December) periods.
Providing the credit lines by the developers has also the positive effect on the number of transactions. Thus, if in 2010-2011 term of loans was limited by the date of commissioning, so, in 2012 the developers met customers’ needs, prolonging granting term on the average for a year.
This trend entailed changes in the structure of financing transactions: the number of sales with use of payment by installments made up 37%. However, the main source (60%) of apartments purchase was own funds of the buyers, mostly got from the previous sold apartment.
In most cases (90%) the purpose to buy an apartment in 2012 was to improve own living conditions. The share of investment transactions, circulated before the crisis, did not exceed 10%.
In view of substantial increase of the cost of resources, attracted by the banks, the mortgage in 2012 did not develop. Average interest rates for hypothecs loans are in the range of 22-25% per year (growth in 2012 was 2.3%). Lack of opportunities to attract long hryvna resources makes it impossible to activate mortgage lending in the short term.
Residential cost on primary market in Kiev by classes, on January – February, 2012, $/sq.m.
Average apartment’s sales volume per month in one residential
complex
The structure of transactions financing on primary real estate market in Kiev
The pattern of demand on primary market depending on
rooms’ quantity
The structure of transactions according the buyers purposes
on the primary real estate market, 2012
Residential property
Kiev
0.9
0.1
improving housing conditions
Investment transactions
2011
01.1
202
.12
03.1
204
.12
05.1
206
.12
07.1
208
.12
09.1
210
.12
11.1
212
.12
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
elite business economy
3Q 2010
4Q 2010
1Q 2011
2Q 2011
3Q 2011
4Q 2011
1Q 2012
2Q 2012
3Q 2012
4Q 2012
3.542.99 3.34
5.14 4.98 5.04 5.26 5.43 5.52 5.84
52%35%
10%3%
1-room
2-room
3-room
other
37%
60%
3%
with loan
without the loan
with credit line
Contact information
UTG LLC
2-a Mechnikova str., (Business centre “Parus”)
01601, Kyiv, Ukraine
Tel./fax: (380 44) 537 23 64
www.utgcompany.com
Vadim Neposedov
President
Vitaliy Boyko
Managing partner
Eugenia Loktionova
Director
Victor Oborskiy
Head of strategy consulting department
Victoria Pogasiy
Market research specialist
This and other company’s review can be found on our website www.utg.kiev.ua
This presentation is the publication of the generalized character. Ukrainian Trade
Guild is not legally liable for the information, the analytics and the forecasts
published in this overview of Ukrainian Trade Guild in terms of possible third
person losses as the result of this report usage.
Any publication of news stories from the report given, whether as a whole or in
parts, is possible only with the company’s reference as the data source.
Photo on front page – RC Komfort Town, by author Oleg Stelmah
Ukrainian Trade Guild © 2013
Fighting for the buyer will be tightened, which will result an extensive use of marketing mechanisms to promote sales and significant improvement of quality of service, including after sales service.
Trends in the residential market in 2012 showed that the "price bottom" is past the point; however, nevertheless, it is too early to forecast the active growth. In prospect, the long term price dynamics will depend on the development of mortgage and growth of effective demand, which is a consequence of development of the Ukrainian economy in a whole.
Given that the primary market has significant potential to increase supply due to the frozen projects; in the medium term we should expect growth in the number of new buildings in Kiev.
RC Green island
Residential property
Kiev
Forecast
In condition of macro-economic stability, prices on the primary and
secondary residential market will not be subject to significant changes.
In 2013, we shall expect stable development activity. The market will
be filled with new projects different from those already existing, with
more rational layout and upgraded infrastructure.
New projects will be run mainly by major developers, who are able to
attract substantial capital for a long period, as the demand is formed on
housing in new buildings with a high degree of readiness.
Reorientation of consumer demand for primary housing that started in
2012 will be continued in 2013. There is growth of trust to new
buildings due to the qualitative changes in the market development of
residential real estate. Particularly, in 2012, real estate developers
started to declare the real term and observe initially announced date of
commissioning.
The trend of increasing competition among key players in all the
segments of the primary market will continue in 2013.