Real Estate in Kiev – Market Overview: results of March and first quarter of 2011.

Real Estate Market

The index of housing costs in Kiev IKm (USD) fell 1.2% to 1,502 points index the cost of housing in Kiev IKm (UAH) decreased by 1.3% to 11,949 points index price expectations (the expected change in value index of the next month) -1 2% Index return home (compared with bank deposits) -0.4 Bank Dep.

In March, the cost of the Kiev real estate has continued to decline; business activity varied from week to week. The number of calls, views and inclinations is markedly reduced, again increasing.

The main reason for these fluctuations in business activity – to change the expectations of market participants. Apparently, the buyers and sellers in different ways about the prospects of the domestic economy, as well as possible scenarios of the Kiev real estate market. Of the variety of factors, estimates and identify those that meet their aspirations.

Sellers reduce prices rather reluctantly. Probably, many of them listened to the words of senior officials that the Ukrainian economy is gradually improving. It is – with one hand. On the other hand, the negative information coming from all over the world, often regarded as an argument in favor of the Kiev real estate. Mol, afraid to change an apartment on the package with the dollar when the world is going on … And what if the dollar does not stand all these trials and collapse?

Customers (a large of its mass) tend to focus on the negative for the country and its economy scenario. The index of consumer sentiment seems to have fallen markedly. Many believe forecasts of possible default, the impending eviction indebted mortgage holders of the secured apartments, a sharp rise in unemployment and, as a consequence of all this, the collapse of Kiev’s real estate prices.

In particular, it is from this point of view the events in the Arab world (say, the Ukrainian economy is too dependent on imported oil and gas price increase which might lead to the collapse of many industries).

From the same position is considered natural and manmade disasters in Japan. Supporters of the collapse in property prices in Kiev are inclined to believe that the consequences will be severe. In particular, there are serious concerns about the freezing of credit promised by Japan at U.S. $ 2 billion under 1.5% per annum for the construction of subways at Troieschyna. If this happens, if interest rates will be increased, but the beginning of credit will be tightened, then to Kiev and the Kiev it is a big blow. But where a big hit can be an outflow of Japanese capital from the economies of many countries as a consequence, decrease the stability of their banking systems and the possible repetition of the recent global financial crisis.

Contribute to the change in market sentiment has made the entry into force of the law “On Enforcement Proceedings,” which substantially expanded the rights of creditors and executive services for the implementation of pledges. The banks appeared effective mechanism of pressure on the indebted mortgage holders, and this may well lead not only to increase the number of apartments on the mortgage market, but also implement them at prices that are significantly below market. Apparently, customers at a very calculated, and many considerably hardened its position in the negotiations and auctions.

While mortgage flats exposed at a large discount on the real estate market in Kiev is not visible. Obviously, banks have been slow to use the mechanisms available to them to implement a pledge of real estate, knowing that their practical application of a mass not only to sharply increase social tensions, but also devalue the mortgages. And, therefore, will hit the banks and the banking system.

According to our data, the March sales prices were on average 14.3% below the average prices of the proposals in their respective market segments. How true these data reflect a trend obscherynochnye – hard to say. First, in every market its own characteristics, its supply and demand. Second, these data were obtained on the basis of a very small number of transactions (hence, the statistical error is high). Thirdly, most of the objects sold are flat, the state which differs significantly (in either direction) from “average”. And although when comparing prices, we use not only a public service evaluation of apartments, but also appropriate methods to take into account the state of housing, such a variety of options is also a source of errors and inaccuracies.

If the outcome of the March move to end the first quarter, then we can fairly confidently say about the trends of recovery of the Kiev real estate market. Impossibly high for the vast majority of citizens of Ukraine prices fell in almost all its segments.

Indices of cost of housing in Kiev IKm (USD) and IKm (UAH) in the first quarter declined by 2,8% and 3,2%

Business activity from month to month grew. While in March the market place rather complex and contradictory processes, which we discussed above, but in these conditions the overall results of the month are positive: in comparison with February the number of transactions increased.

Increased turnover of the market, the list of transactions has considerably increased the share of expensive facilities. ” Looks like buyers of expensive apartments and houses have come to the conclusion that prices have fallen so much that it is time to act. In particular, good demand and two bedroom apartments in the prestigious brick houses in the area Obolonska embankment, where the cost per square meter often exceeds $ 3000.

Banks are quite active in promoting their mortgage programs, and in some cases, bringing in realtors. The results are still quite modest, but they are. In the list of transactions increased the number of flats bought with mortgage loans. Mostly it is a relatively small amount that buyers are added to existing savings. But there were also purchases mortgage flats with updating large enough credits to new owners.

In the list of transactions increased significantly bundle of apartments depending on the quality of repairs. We believe that this is not accidental. Choosing a sufficiently large and each buyer could not hurrying to pick up Taipalsaari and material possibilities. As a result, some have purchased an apartment with quality repair and even furniture, especially not overpaying for them, others felt that more profitable to purchase “killed” the apartment, and make it repairs to your liking.

So it’s not as bad as they say, many members of Internet forums: interest in Kiev and its real estate is a (an appreciable part of buyers – foreign nationals). Another thing is that the number of transactions and turnover of the market now are not the ones that were several years ago.

Indices of cost of housing in Kiev are calculated based on actual database of real estate portal real estate (that is, on the basis of price offers), but take into account the sale price and the size of trades, as well as the dynamics of their change in prior periods. In this price information is given either in dollars per square meter, or in UAH per square meter.

In determining the indices used mathematical methods of approximation, which, while delaying the transition process but allow smooth curves and highlight the trend (the main dependence of price changes).

Unlike forms of the curves on the graphs of the indices IKm (USD) and IKm (UAH) due to currency fluctuations that took place in a particular month.

The main innovations are: tightening the rules of selection of objects involved in the definition of statistics; while expanding the number of information sources. In particular, in determining the statistics were used suggestions made in the section “Announcements” real estate portal (before such proposals are not included). As a result, the sample size increased significantly (and this reduced the statistical error). But it is more complicated screening ads containing false information. In addition, changes in methods of formation of the analyzed samples is associated with transient, difficult to compare statistics for different periods. Because until the transients associated with changes in methodology, we have decided to waive such a comparison.

Forecast for April 2011

We believe that in April the price will gradually decline in virtually all market segments. Rate of decline of the index value of the property Kiev IKw (USD) will be at the level of 0,3% in the week.

Preconditions for growth in the value of real estate of Kiev is now unavailable. Mortgage malodostupna for the majority of our citizens are not interested; streams of rich foreign buyers are not there, the mood of our citizens, to put it mildly, far from rosy.

But the dramatic collapse in prices so far is unlikely. Banks behaving very loyal to troubled borrowers, often helping them to sell the mortgage on an apartment rather high prices. And this gives us grounds to assert that the mass release of apartments on the market at a large discount in the near future will not be.

More difficult to provide a substantiated forecast of business activity. On the one hand, April – a month when activity usually increases: the market participants seek to resolve their housing and financial problems before the summer holidays, there are new buyers and sellers (including suburban real estate). On the other hand, the fluctuations in business activity, which were in March, may be continued and even the development in April.

However, the trend of previous months, give grounds to assume that the demand for modern high-quality housing will be. Especially where the sellers are willing to concede.

As for the low-quality housing, it will be claimed only in the case of very significant concessions to the sellers.