March 23, 2021
On March 1, the launch of the State Program for Affordable Mortgages for the Population at 7% was announced.
There has been much discussion about it, weighing up the pros and cons. This year, the budget for the program is not very large—only 5 billion hryvnia. This is a small amount, which can only support a few percent of those who need immediate improvement in their living conditions. Because of this, many perceive the program not so much as an attempt to provide real help to the population, but rather as a political, demonstrative step. Others sharply criticize the rather harsh conditions for borrowers to obtain such loans.
But in any case, this innovation could be the first important step in solving one of the most pressing issues in the country, which we inherited from the Soviet era: housing.
Let us remember the conditions in which the vast majority of our compatriots live. More than 85% of the housing stock is outdated and even recognized as unsafe. The utility networks and infrastructure that support this housing stock are equally outdated.
The construction of new housing is clearly not keeping up with demand. At the same time, not every Ukrainian who needs it has the opportunity to purchase a future home immediately or even in installments from the builder: such a purchase is too much of a burden on the family budget.
A little bit – in terms of construction volume statistics. Even if we consider 2019, the most productive year in terms of square meters over the last 10 years, we see that over the course of the year, more than 11 million square meters were commissioned throughout Ukraine, or 775 apartment buildings in terms of housing.
Kyiv alone built and commissioned over 2 million square meters, or 150 skyscrapers. Is that a lot? Definitely.
But this does not mean that even such an active construction market has satisfied Ukrainians' housing needs. Everything that has been built is absorbed by the huge pent-up demand. After all, as before, each citizen has, on average, a terribly meager amount of living space. It is hard to believe, but, for example, each resident of Ivano-Frankivsk has 1.77 m2, each resident of Lviv has 1.49 m2, each resident of Ternopil has 1.03 m2, each resident of Odesa has 0.95 m2, and each resident of Khmelnytskyi has 0.87 m2.
And so on.
Housing provision in Ukraine does not meet the needs of the population and their expectations of a decent quality of life. Sociological surveys confirm the high relevance of improving housing conditions for most Ukrainians and its priority compared to many other components of quality of life. According to the State Institute for Family and Youth Problems, about 60% of Ukrainian families are dissatisfied with their living conditions and need improvements. Among young families, almost every second is dissatisfied with their housing, compared to 17% who are completely satisfied, researchers say.
Therefore, given two main factors: an acute shortage of housing as such and huge pent-up demand for it due to the inability to purchase it, we conclude that the domestic construction industry must increase not only the speed but also the quality of its work for many years to come. And financial institutions, including those with state support, must provide the population with affordable and cheap resources to improve their living conditions.
At least until every Ukrainian city dweller has at least 20 m2, as promised by Soviet standards. That is, figuratively speaking, ten times more needs to be built.
And to achieve the minimum level of living space set by the UN – 30 m² per person – it will take an average of 60 years in Ukraine, given the current pace and volume of construction.
At the same time, construction companies involved in housing construction are obliged to focus exclusively on creating modern European-level living space.
In turn, financial institutions must develop numerous lending programs.
Therefore, the current 7% mortgage from the state is the first practical opportunity for many Ukrainian families to purchase housing on the primary market against property rights at more favorable terms than those offered by commercial banks.
To be fair, I would like to remind you that a similar program already existed more than 15 years ago. Unfortunately, it did not last long. We hope that the current program will prove to be more viable.
Do we, as developers, need this? After all, it would seem that we are getting a powerful competitor in the form of the state. Yes, we do! I am convinced that all developers will want to work under this program.
First, such a program can stimulate the market. secondly, the market participants themselves will “catch up” to certain standards in their housing construction, and thirdly, we have every chance to finally see how, thanks to the synergy between the state and business, a long-standing painful issue that seemed to never end is beginning to move forward. This is a great idea, important for both developers and the population, and its implementation is happening right before our eyes.
