November 11, 2020
Every half hour clients walk into property sales offices. Every hour an apartment is booked. Every day contracts are signed.
The autumn business season is in full swing. From what I see, I can say that most properties offered for sale — regardless of the construction stage — enjoy steady demand. It is already clear: this year's sales volumes will not only not decline compared to last year — growth is expected.
This is exactly the development I predicted in spring, at the height of the lockdown. Back then, those forecasts may have seemed too optimistic to some. But the market has put everything in its place. Buyers haven't gone anywhere — they have always been, are and will be there. People will, under any circumstances, try to solve one of the most important questions of their lives — the housing one.
Already from June–July, sales volumes for our properties moved significantly upward despite a rather sluggish summer season. And in August–September our sales offices even exceeded plans. Right now there is brisk booking activity in newly presented properties, and sales are growing.
Buyers are also activated by the significant strengthening of the dollar, which has "gained" 7% over five months. As is well known, Ukrainians predominantly keep savings in foreign currency. Meanwhile primary-market real estate is sold in hryvnia. So a rising dollar exchange rate is the most favorable period for advantageous investment.
At the same time, the difficult year 2020 has undoubtedly brought changes both to the requirements with which investors come to the developer and to the very portrait of that investor.
So, four key questions: who is buying housing now, with what funds, what does the buyer choose, and for what purpose.
Most of our buyers (nearly 2/3) are traditionally those who are looking for housing for themselves and their family. More than a third (over 35%) are investors who put money into real estate to preserve and multiply their savings.
I should note that after the lockdown the second category has grown. We used to see these statistics: 70% of buyers invested in new builds to live there later; 30% traditionally put money into real estate to protect it from devaluation or other shocks, distrusting the shaky banking system. People were also motivated by the well-known fact that you can earn significantly more and faster on primary real estate than on bank deposits.
The growing share of the latter is a telling signal. It means that experienced investors, who are very sensitive to the situation on the market and the economy in general, have not only not lost confidence in the construction sector overall but also see no alternative today for safe and profitable real-estate investment in the near term.
By the way, similar situations exist not only in Ukraine — they are characteristic of countries with much more stable and powerful economies. For example — European countries or the US, for which the pandemic was also a serious challenge. During this period many enterprises declared bankruptcy and entire industries "slowed down". At the same time, the construction sector has not just survived — it has gained momentum worldwide! Investors enter this sector with doubled energy. Why? Because there is a crisis all around. Because banks are actively introducing even negative deposit rates.
Real estate, meanwhile, continues to develop, enjoy demand and bring profit.
However, let's get back to Ukraine. An interesting detail: the spectrum of clients who come to us to buy housing for their family has noticeably expanded. If at the start of the year we noted two main segments — middle-class representatives and Ukrainians working abroad — we now see a more varied portrait. There are public-sector workers and small business owners. People are trying, despite everything, to solve the housing question — and as quickly as possible.
Here I already hear the rhetorical question we, developers, are constantly asked: where do people get the money to buy everything you build?
First of all, let me recall: by various estimates, Ukrainians annually spend 25–30 billion hryvnia on buying housing. So this year will not be an exception.
Let me emphasize an important detail: after the lockdown the approach to investing itself has changed significantly. Traditionally up to 80% of buyers signed contracts with installments and only 20% paid 100% up front to close the issue. That was still true at the start of the current year. But today the lion's share of buyers (up to 4/5) try to pay the full amount at once.
This has its explanation. First, with 100% payment, buyers get certain benefits and discounts from us. Second, in such difficult times as now, people consider it important to focus on the most important purchase and postpone other purchases, plans and expenses.
As for buyer requirements. The loud market scandals this year and last had a "shock therapy" effect and made Ukrainians demanding and cautious.
People now look not only at the company's history and "portfolio" — they are interested in how confidently this company holds its place on the market throughout its existence, what business principles it follows, how flexible it is and whether it can respond promptly to external challenges. Client orientation now plays a very important role.
Buyer requirements for the properties of interest have also changed somewhat.
This year's situation turned many people toward key values: their own family; their own home that can also be a workplace; their own time, which does not necessarily have to be spent commuting to the office, and so on. The lockdown made people reassess certain categories. And the value of one's own home has grown significantly.
Along with this, people care not only about housing as such. They are paying not just for square meters — they aspire to settle in a full-fledged residential space with full-cycle infrastructure, where they have everything they need for daily life right next to their own building or in their courtyard.
Indeed, these are the kinds of projects we are now focused on. I am convinced that this is the trend for the entire market for the coming years.
Rostyslav Melnyk, President of the RIEL Real Estate Corporation, for Liga.net
