Real estate market during the war: new realities, challenges and reviva

Despite Russia's war against Ukraine that has been going on for more than two months, certain positive changes are beginning to appear in the real estate market — gradually recovering from the enemy invasion and adjusting to the martial law, the market is slowly reviving.

And even these first steps to resume construction in the cities of our country that seem "safer" so far are extremely important for supporting the national economy, already adjusting to new realities, and will further be structurally rebuilt for future recovery.

State support of the main sectors of the economy will contribute to this, and legislative initiatives in urban planning  sector and new housing restoration programs will help to adapt and bring the construction industry to a new level of work during the war transition period with further post-war development of the country.

Also, the opening of the long-awaited Real Estate Register will facilitate the conclusion of new deals on the market.

State support for the recovery of property sector of the economy

Currently, we have positive messages from the authorities regarding the launch of the mortgage program, various types of bank lending and mortgage funds emergence that we’ve waited for more than 10 years.

All this will enable people to get cheap hryvnia loans at 3 or 5%. And it will also contribute to the recovery of the market itself, but it will be completely different, because the demand for certain types of apartments is going to change.

For example, if 50% of a residential complex used to be occupied by one-room, 30% by two-room and 20% by three-room apartments, now this will be changed because there will be more people who need not one room, but an apartment for family living.

There are a lot of them in Ukraine and they can take advantage of state programs; market players will have to adapt to them, which in fact is not a problem. This process will take about a month.

State programs will be implemented within 2-3 months after the Victory of Ukraine, and the state will reimburse these interests, then banks will be able to provide loans, and the real estate market will work in full.

Once our economy recovers or at least shows signs of recovery, then we can predict a return of investment in our industry. In my opinion, real property investing can only recover when investors have stable and regular income.

According to experts, there are several possible options for the post-war development of Ukraine's economy. Firstly, it will depend on when the war ends.

Secondly, on whether we’ll have access to the sea and ports. These are some figures: 60% of Ukraine's exports and all export earnings were sent from Mariupol ports: rolled metal and other metal products.

Another 30% are agricultural products that were exported through Odesa ports, Illichivsk and Odesa. A small part of 10% was sent by road and rail.

So, if we do not have access to the sea, our economy must change, that is, move from the export of raw materials by steamships via sea routes to the processing of all these raw materials and the export of already finished products.

We cannot know if Europe and the World Trade Organization will change quotas and all other export conditions for us. Therefore, depending on what the economic model of Ukraine will be like, it can be clear how quickly the economy will recover, and our industry be able to continue its development.

However, even today the government has announced not only for builders, but also for all enterprises of various industries that will work and have collateral, the opportunity to take up to UAH 60 million in loans to replenish working capital.

Besides, the state offers various models for reducing the tax burden. All for the sake of making the business run. And these are really positive steps.

New government initiatives that will help support the construction industry

As for the proposal of the authorities, under which the state will start buying apartments from developers, thus supporting the construction industry, it is not quite the right step, because the regulation or fixation of prices by the state is a direct intervention in a separate sector of the economy.

In my opinion, the government should provide opportunities for the purchase of apartments to displaced or temporarily displaced citizens, instead of buying housing for them.

As for the coefficients for lost housing, the government is developing options for establishing and calculating coefficients to allow getting housing or equivalent compensation to the lost one.

That is, if a person has lost an apartment, for example, in Brovary, they will not be able to buy it in Kyiv, let's say, on Solomianska Square or in downtown.

The same applies to Lviv and Ternopil. These are different in terms of, let's say, the city marketability, and because of this, such subtle aspects should be properly regulated.

I can assume that if a person has lost their home and it is possible to calculate its cost, they should be given the opportunity to receive this amount in order to make a further decision as for their new place of residence, although there are probably something we do not know about.

For example, if many people from Kharkiv would want to take their money, leave the city and never return, such a metropolis as Kharkiv will be lost.

That is, if all residents would like to leave, this city may cease to exist, in this sense, the state will prove right.

There is also one more initiative - after the war, to build all houses in Ukraine like in Israel - with mandatory bomb shelters or special rooms equipped in each apartment.

This will significantly increase the square meter cost price for developers, accordingly, significantly reduce the number of potential buyers just because the apartment will have a bunker.

If the house has basement, basement rooms or underground parking, you can provide these bomb shelters there and equip them with whatever is required (two exits/entrances, places for rest, bathroom, electricity, drinking water), instead of building a bunker in each apartment.

Moreover, being in an apartment during rocket attacks is also dangerous. However, there are no final innovations with their interpretations so far.

Reconstruction of Ukraine

A government program of housing restoration, which will take years, will soon be launched.

In my opinion, in about 2 years, Kyiv region can be restored to its pre-war period condition.

As far as such cities as Kharkiv and Mariupol are concerned, of course, their reconstruction will take more time. We know that the British, Danes and Norwegians would like to take on a large part of the works on rebuilding these cities.

First of all, it seems to me that we will not be talking about residential buildings, but about restoring electricity, gas supply systems, and sewer systems.

In about 4-5 years, these megacities can become completely new modern ones, built in a new way, with use of the latest technologies. And after that they will start building roads and homes.

Regarding multi-storey buildings in Kyiv or Odesa which were hit by a cruise missile that damaged 2-3 floors, from a technical point of view, their reconstruction is quite possible.

Here you will need a correct expert assessment, to figure out the possibilities of their restoration. For example, if it is a monolithic-frame house, such as in Kyiv, near Sevastopol Square, it can be restored in about 2 months.