The impact of the war on the real estate market in Ukraine: forecast for 2025

The impact of economic and political factors on the real estate market

The war in Ukraine has had a significant impact on the real estate market, creating new challenges and opportunities. The fighting has led to significant population migration, which has contributed to an increase in demand for housing in western regions, while the market in the east remains virtually frozen. Economic uncertainty is also affecting developers: high construction material costs and inflation are hampering the implementation of new projects.

However, after the war, the Ukrainian market may become more attractive to international investors thanks to reforms and the reconstruction of cities. In the political sphere, integration into the EU will be a decisive factor, helping to attract foreign investment and financing for infrastructure reconstruction. By 2025, the real estate market is expected to gradually recover, particularly in the affected regions. Whether real estate prices in the western regions will fall will largely depend on the situation on the front lines and the ability of residents of the eastern regions to return to their hometowns.

Price trends in the primary housing market

Analysis of the real estate market confirms that today's prices in the primary housing market in Ukraine vary significantly depending on the region. In western regions, such as Lviv and Zakarpattia, there has been a noticeable increase in the cost per square meter due to high demand arising from mass migration from dangerous regions. For example, in Lviv, prices for new buildings have risen by 20-30% compared to pre-war levels.

Prices have also risen in the central regions, but more modestly, as the economic situation and demand have stabilized. In Kyiv, prices on the primary market remain relatively high, although the rate of growth has slowed due to a decline in effective demand.

In the east of the country, prices for new buildings have fallen or stalled due to a lack of demand and the suspension of construction projects. Developers are facing great difficulties in completing projects, leading to the freezing of many construction projects.

Demand for rentals: long-term and short-term outlook

The rental market in Ukraine has also undergone significant changes due to the war. Many people have been forced to leave their homes and move to other regions of the country, leading to a sharp increase in demand for rental housing, especially in the western and central regions. Real estate prices in Lviv, Ivano-Frankivsk, Uzhhorod, and other cities in western Ukraine are on the rise, having increased by 50-100%, although they have recently begun to stabilize.

At the same time, in regions affected by the fighting, the rental market has almost completely stopped. Many landlords have either left the market or been forced to significantly reduce prices to attract tenants.

What will happen to real estate prices after the war? In the long term, demand for rental housing will depend on two main factors: the reconstruction of the affected regions and the country's economic stability. If the hostilities end, the reconstruction of infrastructure and the return of the population to the eastern and southern regions may gradually restore demand for rentals in these areas.

In cities where new buildings are actively being constructed, such as Kyiv and Lviv, renting in new residential complexes is also becoming attractive to tenants due to convenient infrastructure and modern living conditions.

Regional characteristics: how migration affects the real estate market

Migration caused by the war has significantly affected the regional real estate market. Western regions, which have accepted a significant number of internally displaced persons, have experienced a rapid increase in demand for housing, both for purchase and for rent. For example, in Lviv and Ivano-Frankivsk, demand for new buildings has increased significantly, triggering a rise in real estate prices.

These cities have become new economic centers of the country, where infrastructure projects attractive to investors are being developed. For example, residential complexes from the RIEL Real Estate Corporation in Lviv are attracting considerable interest due to their strategic location and high-quality construction. The western regions are currently the most attractive for investors seeking stable assets in conditions of economic instability.

In Kyiv and other central cities, despite relative stability, the real estate market remains heterogeneous. Rental prices have risen here, but more moderately than in the west. At the same time, some migrants have settled in these regions, which supports steady demand for housing. In Kyiv, the market is gradually recovering after the first months of the war, although activity in the buying and selling market remains subdued.

In eastern and southern Ukraine, where military action has caused significant destruction, the real estate market has virtually come to a standstill. However, once the war is over, these regions could become a hub for recovery and investment in the reconstruction of destroyed housing.

Restoration and reconstruction: opportunities for investors in the post-war period

After the war ends, the real estate market in Ukraine will receive a significant boost thanks to the restoration and reconstruction of destroyed buildings. This will open up new opportunities for investors who are ready to invest in infrastructure projects and the reconstruction of residential complexes.

One of the main areas of focus will be the reconstruction of destroyed regions, such as Donetsk and Luhansk regions, as well as parts of Kharkiv, Kherson, and Zaporizhzhia regions. The restoration of these regions will be a priority for the state and international partners, which will ensure stable demand for construction projects and investors.

Investors will have the opportunity to participate in state and international programs aimed at restoring cities and public facilities. In addition, the reconstruction of damaged facilities and the construction of new ones according to modern standards will contribute to an increase in the value of real estate and its attractiveness on the market.

The role of public policy in rebuilding the real estate market

First, the government has initiated a state aid program for the restoration of damaged housing – “eRestoration”, which provides compensation for housing destroyed or damaged as a result of aggression by the Russian Federation. Such measures not only stimulate the reconstruction of existing properties, but also increase activity in the primary market, where developers can restore damaged houses or build new ones. One of the tools is to attract funds from international donors and financing programs for the rapid restoration of damaged properties.

Secondly, there is the “єОселя” program, which provides the opportunity to purchase housing on favorable credit terms with an interest rate of 3% per annum. Within this program, RIEL Real Estate Corporation offers a wide selection of layouts for new apartments that meet the criteria for state support.

Recommendations for buyers and investors in 2025

2025 will be a period of active change in the real estate market, and buyers and investors should consider several key points:

1. Invest in regions with high demand – western and central regions will remain attractive for investment due to stable demand for housing and growth in economic activity.
2. Choose new buildings with energy-efficient technologies – this will significantly reduce future utility costs.
3. Pay attention to government support programs – taking advantage of preferential terms for purchasing housing can significantly reduce the cost of buying real estate.
4. Invest in the restoration of affected regions – after the war ends, these regions will become major centers for the development of construction projects, opening up significant opportunities for investors.

"Buyers have begun to pay more attention to criteria such as access to infrastructure, the availability of bomb shelters or underground parking, generators, and autonomous heating systems. For example, this is why many apartments were purchased in the Schengen residential complex from KN RIEL. Green areas, recreational space, and the integration of modern technologies, as in the Riel City residential complex, are also of great importance," said Rostislav Melnyk, CEO of KN RIEL. “The introduction of energy-efficient technologies and the creation of safe spaces for residents are becoming standards for new buildings. We pay special attention to the creation of multifunctional areas for work, recreation, and social interaction. Particular attention is paid to safety, from shelters (underground parking lots) to autonomous life support systems.”

How to choose a new building with minimal utility costs

One of the key aspects of choosing a home in a new building is the energy efficiency of the building. Here are some recommendations for those looking for a home with minimal utility costs:

• Pay attention to thermal insulation – buildings with high-quality thermal insulation help reduce heating costs in winter and air conditioning costs in summer.
• Choose residential complexes with modern heating systems – new buildings that use autonomous or individual heating systems allow residents to control their energy consumption.
• Smart home system – if a new building is equipped with such a system, it helps to automatically regulate lighting, heating, and other parameters, and thus save resources.
• Energy-saving technologies – pay attention to the availability of LED lighting, heat recovery systems, and other energy-saving solutions.

New buildings from the RIEL Real Estate Corporation, particularly in the cities of Lviv and Kyiv, are an excellent example of how to combine modern technology and energy efficiency to reduce utility costs. This makes them attractive to those who want comfortable housing with minimal maintenance costs.

Conclusion

The war in Ukraine has significantly changed the real estate market, and these trends will remain relevant until 2025. In the western and central regions of the country, there has been a significant increase in demand for housing due to internal migration, which has led to higher real estate prices and opened up new opportunities for investors, while the real estate market in the east and south has virtually come to a standstill due to the fighting. The post-war reconstruction of these territories could provide a powerful boost to economic development and stimulate new investment. The long-term outlook will depend on political stability and the effectiveness of reconstruction programs, such as “eReconstruction,” which can accelerate the restoration of damaged housing and the return of people to their homes.