Ukraine’s Housing Market Improves

Amazing 72% from their peak in Q3 2008, apartment prices in Kiev, Ukraine are now stable or mildly rising. The Ukrainian economy has been recovering as the conflict with Russia calms. These have been significant reductions in corruption as rated by the World Bank’s ease of doing business tables.

Newly-built apartment prices in Kiev increased 0.43% y-o-y in Q2 2020 (0.1% in real terms), to US$930 per sq. m.. On a quarterly basis, newly-built apartment prices rose by 0.43% in Q2 2020 (1% in real terms). Residential property prices had been falling for more than six years, particularly in 2014 (with prices plunging 36.6%) because of the hryvnia’s devaluation due to the Russian war. Ukraine’s economy is projected to contract by a 7.7% before bouncing back with a 3.6% growth in 2021, due to the economic fallout from the COVID-19 outbreak.

Unlike in previous crisis episodes in Ukraine, this time no large-scale market transformation is expected. The market will go back to equilibrium as quarantine restrictions are gradually relaxed. Despite the crisis, housing demand will remain high but is unlikely to return to growth in the near future. The result of the split in the pro-Western party was the election of a pro-Russian president, Victor Yanukovych, who decided to put off an association agreement with the European Union (EU), which would have provided funds contingent on reforms. Instead, Yanukovych signed an agreement with Russia, which eventually led to his ouster as president in February 2014.

Annual inflation was 2.4% in June 2020, up from 1.7% in the previous month but sharply down from 9% a year earlier, according to the State Statistics Service of Ukraine. For the full year of 2020, inflation is expected to be around 4.7% – close to the central bank’s target of 5%. Inflation averaged 18% in the past six years.

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