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Monday, February 5, 2007

Couple words about investing in real estate in Ukraine

I'd like to express some minds about relations between real estate prices and renting it out. It would be pretty interesting, because many private investors put the money in real estate as in valuable asset which produces rent income.

From the investment point of view, the most important index for the real estate market, and not only for Ukraine, is the rent rates. Specifically, the ratio of the rent rate and the cost of 1 square meter. In recent years, the demand for rental increased significantly, and particularly attractive received this type of business, as buying real estate, with further lease. Only 2006 rental rates, according to the official statistics, increased in Ukraine on average by 31%. The rapidly increasing rents in Kiev and other big cities (1 million population and more).

Today, the apartment lease, the lessor can easily obtain 12% ROI. This is roughly the same as the deposit rate, but owners are expected to increase in the value of his property.

The second indicator is the ratio of the rate of growth in housing prices and the interest. Over 2006 flats in the secondary market made about 50% comparing almost five times cheaper currency deposit rates. Some investors, getting a revenue from the increase in housing and rental income, earned in the housing market for the year about 60%. A property investments made at the beginning of 2005, fully recovered in less than two years!

None of this works well with a good and the constantly increasing lease rates and the real estate prices. If the annual rent amount less than 1 / 12 the cost of apartments, such business, already become less attractive than deposit money in a bank.

So main question is: how long it would be continuing? Even real estate professionals in Ukraine have no one opinion on such phenomena. Anyway I don't believe in the same growth in the near future. Now the time for "smart" investing.