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| PHÎÒÎ: AP |
The number of purchase/sale agreements of luxury apartments in Kyiv practically has not changed in the past six months. Thus, the optimistic forecasts of realtors who predicted considerably growth of this segment of real estate market did not come true. Until the end of the year, the supply of luxury homes will almost double, which in the best case scenario will allow for keeping the prices on their present level
Buyer gets pickier
Contrary to expectations of realtors, the demand for luxury real estate did not show any growth. “Many specialists expected that there would be a revival on this market segment, but their hopes apparently dashed,” confirms head of residential real estate department of Ukrainian Trade Guild Dmytro Pekalo.
In the same vein, Director of Real Estate Department of Sitikon Real Estate Agency Eduard Brazas says that the number of transactions of sale of elite real estate grew by only 3-5% in the first half of 2010 over the same period of the previous year. “The segment still has a long way to go to recover to its pre-crisis level; at the moment two times less deals are signed than two years ago,” he emphasizes. In unofficial conversations, realtors admit that in absolute figures, the growth of sales is practically invisible.
Meanwhile, the number of apartment showings from January to June doubled compared with the same period of the last year, tells Brazas, but that did not increase the number of transactions. The expert observes that often the buyers consider different variants over one year and as a result do not buy anything. Many buyers await further decline of prices or dumping offers from the borrowers who urgently need money. “In 2007-2008 the prices for residential real estate grew continuously and the decision about purchasing a luxury home was made rather quickly, while starting from 2009 the buyers took a more considered approach to such purchases,” confirms deputy general director for strategic development and marketing at TMM Company Oleksiy Hovorun.
Besides businessmen and politicians, foreigners from Italy, Turkey, Germany and Russia still show interest for luxury residences, says General Director of Park Lane real estate agency Halyna Melnykova. A number of well-to-do people began to actively rent apartments with a possibility of their further purchase, which allows for discovering the drawbacks of the home prior to signing of the purchase/sale agreement.
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| PHÎÒÎ: SHUTTERSTOCK |
Room for growth
Unhurried behavior of buyers is obviously due to growing supply. In the beginning of 2010, there were over 1,000 offers in the database of Kyiv real estate agencies, while now the figure is 20% higher. Melnykova says that the price of the most modest luxury apartment is around US $300,000 to date, while the most expensive residence will cost US $14 mn to a potential buyer. The growing supply has increased the intensity of apartment showings in newly built apartment buildings. In the beginning of 2010, the majority of purchases were made on the secondary market, while now around 40% of all purchase/sale transaction is made on the primary real estate market. The buyers are interested only in already commissioned apartments and do not consider buildings without proper documents, Pekalo notes. The priority to primary market is given, in his opinion, because the majority of apartments on the secondary market do not meet the standards of luxury housing.
Prices at the level
Interestingly, the prices for apartment in old residential buildings can be 1.3-1.5 times higher than in new buildings. This is largely due to special offers, discounts and concessions of developers who are forced to make then in order to somehow revive the sales. Meanwhile, the owners of apartments offered for sale on the secondary market can take a long time to sell their apartments waiting for the offer they want.
Over the past six months, prices for luxury homes have not changed substantially and currently are at the level of US $3,000 – US $6,000 per square meter on the primary market and US $4,000 – US $6,000 on the secondary market. At that, the developers and owners of luxury apartments are not as eagerly agree to make concessions for potential buyers as they did last year. “The sellers stopped offering 20-30% discounts. Now, the construction companies are ready to give 1-3% discounts, maximum – 5%,” says Brazas.
A similar trend is observed on the secondary market. Brazas says that the owners of luxury real estate are ready to wait for their buyer for a long period of time in order not to give more than 5% discount. “The majority of them will re-orient to the segment of real estate rent where the demand is currently growing actively,” he explains.
According to forecasts, the prices for luxury real estate will not grow until the end of the year, which will be partially influenced by the growing supply. In particular, according to Knight Frank, construction of residential complexes Aristocrat, Diamond Hill H-Tower and second line of Vozdvyzhenka is under way. In March, construction of Pechersk Towers residential complex, which was suspended in June 2009, has resumed. Overall, there are currently around 10 high-class projects being constructed in Kyiv, while the general volume of supply on the market will be around 2,000 apartments.
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