Jeppe De Boer, a Managing Director and Head of Real Estate Investment Banking at Renaissance Capital, gives his opinion about the risks and opportunities of investing in real estate

  Mr. De Boer, there´s a lot of talking around about an overall drop in the real estate prices and the shrinking attractiveness of investing in the real estate globally. How long do you think this process will continue?
J.B. You are correct on the one count: that real estate value is down. Globally. In terms of the attractions of investing in real estate, I´m not sure that investing is getting any less attractive. If you look at what´s been happening since the beginning of the year on a global basis USD 23 billion of new money was raised by real estate companies in public sector alone. So clearly, investor across the globe are still very attracted to putting money into real estate. In addition, we believe that there is good evidence that investors are probably today more attracted than a year ago because the prices are lower, so there is more value and there´s more recovery potential.

 OK. But still, the dynamics in European capitals like London, Paris, Berlin, Moscow, Kyiv. Is there any difference in the trends? Is Kyiv real estate more attractive than investing in Berlin?
J.B. If we are talking about the difference in the short term, it has been easier to attract new money to London or to Paris, or Western Europe than it has been to attract new money to Moscow or Kyiv. And I suppose the key difference between those markets and these markets is that those markets have very large domestic groups of investors that are used to investing domestically. What is lacking in Moscow and Kyiv is any large domestic system for local institutions to invest money in their own local markets. 

 What would you advise to your Western clients in terms if investing in Kyiv? Moscow?
J.B. In the long term perspective Moscow and Kyiv are the markets that are fundamentally undersupplied when it comes down to good quality real estate. They are markets that are quite restricted in terms of creating new real estate, and it is maybe difficult to perceive that today considering the underlying economy. But the longterm economic trend continues to be very positive in both Ukraine and Russia. So, from this perspective these are the markets where investor can expect most growth in the long term. Of course, looking at today´s situation Ukrainian economy shows negative growth. Liquidity is very low, it is almost impossible to raise bank financing and it is very difficult to make any real estate investment work without availability of bank financing.

 What about attractiveness of investing in real estate by sector: residential, commercial, logistics?
J.B. I don´t think that these markets are large and mature enough to provide visibility on different sectors. When you are talking about investing in real estate you would usually think of investing in a large existing shopping mall or a shopping center, where you invest and you get the rent. If you look at most of the investment opportunities in Kyiv today they involve new development opportunities: you have to invest in land, in construction where you need a lot of financing. You have a lot of negative cash flow in two or three years following the launch of a project before you rent it out and have a positive cash flow. So, traditional real estate investment market as we know it in London or Paris is very, small here.  Still, these are the markets where investors can expect most growth in the long term.