What trends in Ukraine’s real estate market should be considered when investing in 2024?
The uncertainty caused by both the war in the country and market factors does not stop the development of the real estate industry. On the contrary, it adapts, taking into account new trends and consumer needs.
After February 24, 2022, the investment climate in Ukraine underwent significant changes due to military aggression by the Russian Federation, leading to the emergence of new challenges for foreign investors. The war has become a serious obstacle to potential investments for several reasons. On the one hand, the presence of active military actions in the country evokes associations with high uncertainty and the risk of losing invested funds among international investors. On the other hand, the lack of a system to insure such war risks makes the investment environment less attractive for conducting and developing business in Ukraine.
With the aim of creating favorable conditions for attracting investments to Ukraine and stimulating the economic development of regions, the Parliament adopted the Law of Ukraine “On State Support of Investment Projects with Significant Investments in Ukraine”, amended and adapted to the conditions of martial law. The main task of the Law is to stimulate the attraction of strategic investors to the national economy by providing state support for large investment projects. Furthermore, from 2024, the Law concerning the insurance of investments in Ukraine against war risks has come into effect.
Restoration of investment demand
Nevertheless, the uncertainty caused by both the war in the country and market factors does not stop the development of the real estate sector. On the contrary, the sector adapts, considering new trends and consumer needs. A number of well-known advantages of investing in real estate, such as – predictable rental income, the tendency for asset values to increase, protection against inflation, and the growth of family capital, – are precisely the factors that have been effectively working for centuries.
At the start of 2024, the National Bank of Ukraine (NBU) reports that Ukrainians possess 764 billion hryvnias in cash, equating to nearly $20 billion in USD. And this is about savings only in hryvnia, which, by various estimates, make up a third of all savings – cash in dollars/euros, foreign currency deposits, government securities, that is, domestic government loan bonds in currency. According to the latest calculations by the NBU, this is more than $100 billion.
Despite the reduced investment demand compared to the pre-war years, the real estate sector is experiencing positive shifts, especially in the primary market. However, there are certain “buts,” including the washing out of liquid concepts of residential complexes (RC) and issues with construction dynamics.
The stability of investments in real estate also depends on the political and social conditions in the country. Government programs for the restoration of infrastructure and housing, such as eVidnovlenya and eOselya, the legislative base, as well as support for foreign investments, can serve as additional stimuli for the growth of the sector.
Demand for diversification and innovation
The demand for diversified real estate formats is growing. Apart-hotel formats managed by experienced operators are becoming increasingly popular, offering investors profitable business models with a service component. Such a product meets the needs for passive income and access to a comfortable life in a complex.
Current trends indicate a shift in consumer preferences. There is a growing demand for residential complexes with developed infrastructure, high levels of service, and environmental standards. This leads to an increased interest in investments in projects that meet modern requirements for sustainable development and comfort.
Diversity of investment opportunities
The real estate market offers a wide range of opportunities for investment: from purchasing apartments in new buildings to investing in commercial real estate and land plots. In conditions of volatility and uncertainty, long-term investments can offer more stable and predictable returns. This is particularly relevant for the real estate market, where prices can increase over time.
Diversification, quality of life, and innovative formats will be key factors that will determine the success of real estate investments in the near future. Investing in real estate remains an attractive option for preserving and increasing capital, adapting to changing conditions and market needs.
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