Afraid of a “bubble”. The situation on the real estate market

Пугают "пузырем". Ситуация на рынке недвижимости

Magazine Reporter understood why cheaper primary property.

The national Bank scares “bubble” in the housing market, investment bankers, too, remember the “bubble” in vain, writes Paul Kharlamov in No. 33 of the Journal Reporter. What is really happening with square meters and prices, as well as with developers and their new buildings?

The biggest collapse in the Ukrainian market of primary real estate happened in 2009 after the banking crisis and polutorakratnoe the devaluation of the hryvnia. And no wonder: the rapid growth of prices per square meter in 2004-2008 was driven by loans for housing. Banks were handing out mortgages literally with my eyes closed — mostly in dollars and euros. The sharp devaluation of the hryvnia and the credit freeze has crippled the market, causing real estate prices collapsed in two and more times.

But in 2011-2012, the primary began to grow again. In 2012, for example, the developers have put in operation 10, 75 million square meters of housing, which was a record for all the years of Ukraine’s independence. And since then, the volume of construction is not particularly reduced, balancing at around 10-11 million sq m per year.

But if before the crisis, together with the pace of development was vzvinchivanie and property prices, then 2014 is bucking the trend. The average monetary cost of a “square” in 2017 has reached the level of 2005. Developers explain the cheapness triple weakening of the hryvnia against the dollar, which, as we recall, happened in 2014. Some experts believe that the market is inflated another bubble, which may lead to a collapse.

Five Grand for “ruble”

The entry threshold in a primary is now really very low. Even in Kiev, which remains the most expensive in Ukraine the city from the point of view of real estate investing, the bottom plate the price per square meter stubbornly clings for $450-500. “And there is a clear reduction of the price gap between cheap and expensive housing,” — says Alexei Govorun, Deputy General Director for development and marketing of TMM.

This means that in the range of $550 to $950 for the “square” you can find deals not only in residential complexes comfort and business class. Cheaper and premium: the price per 1 sq. m in rent from $2,500 to $3,000 real deal, according to realtors, often held on a $1.800-2.000. In the early stages of construction in premium and $1.350-1.500 per 1 sq. m.

In the suburbs of Kiev and regions the prices even sweeter. In cities such as Lviv, Odessa, Dnepropetrovsk and Kharkov, you can easily find offers with the price tag of 15-25% below the capital. That is from $300-400 per 1 sq. m. But this level is not 2005, and 2002-2003.

Пугают "пузырем". Ситуация на рынке недвижимости


Holiday generosity

What’s funny: even in a situation where housing prices and the already hamstrung, the developers manage to do discounts for real buyers to 20-30%. You need not go far: the sites of construction companies are literally full of discounts and special offers. While the developers claim that in the foreseeable future to increase the price of the square meters they do not plan to. “The price situation on the primary market until the end of 2017 will be stable. Only slight fluctuations in the value per square meter, within 5%,” — says Maxim Barbash, head of the Board of Directors of the construction company GEOS. Moreover, according to consulting company ARPA Real Estate, in the I half of 2017, the dollar prices of primary real estate were down 1.5-2%.

All this only confirms the fears that the primary market if not rested in the bottom, close to stagnation. The explanation is simple: only the excess demand gives developers the ability to dictate terms. And now the situation is diametrically opposite. Here’s to you and the price is lower than ever, and even discount and installment in addition.

It reduces the number of transactions for the purchase and sale of new apartments. “The number of transactions in the primary market is less than 5 thousand a year [Kiev]. However, only for the first half of 2017, was launched on 30 new buildings to the market “came out” about 21 thousand new apartments. If the situation in Ukraine will not change, at this rate sales housing in the country will last for the next 10 years,” says Michael Artyukhov, managing Director of ARPA Real Estate.

Another eloquent indicator is the overvaluation of real estate (see infographic). It is believed that investment in the purchase of square meters should pay for itself within 8-9 years of renting apartments for rent. If the money is returned much faster — housing is undervalued, longer — overrated. Given that the payback period of investment in a primary still is in the range of 10-11 year lease (for expensive housing — all 13-14 years), prices still have to fall. Well, or the rental rates still have room to grow. But they are still not in a hurry to grow — to the delight of the tenants and to the sorrow of the rentier.

At whose expense Banquet?

Of course, according to the average buyer it’s very, very bright. A huge choice of accommodation at attractive prices. What more could you want? But the catch is that the low demand for housing deprives developers of the constant influx of money needed for construction. So for those who decided to buy an unfinished home, you increase the risks to get involved in the protracted.

“The active development of the primary market “is moving” money is not the ultimate buyers and banks, and private investors and owners of projects. But such a business design is very fragile and precarious,” explains Artyukhov.

However, the government in late summer, attempted to revive the mortgage market. The Cabinet of Ministers on 18 August adopted the resolution No. 616, which allowed the State mortgage institution (SMI) to provide residential property in financial leasing. In essence, the customer shall place the rent with the right of redemption after payment of all leasing payments.

“But developers familiar with SMI for many years and know that this institution is different very little funds. And actually on the lease with us will pay cash money and securities. Therefore, this scheme is unattractive,” — said the talker. Besides, even if the rate of 15.3% per annum, which will pay buyer such financing looks expensive.

Problems? Get!

According to the Association of victim assistance investors (APPI), only in Kiev 153 objects belong to the category of problematic, in Lviv such buildings 33, Odessa — nine. “Although in reality a number of problem buildings in Ukraine are not as great as it seems. Not more than 10% of the total number of new facilities,” says Barbash, stating that the main causes of freezing construction is not only the absence of the developer money, but problems with permits.

A striking example — 40 objects associated with the scandalous businessman Anatoly Voitsekhovsky, in summer 2016, was arrested and out on bail — and fled from Ukraine. Almost all residential complexes that were built belonged to him, the company were built illegally. As a result, construction was frozen, and people who invested money in them, were left with nothing. Most buyers seduced by the low price, and the performance of the Builder especially did not penetrate.

“In 2014 I invested money in the purchase of apartments in the residential complex Mosaic. Home grown by leaps and bounds, and the developer of UK city Groups [associated with Voitsekhovsky] implemented in the capital a couple of dozen projects. But in January 2015, a scandal erupted when interior Ministry stopped the construction of four large residential complex. Among them was my height,” — says the inhabitant of Kiev Yulia Zaderyaka. By the way, the construction of the Mosaic, almost two years later and was not renewed.

For those who was held hostage by the frozen building, the situation is exacerbated by the fact that other options, except to complete the construction at their own expense or find a new contractor, no. But in a market where the supply of square meters and so abundant, the developers are not particularly eager to solve other people’s problems. They have their homes to sell. So cases where investors were able to pull the brunt of the completion of the facility, units. One example is the residential complex Fundukleyev street Bohdan Khmelnytsky, 58A. In addition, in July 2017, the Corporation ukrbud said that will complete the construction of the LCD Akademgorodok, which was frozen in 2007.

Forewarned — forearmed!

The legislation gives unscrupulous developers a lot of loopholes to defraud investors. In terms of construction over the past few years has been significantly simplified, and often to lay the Foundation, quite a statement of construction company in the State architectural and construction Inspectorate (GASK). No certificates and permits are not required. In the end, on land which is reserved for Park or school, suddenly grows a skyscraper, and instead of the declared 16 floors constructed 24. And it is almost equally likely for budget accommodation and expensive buildings. For example you need not go far: Veles Place, cosmopolitan, Royal Hills — all objects in the city center, the construction of which was suspended.

“Accidentally in the fall of 2014 saw the LCD is the capital of Meridian. The price offered is fantastic — about 7,000 UAH/sq. m., my husband was ready to sign a contract, but confused by the fact that the sales Department bustled and didn’t want to provide any documents. Decided not to get involved, and no wonder: just a month stopped construction due to the fact that it is illegal” — from Kiev says Elina Romanova.

However, lawyers believe that to recognize scams and save your money is quite real. “Characteristics of the construction problem can be clearly attributed to the long stop construction, criminal cases against the owners and Directors of construction companies, the arrest of accounts and property of the Builder, issues with other objects”, —cites the example of Igor Kornev, managing partner of law firm legal GORO.

But the main question that the buyer simply is required to ask the employees of the sales Department, should relate to the purpose of the site and its status. “Even before the development of the building project and the commencement of any works the developer needs to occur right on the site. In most cases it is either leasehold, or right of land ownership,” — explains Dmitry Sirota, managing partner at SDM Partners Law Firm.

And if the company is muddying the waters, it begins to tell, what land rights are formalized and will be ready almost tomorrow. “Sometimes even refer to the website of the local authority, show some “official” letter stating that the earth is about to be. But such explanations should be treated with great caution as they give no guarantee that the ground all right,” warns the Orphan.

Wrenched inside out

An additional help in finding information about the object and the developer can become specialized forums (one of the largest is on the website, as well as information posted APPI. “In Kiev it is possible to check the construction on the site of the urban cadastre. It contains General information on observance by the developer of the legislation and assessing the legality of the construction,” recommends Andriy Dovbenko, managing partner of the law firm Evris.

With extreme caution should be taken to the availability of litigation associated with the developer and its objects (that information is in the unified register of court decisions) and decisions of the State architectural and construction inspection for the suspension of construction. “In our experience, GASK stops construction work on the basis of misuse of the land. Although these regulations can be appealed in a judicial procedure than used by unscrupulous developers,” —said Kornev.

But even the full package of documents and all permits does not eliminate the risk that after some time, the construction freeze, for example, due to the lack of money for the completion of the object. Therefore, the best safety net is to check the history of the houses that the company built before. If the problems were limited to breakdown of deadlines for two or three months is not critical. It’s almost a tradition.

But if the building not once, not twice frozen by judicial decisions and in the process was involved, law enforcement agencies, better to pass.

Good choice of new housing in excess, and prices on real estate developers to drive up until they don’t.