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Ukraine Real Estate Report Q2 2011
Business Monitor International, March 2011, Pages: 62
Ukraine Real Estate Report Q2 2011 - All three series of interviews with in-country sources in Ukraine over the course of 2010 have confirmed that conditions in the country's real estate sector have stabilised in the wake of an extremely difficult period in 2008-09. During the global financial crisis, Ukraine had the dubious distinction of being the world's fastest contracting economy. That episode is now over.
Over the course of 2010, rental rates have risen by about 5-10% on 2009 levels in Dnipropetrovsk and Kiev, and by about twice that amount in Kharkov. Looking forward, our sources expect that rental rates will track sideways, or decline very slightly, during 2011. However, growth should resume in 2012. Our sources envisage that yields – which are considerably higher than they were in 2007-08 will generally move sideways over the next year or so. The implication is that capital values will track rental rates. We are looking for a fairly gradual recovery in the Ukrainian economy. Everything else being equal, this is consistent with the cautious optimism expressed by our in-country sources. However, we highlight several facets of the Ukrainian real estate sector. The first is that except in the retail sub-sector of Kiev, vacancy rates remain high. The implication is that the rise in rents (and, implicitly, capital values) is being driven by transactions at the top ends of the various sub-sectors.
This, in turn, suggests that pent-up demand for high-end office and retail space and conveniently located industrial space, which was suppressed in the wake of the global financial crisis, is finally having an impact. Moreover, infrastructure is being improved as a result of a wave of new investment prior to the 2012 UEFA Championship, which is being hosted by Ukraine and Poland. It is possible that, in Dnipropetrovsk and Kharkov especially, significant quantities of mid-to-low market office and retail space will remain un-let. The threat of renationalisation and stalled privatisations, which until recently loomed over the investment climate, seems to have receded and property rights have become more secure. Issues of transparency, corruption and red tape are also being addressed, albeit slowly.
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