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Ukraine Real Estate Report Q4 2011
Business Monitor International, Oct 2011, Pages: 49
After sharp falls in property values following the global financial crisis, Ukraine’s property sector began to recover in 2010. This momentum is expected to accelerate through 2011 as consumer spending supports the economy and export demand helps to strengthen the manufacturing sector, in turn driving demand for property. The banking sector has also begun to tentatively lend again.
While BMI continues to maintain a positive outlook for the property sector in the Ukraine, it highlights the increased risk since BMI's last report. Following a marked slowdown in real GDP growth for Ukraine in the second quarter, BMI revised downwards its expectations for full-year growth in 2011 to 4.0% (from 4.4% previously). A weakening global growth picture bodes ill for Ukraine’s export-dependent economy, and a concomitantly faltering domestic demand picture underpins lower growth expectations for the remainder of 2011. Slower economic growth is likely to impact demand for property space across the sectors, with consumers more likely to curtail spending and be more cautious on residential property purchases.
Key opportunities in the real estate market:
- A recovering level of demand for, in particular, high quality property in the office and retail space.
- A continuing increase in rents from the very low levels seen during 2008-2009.
- A recovery in values at a rate that is expected to see yields track sideways. The implication is that capital values will track rental rates.
Key risks to the real estate market:
- The economic recovery is weak and could be derailed. BMI's long-held view is for the economic recovery to slow in 2011. BMI expects final consumption expenditure to expand by just 0.4% in real terms. Credit growth to households in Ukraine continues to stagnate, and BMI broadly expects this to persist over the medium term.
- Some Ukrainian property companies have never fully recovered from the global financial crisis and may still hold too much debt. If a downturn persists or worsens, they may be vulnerable.
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