Author Topic: The Ukraine wobbles  (Read 13292 times)

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Offline hotbmw

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Re: The Ukraine wobbles
« Reply #15 on: 01:13 23-Oct-2008 »
P-N, Azzice, i am also interested in investing in UA. i have been coming here for 3 years now and love this country.

What are your gut feelings on the property market over the next 6 months?
Is it quite possible that we could see 25% drops or?

Im interested in buying an old apartment that needs renovating. Maybe buying a 1 room apartment thats large enough to convert into a 2 room. Needs to be near a metro station (5 mins walk).
Was thinking near metro palats ukraina or obolon region. any thoughts guys?

Or any other regions i should look into guys?

Thank you in advance.
Robi

Offline Vera

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Re: The Ukraine wobbles
« Reply #16 on: 03:21 23-Oct-2008 »
The prices for a 1 room apt. in Kiev are still at $ 65-$ 120,000 and up level. I too check regularly. Before the financial crisis I used to hear that there was no way the prices would go down until Euro 2012. However, with all that is going on now I do not see how, unless things change for the better somehow, can the prices stay at this level. I understand it is almost impossible now to get mortgages, there are not as many jobs in Kiev now and I read an article about foreigners puling out their capital and leaving Ukraine (do not know if it is so or not) anyway, taking this all and other factors into account I do not see how the prices could stay at the same level.
Honestly ,if prices do fall by 25% ,still a 1 room apartment will then cost $75,000- I still do not see it as a good value for the money, it is unreasonable (but it's just me).
« Last Edit: 03:41 23-Oct-2008 by Vera »
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Offline hotbmw

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Re: The Ukraine wobbles
« Reply #17 on: 04:15 23-Oct-2008 »
Hi Vera
Thanks for your info. I really appreciate it.
Are you monitoring any good websites in english that i can look at also?

Are you working in UA Vera?

I dont know, i think $75,000 for an apartment near the centre by a metro such as palats ukraina is fair value for a foreigner. I look at it this way:

- If i can convert a decent sized 1 room apartment into 2 rooms and renovate it to western standards (maybe spend $15,000 on renovations and some furniture) it will increase in value when the market recovers. (Im not looking at selling anytime soon so i can hold).

- I cant buy anything in my home country (australia) and get rental returns at 10% or more. If i buy for 75k and 15k for renovations - 90k cost, i could rent it out for at least $75 a night. Rent it 15 nights out of 30 (cant always be fully occupied of course) thats $1125 a month, $13,500 a year. A return of 15% a year (gross).
Or if you want you could say u could rent it out for a conservative $1000 a month to a long term tenant thats $12,000 a year, thats a 13.33% return p.a

- I dont expect capital growth in the near future but i do see massive capital growth in UA in many yrs to come. After Euro 2012, after it has the euro as its currency, after the next generation of leaders come through & get UA on track. It is Europes largest country (russia eurasia). The black sea coast has untouched resources, they can be self energy sufficient in the future. If i can buy at 25% off now close to centre, close enough to be appealing to foreigners visiting for tenancy, i think its a no brainer.

What do the experienced people here think? P-N? Azzice? others.

- I spend at least 4 months a year in UA and pay about $1400 a month for a nice place in the centre so my rental cost is lets $5600 a year to stay in UA (4 months).
If i stay for free for 4 months and rent it out the other 8 months i thnk its a wise investment (at 25% off).
That $5600 i dont need to pay a landlord would cover the bank loan interest for the year and the 8 months its tenanted it pays off my loan at over $1000 a month.

What do you think based on my situation?

Offline Vera

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Re: The Ukraine wobbles
« Reply #18 on: 04:34 23-Oct-2008 »
I based my rather primitive calculation on an average 1 room apartment ,say, in Darnitskiy rayon of Kiev.\
Basically it like 20-30 min by metro to the center of the city. At present such apt. costs around $100, 000, so then if you anticipate it to go 25% down then it will cost $ 75, 000.
The apartments in the center will be the very last to become any cheaper and if they will, not by 25 %.
So no, I do not think you will see an apartment in he center dropping in price that much and within 6 months at that. So when I said that I did not have apartments in the center in mind. Those are and for some time will be quite expensive.
And I monitor sources in Russian only, haven found any English language one yet :))
"You never really know a guy until you've stared at him for 8 hours through high powered binoculars." -Spongebob Squarepants

Offline hotbmw

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Re: The Ukraine wobbles
« Reply #19 on: 04:46 23-Oct-2008 »
Ah ok. I thought you meant in the area i was hoping for.

I dont know, a 25% drop is not even bringing the market back 1 year, its bring prices back to where they were late 2007. Not a massive drop...

Maybe im just hopeful, i dont know. Any other thoughts?

I saw in aviso that there is a 25sqm 1 room apartment for sale now listed at $76,000. Its in pechersk, 1 block from the metro.

I dont know, im thinking if prices fall by 25% i may find a similar deal but at 40sqm. Well thats my hope/dream :)

Im not aware of that region Vera. Whats the name of the nearest metro?
Im looking forward to hearing other opinions also.


Offline Vera

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Re: The Ukraine wobbles
« Reply #20 on: 04:52 23-Oct-2008 »
The nearest Metro station there is Kharkovskaya. It's an OK place for a local. I do no know if many foreigners would like like to be living there, though.
Anyway, I too would like to hear expert opinions but they will only wake up in about 2-3 hours, so will have to wait till then  :) :)
« Last Edit: 04:53 23-Oct-2008 by Vera »
"You never really know a guy until you've stared at him for 8 hours through high powered binoculars." -Spongebob Squarepants

Offline P-N

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Re: The Ukraine wobbles
« Reply #21 on: 06:56 23-Oct-2008 »
I cannot give you advice on Kyiv I am afraid as I know little about the market there on the domestic accomodation side.

What I would say, is that if you are in a position to buy anything in a depressed market and wait without needing an immediate return, you are very likely to make a good return when the market recovers.

Without talking about Kyiv specifically (because I cannot), I believe that there is another 6 months of depreciation in the market before it plato's and eventually begins to rise again towards 2010.  I would not expect the rise this time to be as dramatic as it has been before with regards to the profit curve, but expect it to curve upwards in a more gradual manner than previously in Ukraine.  Again if you are in no immediate rush for big returns then this is no bad thing.

There will be certain areas of the domestic housing market which will "kick the market trend" as in any country.  In the US, there will be certain locations or parts of the property market which will lose only 5 - 10% of market value over a short time, compared to other locations which may lose 30% and never fully recover in 5 years.

Kyiv may be one of those areas, or specific areas within Kyiv may "buck the trend" and my knowledge of the Kyiv market does not allow for any serious guidance.

The refurbishment of the inside of the apartment (if there is no structural remodelling only decoration) will be in the region you suggest.  It certainly would be in Odessa, depending on the standard of fixtures and fittings you decide upon.  What I would say is with a $5 tile, even with a very good tiler, you would get a $10 finish.  With a $25 tile and a very good tiler, you will get a $100 finish.  This however depends upon your budget.

If you have an idea in your head as to what you would want when renting and wish to achieve it, that idea will be shared by many.  It may be that should you find your bargin apartment in the locaion you want and you will do little with it until you can save enough to reach the internal standard you want to achieve and budget for it.  I would advocate that you do not sacrifice the quality of finish for the case of speedy decoration particularly in the rental market.  If it looks like it cost a lot, your tenants are more likely to take care of it than if it looks like a cheap finish.

If you have any specific questions, I am happy to help you (ie. size of boiler (KW) for the heating and hot water based on size, number of windows, number and use of rooms, location of the apartment (north, south, east, west facing) double glazed or not etc etc. as they all make differences to the calculation and therefore size in KW of the system, or is it better to use plastic pipe over copper pipe in the long term etc.etc.

As for the Kyiv market, others can help you more than I.  :)
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Offline azzice

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Re: The Ukraine wobbles
« Reply #22 on: 08:01 23-Oct-2008 »
Hi Hot. Your questions are quite complicated but i try to explain you my point of view in my bad english.

First of all nobody really know what will happen in the next future. We all know that the residential market in Kiev is very speculative and not transparent at all.

As I understand you are looking for an object in the secondary market (existent apartement which needs renovations). In my opinion in this segment it will be very difficult to hope in an immediate drop of 25% in prices. 25% drop can maybe be observed in new developments projects where developers need to sell their objects fast in order to recover their investments.

You can find something in english on this site: arcoreal.com.ua

In russian you can find some very helpful info on average prices on http://www.blagovest.ua/realtystat/show.lisp

As you can see the average price for 1sqm is about 3'000 usd even in the less attractive parts of the town....

As for the renovations i think 15'000 usd is really too little. It will also be very difficult to find a big 1 room apartment thats large enough to convert into a 2 room. In fact the vaste majority of such objects, during the communism where occupied by many people (1 or 2 family) therefore dividing walls are still in place....

In my opinion, if we really will see a massive drop in apartement prices during the next years, then the recovery could take even 10-15 years (see germany, japan, england or Italy exemples...)

Offline hotbmw

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Re: The Ukraine wobbles
« Reply #23 on: 08:06 23-Oct-2008 »
Thank you P-N :)
That is exactly my scenario P-N. I am a frequent visitor (4 month stints) in UA so it makes sense to use my money to buy rather then giving it to a landlord. Especially if there is a downturn.

I only expect a long term appreciation in my investment. I may never ever sell. I have a girl there and we are in love so this is why i am also serious about this. Would be nice to spend the summers in UA and other 8 months or so in Australia.

I definitely will take your help if possible in the refurbishment area. And i definitely agree that it needs to be done properly.

How do u see Odessa in 10 years time P-N? If i cant buy in Kiev this would be my next choice. I just dont know what part would be best. Centre or Arcadia by the sea?

Are prices half that of Kiev or?

After i find something i would like to take your offer up on the renovations help. Happy to take you out for drinks or dinner or whatever in appreciation when im in Odessa.

I was a financial adviser up until some yrs ago and everything to me suggests there must be a downturn. No lending. Banks asking owners to pay up loans. High inflation, increasing cost of living. Over borrowing, unable to meet repayments. Job losses. Unstable government.....

Must be!

Offline hotbmw

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Re: The Ukraine wobbles
« Reply #24 on: 08:13 23-Oct-2008 »
Thanks for your advice Azzice. And your english is good.

How risky is buying these new apartments? Do u mean the ones that are almost finished or one that is already finished?
I have heard lots of scary stories about buying off the plan (not finished apartments).

But u r right, this is definitely going to be the cheapest options.

Thanks i will take a look at that site now.

Logic suggests it must fall but who knows.....


Offline azzice

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Re: The Ukraine wobbles
« Reply #25 on: 08:35 23-Oct-2008 »
Yes it can be risky especially now. In fact if you buy off plan you will not receive any property act before the completion of the object....al what you will receive is a sort of bond ( 8).... so if the company make bankrupt you risk loose all your money...
« Last Edit: 08:54 23-Oct-2008 by P-N »

Offline P-N

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Re: The Ukraine wobbles
« Reply #26 on: 08:48 23-Oct-2008 »
Odessa is more predictable than Kyiv to some degree.  

As Azzice rightly points out, the new build appartments (and those currently under construction) will not appreciate the returns the builders were anticipating when they started the projects and as such, they are selling them more cheaply than anticipated in order to gain some form of capital return in the short term (either to stave off liquidation or to fund other projects) and there are defiante opportunities for someone who is prepared to "shop around" or "haggle" at the moment regarding new build.

I would think that in the current climate, buying "off plan" may have additional risks to those which are finished, existing and physically there for obvious reasons.

With it being such a massive tourist destination from May - September inclusive and in excess of an extra million people being here during that time, the rental market is very good for 6 months of the year and you would have no trouble whatsoever renting at $75 per night and more.

There is also a good chance of getting a decent sized apartment for anywhere between $120 - $150,000 which would meet the criteria you lay down if you are prepared to look and upon finding something, not delay in the purchase of it.

Typically here, rather than $3000 psm in Kyiv, you are looking at between $1300 psm and £1800psm dependent upon where in Odessa you want to be.

Arcadia and Fransuski Boulivard are more expensive than the city centre for the most part but there are good buys in these regions if you do your homework.  Shevchenko Park, close to Carl is also a very good part of the city to buy.

As for Odessa in 10 years time - it will remain a major tourist attraction for sure.  It now hosts numerous large cruise liners on a regualr basis with a lot of 50+ people from the US and UK visiting and returning the following year on a rental/hotel basis due to the cosmopolitan look and good weather.

Odessa's problem (although not yours in a rental market) is that it is still very much tourist orientated.  When you consider Odessa's top external investors from outside the CIS, it looks as though that will continue for a long time.  (In case you are wondering, the countries who invest the most capital in Odessa are Cyprus, Greece and Germany).

There is also the option for long term leasing here and there is a company I know (;)  ::)) who specialise in finding long term rental accommodation for foreigners (translating rental agreements, sorting out ultilities, internet connections etc etc) and that can also be an option for you.  They deal and are currently dealing with a large American firm who have just sent a "lead team" here with another 15 people to follow shortly.  As long as the flow of foreign companies continues to spill out of Kyiv to Odessa then this is a long term possibility - it remains to be seen if there is an effect in the long term due to the current/impending resession globally on this market though.
« Last Edit: 09:01 23-Oct-2008 by P-N »
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Offline P-N

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Re: The Ukraine wobbles
« Reply #27 on: 09:17 23-Oct-2008 »
Another option you may want to consider either in Kyiv or Odessa, is finding a groud floor apartment facing a major road/thoroughfare and buying it with the intention of changing it's use to a commercial office.  Odessa (and I am fairly certain Kyiv will be) is desperately short of office space (affordable of otherwise).

In Odessa (speaking from experience), the current "administration fee  ;)" to change the usage to that of commercial office is $10,000. but it is simple to refurbish an apartment into an office.  The key is the location of course.  Facade on or very near a well used road with the ability to park outside and on the ground floor, so neighbours have no reason to complain about dozens of people blocking stairwells or cramming into lifts.

The return on a rental office is much higher than an apartment and normally for a longer and sustained period of time.  It also has a higher "sale value" or "rental value" psm than an apartment for domestic occupancy.

I am not sure how easy it would be to accomplish this in Kyiv as I do not know how many properties would meet the locational requirements and also how much and how easy it would be to get the "administrative" changes to the documents.  It would, as always in Ukraine, depend upon who you know, or who people you know, know.  :o :o :o

Just something else to consider if you see a bargain on the ground floor when you are looking.  :)
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me

Offline hotbmw

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Re: The Ukraine wobbles
« Reply #28 on: 11:23 23-Oct-2008 »
Lots of food for thought there guys. Thanks.

I wouldnt buy off the plan in UA. But maybe an apartment that is just finished but no buyers is an option.

My gut still tells me that there must be a decent correction so i will wait a few months.

P-N do u think $15,000 for a smallish apartment 40-50sqm is about right for a nice remont or more like 420,000?

Will have more replied an questions tomorrow :)

Offline P-N

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Re: The Ukraine wobbles
« Reply #29 on: 11:35 23-Oct-2008 »
It very much depends on the materials (fixtures and fittings) you want and where you get them.

It will also depend on where the apartment is - there is probably a difference between Kyiv and Odessa prices when working out labour costs psm.

I would only be able to answer that question more accurately if I had some idea of what you had bought in comparison to what you have in your head as an end result.

The last one I did cost $22,000 all in, but the standard of materials was in the low - middle range as requested by the owner.

I am currently starting on another refurb for someone (although there is a delay due to the owner wanting to double the size of the balcony and I am awaiting the amended documents to carry this out).  In the case of the current job, there is some structural work which is critical to the requirements of the client which will not provide you with an accurate measure without going into detail for you.
"When surrounded by the dark void of the willfully blind, it does not excuse those that are a spark of light their duty to shine" - Me