Gains in Ukraine
Why limit yourself? If you are looking to buy-to-let by the beach, in town or at a ski resort, Ukraine has it all, says Lucy Davis
One of the founding Soviet republics, Ukraine has been independent from Russia since 1991 but it was slow to embrace market forces and experienced virtually no economic growth until 2000. Since then, things have been looking up for this Eastern European country. Average growth was 7.7 percent annually over the five years between 2003 and 2007, and a growth of 7.3 percent was experienced last year, partly due to the under valuation of the Ukrainian currency the hryvnia. This is one of the highest growth rates not just in Europe but worldwide, so it’s a dramatic turnaround indeed.
Ukraine’s recent accession to the World Trade Organisation has also raised the country’s profile, and as joint hosts of the UEFA Euro 2012 championship with Poland, the country is currently gearing up to cope with an influx of tourists. Many real-estate experts believe that Ukraine’s large size presents an enormous potential for development, making it a significant investment opportunity for property investors and developers.
The country that possesses the largest territory in Europe has plenty to draw tourists and would-be investors. It has a temperate climate - subtropical on the Southern Crimean coast, where there are countless black sand beaches. A cosy 485-square-foot apartment in Sevastopol near Baclava Bay will set you back about HK$1.9 million, and you’d be able to rent it out for around HK$10,000 per month in high season.
In the Carpathian Mountains, meanwhile, there are ski resorts aplenty, and centres like Slavsk, Dragobrat and Bukovel internationalstay open until the end of April. Development is rife in these areas, and one apartment complex, the luxurious Eagle Valley Mountain resort in Slavsk, which went on the market in late 2007, has already generated much interest. The first of its kind in Ukraine, it offers everything from studio apartments to sumptuous four-bedroom penthouses, generously sized at over 2,000 square foot.
At Eagle Valley Mountain you are looking at paying around HK$4,600 per square foot for apartments on the lower floors and around HK$5,500 per square foot for high-floor apartments. The developers offer an Owner’s Rental Pool scheme, where funds for rental are returned on a per metre square basis, with monies paid to owners every four months. The company doesn’t reveal exactly how much its properties generate in rent but points out that demand is high in the area. The thousands of skiers who head here every season will doubtless appreciate the impressive facilities including sauna, swimming pool and gym, and that the closest ski lift is just 350 metres away.
The good news for overseas investors is that there are no major restrictions on foreigners buying property in Ukraine, and there are plenty of other positive points to investing here, the biggest being high yields, which can reach 10 percent in the capital Kiev. Residential property prices continue to rise, and while they have not reached the stupendous levels of Moscow or St Petersburg, the cost of an apartment in the centre of Kiev tipped over HK$8,000 per square foot this May. That’s considerably higher than Warsaw or Prague, yet the average monthly salary in Kiev still has a long way to go before catching up with its neighbours. In view of these high prices, many potential local buyers are being forced to rent, which has provided a good opportunity for investors focused on rental income.
On average, a 538-square-foot apartment in Kiev will cost HK$1.5 million and bring in a monthly rental of around HK$13,000. A 1,291-square-foot unit comes in at around HK$3.9 million and commands a rental of HK$28,000 to HK$30,000 per month.
Looking to the future, one company worth investigating is XXI Century. One of Ukraine’s leading property development companies, it focuses most of its energies on profitable Kiev. Its grand-looking Voznesenskiy Yar complex, due for completion in 2010, will not only feature swish residential apartments but also offices and a landscaped park. Prices for the property have not yet been revealed but they are expected to eclipse those around Mikhail Grushevsky, which is one of the most expensive residential areas in the city. The company is also planning to restore architectural monuments nearby, such as the Kiev viaduct, which will boost prices.
In Ukraine, the total cost of buying and selling a home is around 5 percent to 7 percent of the property’s value. There are no capital gains tax on the first property you buy here, and only 1 percent inheritance tax to consider. The agent’s commission is around 3 percent of the property value, and you are also required to pay a pension fund levy (1 percent), plus stamp duty and registration fees. Most foreign property buyers open a local bank account, and find it easy to transfer money easily between accounts to make that savvy Ukrainian purchase.
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