Demand for ready-to-move-in apartments. Summary of the housing market in 2024 and key forecasts for 2025.
Results of 2024: Demand Has Not Recovered, Developers Continue to Build
- Critically low demand for new properties, influenced by increased enemy shelling, economic decline, general uncertainty, and discouraging news from the front. Currently, it remains at 20% of pre-war levels;
- Uneven demand: a better situation in western and central regions, with an almost completely dead market in frontline areas;
- Gradual increase in housing prices. Over three autumn months, prices rose by an average of 4%. This increase is not critical, but it exists. It is the result of a significant rise in construction costs (up to 45%), operational and logistical processes, power outages, and labor shortages due to population outflow and mobilization;
- A wide range of various programs, offers, promotions, and other marketing initiatives from developers to stimulate demand and competition for clients in the market.
Experts note that the weak demand for new housing throughout 2024 is a consequence of military actions, mobilization processes, and uncertainty. The energy terror perpetrated by the Russian Federation over the year also has a significant impact on demand.
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"All hopes are always pinned on the second half of spring; in 2024, it was the same, but a massive shelling occurred, destroying a large part of the country's energy networks. This impacted both buyer expectations (psychologically) and companies' ability to ramp up activity. The summer was unstable: the demand curve remained practically unchanged, and uncertainty regarding the energy situation created additional deferred pressure on the autumn business season. We must give credit to the energy workers who made it possible to restore power in homes and construction sites, which is why in autumn we began to talk about the recovery of solvent demand," says Victoria Bereshchak. She adds: the situation is complicated, especially for the mass market without a clear client-centric concept and for the business class.
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Companies report that there is interest in purchasing apartments, but new transactions are quite few. This is influenced by both seasonal and political factors. "The number and intensity of shelling have had an impact (each massive missile strike on the capital postpones transactions by about 3-6 months), events on the front, enemy threats to use intercontinental ballistic missiles, and uncertainty ahead of the elections in the USA. On average, almost 60% of client inquiries in sales departments are deferred demand," noted Natalia Dubik, project manager of the Greenville group of companies in Kyiv.
As Susanna Karakhanian pointed out, the highest buyer interest throughout the year was directed towards projects that collectively met three basic criteria: real construction (even if slow, but constant); the developer's adaptability to external challenges like blackouts or labor shortages; and the functionality and ergonomics of the project. "Residential complexes with their own ecosystem and flexible layouts are in high demand. For example, there is a demand for European-style apartments with large kitchens-living rooms from 17 square meters and two bathrooms," said Susanna Karakhanian.
Prices and Mortgages: What's Happening and How Credit Affects Housing Purchase Transactions
Throughout 2024, developers reviewed prices, but there was no significant increase in costs. Victoria Bereshchak notes: the fluctuations in the price per square meter were within the range of rising construction costs. "There are several factors: inflation, a shortage of qualified builders (mobilization, competition for specialists with the government, which also has requests due to reconstruction projects), and rising construction material prices (averaging up to 45%) due to changes in logistics chains and loss of production capacities," says Victoria Bereshchak.
Experts note that slow demand is holding back price growth. "In December, some developers planned to raise prices by an average of 5-10%. It is predicted that by the middle of next year, the price per square meter could reach 65 thousand hryvnias," noted Susanna Karakhanian.
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Victoria Bereshchak noted that throughout 2024, the corridor of average price growth in hryvnias was in the range of up to 15%, with the most significant increases seen in the comfort+ segment in Kyiv (10%), Lviv (15%), and Uzhgorod (13%). "The only exception to this 15% rule is Ivano-Frankivsk (22%): the city had different starting data, as before the large war, we spoke of a price per square meter at the level of 15,000 UAH/sq.m, now it is 35,000 UAH/sq.m," says the real estate market expert.
The situation in the real estate market depends on objective factors — the geopolitical situation surrounding Ukraine, the frequency of shelling, and events on the front.
Companies had hopes for a revival in apartment sales due to the state program "єOselya." However, very few transactions were actually concluded through this program. The NBU notes that in the first half of the year, 5% of transactions were made with mortgage involvement, but this share subsequently decreased to 4%, which is comparable to the figures from 2021. Almost half of all loans issued since the beginning of the year were for properties in Kyiv and the Kyiv region. "The reduced role of mortgages is explained by the slowdown of the "єOselya" program due to changes in its design and limited resources. Therefore, the program's role in the real estate market is unlikely to strengthen in the near future, and to stimulate the market, more mass products from banks need to be developed," states the "Financial Stability Report."
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Natalia Dubik reported that according to the Ministry of Economy's data, as of October, approximately 9 thousand families had benefited from the "єOselya" program. Of these, only 3 thousand received loans. "Considering that the government planned to issue 12 thousand loans by the end of the year, the current pace of the program's implementation looks low. "єOselya" still needs to be either improved or a viable alternative found," believes Natalia Dubik.
The share of the primary market in the structure of the "єOselya" program is too small to talk about a significant influence, says Victoria Bereshchak. She adds that a solution that could transform "єOselya" into a market driver involves the synergy of several factors: revising the level of the down payment and the interest rate without additional conditions (an interest rate of up to 3-5% and a down payment of 10%), as well as stable state funding for the program at a minimum of 12 billion UAH per year for the next 5 years without the risk of losing the funds.
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In addition to state mortgages, the market should also be stimulated by independent programs from developers, such as well-thought-out and attractive installment plans for buyers. "Current analytics from Kyiv developers show that the total number of clients who used installment programs has increased by 15% compared to the previous year. This tool is particularly in demand among buyers seeking to minimize risks associated with the unstable hryvnia exchange rate. Additionally, installment plans can be offered with a fixed price per square meter in hryvnias or at low interest rates (or even none), making them more advantageous for clients," notes Susanna Karakhanian.
What's Next for Prices and Housing Choices in the Primary Market: Forecast for 2025
The recovery of new residential complex construction continues; however, experts state it is still too early to talk about the full operation of the market, as many residential complexes are still on pause. Natalia Dubik shared: throughout 2024, almost 80% of developers in Kyiv (across all segments of the primary market) publicly reported a resumption of construction. However, it is important to distinguish between real construction and imitation for marketing purposes. "Real construction is about half of this figure. Acceptable construction rates now are 1 monolithic floor during the warm season," noted Natalia Dubik. Victoria Bereshchak shares a similar opinion, stating that in the capital region, about 80% have resumed work, but real construction rates and results show half of that. "The best performance among developers is in the western regions: there, real construction rates show about 55% of companies," says the expert.
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Market experts say that in 2025, the pace of construction will be influenced by factors such as the situation on the front and the geopolitical context. Prices for new apartments will slowly rise. "There may be fluctuations within a corridor of 7-10% in hryvnias. Prices cannot decrease because construction costs cannot be reduced. Many