Best real estate investments in primary market
In Kiev continues to grow the number of investment transactions in the primary real estate market. At the same time, the yield on these investments decreased slightly.
How will investment in housing, told the experts of City Development Solution.
“Spring surge in the number of investment transactions up to 45% was associated primarily with the next round of devaluation of the domestic currency. For our citizens, buying an apartment is one of the few ways to save money. However, the number of those who see in this not only the salvation of the savings, receiving stable income,” – said the consultant CDS novel ends. By mid-year, the share of investment transactions has increased to 50%.
And those who treat such investments as a business are very different. There are so-called “block investors” who buy apartments in the same complex. According to the Director of CDS Yaroslava Chapko, the package can be from 10 to 100 apartments, and sometimes more. “There are even cases where whole purchase homes, make repairs and rent. However, it is more typical for low-rise buildings in the suburbs,” she said.
Another group is the ordinary private investors who buy only one apartment at a time. The main interest they show to one-bedroom apartments, for which demand remains stable both for sales and for the subsequent rental. Although, as noted by Yaroslav Chapko, the profitability of such investments tends to decrease.
How to make
To find out how to invest in real estate in the primary market, Yaroslav Chapko gave several examples of when the money was invested in apartments in a particular residential complex under construction in 2015.
The investor bought a one-bedroom apartment with an area of 37 sq. m of economy class-I 507 thousand UAH. ($20.6 thousand at the exchange rate at the time of purchase). The house was completed in 2017 and put into operation. There are two options – to sell the apartment immediately or to rent out. It can be resold over 830 thousand UAH, or $31.5 thousand (at current exchange rates). Thus, the yield of 22,9% annual in grivna, or 18.4% in the dollar, higher rates of Bank deposits. If the same person will invest in equipment and renovations of about 100 thousand UAH and decide to rent an apartment to rent (7.5 thousand UAH, or $288 per month), according to experts, investments will pay off for 13-14 years.
Economy class gives a slightly lower return. Bought in April, 2015 newly built one-bedroom apartment with an area of 52 sq m for 962 thousand UAH ($39.1 thousand) in the house with 40% willing, after object input in operation the investor will be able to sell it for 1.22 million UAH. ($47 thousand). Thus, the yield will be 7.7% per annum in UAH or 5% per annum in dollar. If you rent an apartment to rent after renovation (260 thousand UAH of investments), return your tool, you can at 18-19 years at a monthly rent 10 thousand UAH. ($385) per month.
A good effect would give the investments the comfort class on the primary (10%) under construction. One bedroom apartment of 45 square metres and was purchased for 874,5 thousand UAH ( $35,5 thousand) in April 2015, and sold in June 2017 for 1,56 million UAH ($60 million). This investment would yield at 28.9% annual in grivna, or 24.9% in the dollar. The option of repair (UAH 234 thousand) and the subsequent lease from the beginning of 2018 over 11 thousand UAH ($423) per month could be paid off in 16 years.
The most difficult option – investment in the business class. By April 2015, a one-bedroom apartment with area of 63 sq m in the object with 40% readiness, the investor paid 2,526 million UAH ($102,7 million). After entering the house in operation in June 2017, he could sell it for 3.12 million UAH. ($120 thousand). Rent after renovation (491 thousand UAH) for 28.6 thousand UAH. ($1 100) per month will provide an opportunity to recover investment over 16-17 years.
The current situation
“Investments in the currently under construction reliable builders will also provide an investment in the future. However, according to our estimates, it will be a little lower,” – said Yaroslav Chapko. Provided that the dollar 2.5 years will be about 29 UAH, as forecasted by macroeconomists, the expert believes the most effective option of investment the purchase of housing in business class. The most unattractive she calls comfort.
Having invested now $68,1 million in one-room apartment business-class, after putting the house in operation it can be sold for $88,4$ (6,6% per annum in foreign currency). For economy-minus the same options is $22.6 investment and $24.5 thousand after resale (3.4 per cent per annum). Economy class will offer accordingly $28,5 and $33,6 million (2.4 percent). Comfort class will give a symbolic 0.7% per annum with investments of $37.7 thousand and the resale of ready apartments for $42.7 thousand
This dispersion in terms of profitability in the comfort class when investing two years ago and now Yaroslav Chapko explains the continuing trend to lower prices. “We see that most objects comfort class is overvalued at the start of sales, in fact not offering the buyer any additional facilities and infrastructure compared to the economy. With the end of 2016, prices began to decline, and we see the reduction in price gap between economy and comfort class and the increase between the budget and premium segment”, – said Yaroslav Chapko.
Also, she emphasized on the effectiveness of housing delivery in rent affects the style of repair. According to her, the greatest demand functionality – regardless of the housing class. “Even in business class, potential tenants want to see the simple and convenient design. No gold pens for $150. Everything has to be practical, literally, IKEA-friendly,” – says Yaroslav Chapko.
A leader in the efficiency of investments in construction projects showed the foreign resort property. Investing in apartments on the sea, for example, for $70 million not only give you the opportunity to sell the property after its completion ($75 million). Typically, the developer offers the service of rental that brings in $12 thousand of income in the year or 7.5% per annum.
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