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That threatens the real estate market of Ukraine

Что грозит рынку недвижимости УкраиныIndicators of real estate market of Kyiv from may 4, 2017.

On the eve of may holidays, when the real estate market is almost completely stopped, the prices of apartments in Kiev unexpectedly rose from 1.9%. Individual segments rose even more. For example, the growth of prices for apartments in new buildings near metro amounted to just 2.9% for the week, and two-bedroom separate – 3,2%.

Among the probable reasons for this rapid growth is changing the structure of a sentence before a relatively long break, the strengthening of the hryvnia and the increased demand from buyers. Consider these reasons in detail and try to understand what caused the price increase.

The most common cause of surges in prices over a short period of time be a sharp increase or decrease in the number of proposals. On the eve of may weekend, which for many will last for a week and a half, it was quite natural: in order not to be distracted by phone calls and viewings, sellers temporarily remove their items from sale to again put them at the end of the leave. The number of proposals this week fell by only 3%, so that substantially affect the price it could not.

The second reason is the strengthening of the hryvnia. As well as its devaluation, the market responds by lowering the dollar prices and the strengthening could react with growth. Strengthened the national currency during April: since the beginning of the month, the hryvnia exchange rate increased by 2.2, and for the last week – 0.7%.

In the absence of demand the exchange rate would not affect the price. According to realtors, in April, the demand has increased, albeit slightly, and often exploratory in nature. Transactions also occur, mostly in the budget segment, which, it seems, was enough to raise the prices. But it is unlikely that the price increase will last long.

Last week Domik.ua wrote about legislative innovations APR and how they in the future can affect the real estate market.

This week, the list of initiatives has been enriched with bill No. 6403 “On regulation of urban development”. It involves changing the rules of development of cities, a detailed analysis of each project and its conformity with the existing urban environment and the interests of the inhabitants. In addition, the bill provides for the establishment of borders of territories where building is prohibited, and the issuance of building permits, will take into account public opinion.

Domik.ua studied in detail the main provisions of the bill. You can read about it on the link . Today we will analyse how its adoption will affect the real estate market of Ukraine.

First, the authors of this bill once again plan to create urban master plans and zoning. Only now it is proposed to clearly prescribe what should be the General plan and to oblige stick well.

The second interesting point is to carefully study all construction projects with public participation. Involving local residents to discuss development projects of a plot is logical, it is a well-established international practice. In this respect, the example of the development area of Nyhavn Copenhagen, where the authorities, the local residents of 10 years dismissed, while the architects have not proposed an option that suits everyone.

In Ukraine while such a scenario seems unlikely. In Kiev, all the plots are in someone’s ownership or lease. The owner or lessee usually assumes the role of a customer building. But neither he nor the developer does not want to wait until the project is approved, not only relevant institutions, but also local residents.

The bill also provides for the comprehensive development of territories. For example, in Kiev today almost no large vacant parcels for development. Except that developers will undertake the revitalization of industrial areas, creating in their place, not only housing but also the necessary infrastructure. In this case, the cost of the zero cycle of construction will be huge, which means a rise in the cost per square meter.

Developers today rarely involve in the project of building parks, squares and public spaces. As well as a sufficient number of places in the underground Parking, not to mention the municipal schools and kindergartens. Buyers of apartments of a class “comfort” and “business” can count up to the Playground, Park and private kindergarten. In economy class and is a luxury. And the LCD premium public space or number of seats in the Parking lot equal to the number of apartments in the house, is presented not as the norm, and as an additional advantage. It is natural: the construction of large Parking facilities or social infrastructure increases the cost of construction and almost never pays off. On the other hand, the residents adjacent to the construction site houses usually perceive the developer as the invader, deprived of their Playground, Park or Parking, but proposes nothing instead. Therefore, they are often protesting against the construction.

If the bill will come into force, the approval of any project may be delayed for months or years. And all this time, the developer likely would have to pay rent for the land, incurring losses. Otherwise, he will have to seek the support of local residents, building the same social infrastructure or public space. For the area and future buildings is all well and good, but again increases the cost of construction. Additional costs will be imposed on future buyers of apartments.

On the other hand, protests against the construction in Kiev has turned into a business. Repeatedly same people were seen at the protests against different buildings in different parts of the capital. And everywhere they positioned themselves as local residents. The new law may contribute to the development of this kind of “business”, and how to resist it, is not clear. Except that lawmakers would limit the legal forms of public participation in discussion of development.

Another “risky” situation the document – providing local authorities with additional regulatory powers. On the one hand is the international practice, aimed at the maximum satisfaction of interests of local communities. On the other – in Ukrainian realities is, unfortunately, creates favorable conditions for corruption in the construction industry is so high.

Of similar concern is the provision that all projects of integrated development should be approved on a competitive basis. Obviously position is a huge step forward, but implementation experience, for example, ProZorro suggests that Ukrainian officials are able to circumvent even the most transparent competition.

Finally, lawyers fear that after the adoption of the law can begin a massive recall already issued building permits. This authorization is valid until the end of construction works and can be withdrawn only in case of serious violations of building codes or design documentation. That is, if the developer after the entry into force of the new law will adhere to the project documentation, chances are no one to revoke its permission for the construction will be.

Even if bill No. 6403 be adopted before its entry into force will take time. The document envisages amendments to several other regulations. So developers have the time or will to complete their projects, or to revise the plans.

© 2017, paradox. All rights reserved.

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