About a month before the outbreak of the war between Russia and Ukraine, on Christmas Eve 2022, I made my last visit to the country, traveling together with a client who was advancing a large real estate project there. In recent months I have been receiving inquiries from quite a few clients interested in real estate in Ukraine.
Before the outbreak of the war, the Ukrainian real estate market attracted many investors, among them many Israelis. Real estate prices that were relatively low compared with Western European countries, alongside the high growth potential of the Ukrainian economy, created an attractive opportunity for foreign investors.
The Ukrainian real estate market experienced significant growth in the years before the war. According to data from the international consulting firm JLL, real estate prices in Kyiv, the capital of Ukraine, rose by an average of 10% a year between 2017 and 2021. The main investment hubs were the large cities such as Kyiv, Odesa and Lviv, where a significant rise in prices was recorded for apartments and commercial properties.
Russia's invasion of Ukraine in February 2022 was a dramatic turning point for the country's real estate market.
According to data from Dragon Capital, a Ukrainian investment company, real estate prices in Kyiv plunged by about 40% to 50% since the start of the war. Activity in the real estate market almost completely stopped in the first months of the war. Many real estate transactions were cancelled due to uncertainty and investors' fears. For example, according to the Ukrainian website OLX, a 2-room apartment in the Obolon neighborhood of Kyiv, which sold for 70,000 dollars before the war, is now offered for sale at 35,000 dollars.
In the first months of the war chaos reigned, with land registry offices not operating regularly (and not only them, but a large part of the government institutions), and notary offices closed, which made it difficult to carry out real estate transactions. The fighting caused extensive damage to infrastructure and many buildings, which led to a further decline in property values. In addition, millions of Ukrainians were forced to leave their homes, which led to a decline in demand for real estate.
At the same time, today, almost 3 years after the outbreak of the war and despite the many challenges, there are first signs of recovery in the Ukrainian real estate market. Although in recent months there has been a moderate rise in the number of transactions and a slight rise in real estate prices in certain cities (in a conversation I held this week with a Ukrainian friend, a real estate developer in Odesa, he said that in the last two months alone about 20 Israelis have bought apartments in the Unity project in the city), and demand for rentals has also risen significantly due to the large number of internally displaced persons and the gradual return of citizens to the big cities, it is important to remember that the situation in Ukraine remains fluid and the future of the real estate market depends largely on developments in the war and on the political and economic situation. Some pin hopes on the imminent entry into office in the US of Donald Trump, who has often expressed firm positions about ending the war, and, taken together with the current low prices, see an opportunity for long-term investors who believe in Ukraine's potential for reconstruction and growth after the war.
As someone who has accompanied investors and developers operating abroad for years, and who has accompanied investments in Ukraine, I believe that investing in real estate in Ukraine today carries high risk. At the same time, there may be opportunities for experienced investors with the ability to take risks, who believe in the long-term recovery potential of the Ukrainian economy.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית