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REAL ESTATE FEVER GRIPS UKRAINE
The boom's major drawback is that the construction industry is fast becoming "one of Ukraine's most criminal and least transparent industries," Ukrainian economic agency UFS lamented
  

Agence France-Presse (AFP), Kiev, Ukraine, Sunday, April 11, 2004

KIEV : Dozens of construction cranes crowd the Kiev skyline as the Ukrainian capital is gripped by a real estate fever that experts say is about to spread and infect the entire country.

"The industry is growing very well, but the real boom will come later," said Ilya Pavlenko, vice-president of the Perry Construction company, which is 100-percent foreign owned.

The number of construction sites in this ex-Soviet republic grew by 26 percent in 2003 and the trend carried on well into 2004, according to official figures.

(Click on images to enlarge them)

Construction of apartment houses alone has reached new heights every year over the past three years, with a 5.9-percent rise in 2003 - which means 6.4 million square meters (90 million square feet) of new housing space.

The boom is nothing surprising, as acquisition of good-quality lodging has become a near-obsession with many Ukrainians, desperate to get out of crowded, crumbling apartments dating back to the Soviet era.

Even in Kiev, the average space per person is only 20 square metres, compared to 28 square metres in Portugal and 36 square metres in France.

The dream is made real by Ukraine's economic revival which has boosted incomes, as well as development of a mortgage loan system which tripled from 2002 to 2003 to top 800 million dollars (660 million euros).

Part of the recently renovated elite residential building on Chervonoarmiyska street in downtown Kyiv collapsed in July, 2003. The accident was blamed on unsanctioned remodelling by owners of some of the apartments
ArtUkraine.com Information Service photo

"Even if interest rates remain high, at 14-15 percent a year, most of our clients still take out mortgage loans to buy their apartments," pointed out Lyudmila Zabiyaka of the Blagovest real estate agency.

The demand has also boosted housing prices which doubled in 2003 and continue to climb, reaching up to 1,000 dollars (825 euros) per square metre in Kiev's downtown, much to investors' delight.

"The sale prices for new apartments are often three times as much as the cost of building them," boasted Marta Kostyuk, expert for the DTZ real estate consultancy.

However, the boom is mostly centered on Kiev and industrial cities of Donetsk, Dnipropetrovsky and Kharkiv, with the rest of the country still untouched by this new-found affluence.

Construction of commercial centers and offices, which the market desperately needs, continues to expand as well, increasing output by up to 25 percent for office space and up to 35 percent for commercial centers, Kostyuk said.

According to expert estimates, Kiev's total office space is 250,000 square metres, of which some 10 percent are as yet unoccupied.

However, small businesses prefer to save money by installing themselves in regular apartments outfitted for office use.

To meet demand, numerous construction companies plan to build as much as 150,000 square metres of new office space by 2005, according to experts who also predict a rise in office rents of 10 percent this year.

Commercial centers and shopping malls also share in the boom, but their growth is still insufficient, with Kiev boasting only 30 square metres per 1,000 people, compared to the average of 150 to 400 square metres in eastern Europe.

The boom's major drawback is that the construction industry is fast becoming "one of Ukraine's most criminal and least transparent industries," Ukrainian economic agency UFS lamented.

However, the fact could not tarnish the market's promising growth, expected to reach new heights in 2004-2005, the agency said.

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