As the newfound nationwide passion for home ownership continues to take hold in Ukraine, satellite villages outside of Kyiv are proving increasingly popular. The number of these small and often ad hoc cottage settlements in the Kyiv area has increased threefold since 2005 and is expected to reach 100 by the end of the year. The construction of 21 such communities, with 1,100 houses total, has already been completed. Another 41 projects, encompassing some 4,500 homes, are still under construction. More than 30 sites encompassing 5,200 houses are currently at the planning stage.
The amount of cottage real estate currently on the Kyiv market is estimated at 1.87 million square metres. Given that the average price per square metre is estimated at USD 2,000, the market is valued at USD 3.15 billion. Some 400,000 square metres of this ever-expanding total have already been sold and another 150,000 square metres are expected to be sold by the end of the year.
As well as cleaner air and more personal space, one of the great pulls of Ukraine’s growing suburbia remains the relatively low cost of cottages. The average price of a house in a community outside of Kyiv is 30-50% lower than the price for the average apartment in Kyiv. However, as is the case with most new flats currently on offer in the city, some 85% of Kyiv’s cottages are sold while still unfinished, leaving the new home owner with the task of finishing off work on the property. Such added investments can end up being substantial.
For the time being most people who decide to try the country life are staying close to the bright lights of Kyiv. The majority of cottage communities are located within 20 kilometres of the city limits (62%), while a further 26% are located 20 to 30 kilometres beyond the capital, and 12% are further than 30 kilometres away. However, the infrastructure improvements envisioned as an integral part of Ukraine’s Euro 2012 preparations should pave the way for an explosion in cottage villages situated well beyond the current range.
Few bargains on offer
The annual price growth in the Kyiv area cottage industry is currently thought to be 20-25%. Cottage communities are conditionally classified into three classes: basic, mid-range and high-end. A high-end home might cost some USD 5 million, a mid-range domicile will cost USD 600,000, while a basic cottage can be bought for about USD 180,000. This puts a square metre for a summer home at anywhere from USD 890 upwards. Building your own is also an option, and is nominally cheaper, with one square metre costing USD 450-700 if you are prepared to literally do it all yourself, or at least go through the hassle of overseeing others do the construction work.
Most home-owners who have gone through the process of building their own properties tend to advise buying the finished product instead, claiming that any savings in the cost of the project are generally end up costing you far more in terms of time as building is slow and most developers insist the house should be built by their own contractors. In the end, the primary advantage to building your own home is not economic but simply the fact that you can do everything to suit your own tastes.
Post-Soviet palaces
As Ukraine recovers from the economic malaise of the post-Soviet years and incomes rocket, many upwardly mobile Ukrainians see a move to outside the city as a sign that they have joined the new middle classes. The bulk of the properties currently available on Kyiv’s suburban cottage developer market reflect this upper middle income bracket, ranging in price from USD 350,000 to USD 500,000. Less expensive houses, running from USD 200,000 to USD 350,000, account for 33% of the market. Cottages costing USD 700,000 to USD 1.5 million account for over a quarter of the market, or 26%, while a further 9% of all properties for sale in the Kyiv area are priced at over USD 1.5 million. However, amid the scramble to benefit from the largesse of the oligarch classes there has been something of an over-emphasis on the top end of the market, resulting in vacant properties. Olga Maslova, marketing director with the DeVision company, a residential real estate developer, states that currently “supply is greater than demand for high-end homes, while there is a dramatic lack of supply in the intermediate class of property.”
Modest, middle class tastes
Ukraine’s first cottage villages were the stuff of post-Soviet legend, full of huge palaces nestled away in secluded woodland areas behind armed guards and imposing turret defensives. These were the places where the first millionaires of the independent age enjoyed their salad days in the years before townhouses in London and Mediterranean super-yachts became the order of the day. Tastes have changed in the past decade and in today’s market far more modest 300 square metre cottages are the most frequently requested.
Market observers predict that houses will go on getting smaller in future years, although the amount of land surrounding properties will be larger. “Existing cottage villages tend to occupy 15 hectare plots of land on average, while the villages currently being planned are supposed to be located on 55 hectare sites,” says Vitaliy Boyko, director of the Ukrainian Trade Guild consulting company.
At present, most projects have been focused on generating a quick turnaround, often to the detriment of quality. This short-term approach is also expected to change in the future, bringing greater assurances of quality to the consumer. “A trend noticed this year is the emergence in the market of high quality projects with well-developed infrastructure. The geographical borders of the market are also extending, with the cottage towns moving to more than 50 kilometres outside of the Kyiv city limits,” says Volodymyr Stepenko, marketing director with the SV Development consulting company.
Quality question marks remain
Most market analysts predict the gradual growth in cottage prices, though they do not anticipate anything as dramatic as the rocketing prices of Kyiv apartments in 2002-2007. “Prices will keep growing by 25% annually in 2008-2009, with a gradual slowing down to 15-20% rises in 2010-2011,” comments Mr. Stepenko.
“Some see a stagnating market, although countryside realty prices are still showing stable growth,” says Oleksandr Zatserkovskiy, an analyst with Zoloti Vorota, a Kyiv-based real estate developer. He notes that high-end and mid-range houses will keep growing in price above even Ukraine’s rampant inflation growth, although he expects that prices in the inexpensive home segment will be more stable.
Ms. Maslova of DeVision predicts growth as high as 30-40%. “Although more and more people from various social groups are buying cottages, countryside homes are still not for everybody. Average prices varies from USD 900 to USD 5,000 per square metre at the project stage and are close to USD 7,000 in existing cottage towns,” she comments.
The ripple effect
Growth in the price of land will inevitably serve to fuel the rising cost of a place in suburbia. Q1 2008 saw an up to 5.4% increase for land prices in a zone within 30 kilometres of Kyiv, and this figure will keep growing. Price rises are also anticipated in the more remote areas as the cottage village effect ripples out through Kyiv Oblast. Other regional capitals across the country are experiencing a similar pattern, driving the regeneration of rural areas that appeared to be in terminal decline for the first fifteen years of independence. The end result will be a population moving from rural towns to big cities and then back out to cottage villages once they have built themselves a successful career.
