Buying homes in wartime: who’s doing it and is it justified?

Due to the Russian-Ukrainian war, millions of Ukrainians live outside their homes. Many houses and apartments have been destroyed or damaged — for example, as of mid-September 2023, the victims have submitted 506,311 reports about damaged and destroyed housing through Diia [e-governance service in Ukraine – ed.] This is by no means the final number. Millions of individuals live abroad, with some forced to relocate to other areas. Many of them require not just temporary but permanent housing. However, is there enough funding allocated for this? And does it make sense to utilize those funds at this time?

"Naturally, things were going well before the full-scale war broke out. Everything was being bought and sold. But during the first or second month of the war, there was no activity at all. People only purchased apartments if they had already finalized agreements beforehand," Nataliia Sokolova, a real estate specialist with over ten years of experience in Kyiv and the surrounding region, shares her personal experience. Despite the ongoing war, she has remained in the capital and continued working.

Anatoliy Topal, vice president of the Association of Professional Real Estate Managers and currently a military man, provides approximate data:

"Before the start of the major war, the demand ratio was approximately 80% for investment deals and only 20% for personal living. This means that 80% of housing purchases were made for investment purposes, such as reselling and saving money, or for business, such as renovation, rental, or sale. On the other hand, only 20% of housing purchases were for personal use. However, as the market slowly recovered in the late summer of 2022, this proportion of demand remained unchanged: people were primarily buying homes to fulfill their housing needs."

"As of now, the market volume has decreased significantly, but there are still people willing to purchase housing," says Serhiy Kurhanov, a realtor and member of the Association of Real Estate Specialists of Ukraine.

According to Nataliia Sokolova, there has been a significant decrease in real estate prices. Most of her current clients have a limited budget, with some able to afford up to $100,000 in certain cases, but most falling from $30,000 to $50,000.

Most of our clients are from the regions of Kherson, Zaporizhzhia, Mykolaiv, and Kharkiv. Interestingly, they show more interest in the Kyiv region than the capital. Nataliia attributes this to the desire for familiarity in their living environment, even if it just resembles their previous hometown.

"Unfortunately, they have very little money at the moment. You see, they originally came here to live in rented apartments, but once they realized that the situation wouldn't improve and they couldn't return home anytime soon, they started running out of money. As a result, they began to buy whatever they could afford. This often meant purchasing extremely old houses, some as far as 100 kilometers away from Kyiv, with prices ranging from 10 to 30 thousand dollars," the real estate expert shares.

Children are also looking for such options for their parents from areas under constant enemy fire.

"They also purchase housing for parents in rural areas, up to $30,000, as long as there is some infrastructure and a peaceful environment," Nataliia Sokolova explains.

Of course, those who have more money are interested in the capital.

"Kyiv is more protected even in terms of feelings. Additionally, the surrounding Kyiv region is seen as a safe haven for travelers from more challenging regions," Nataliia adds.

The damaged properties mainly concern residents of Kyiv, but the owners are not eager to sell because they are counting on compensation from the government.

According to Serhiy Kurhanov, a real estate agent and member of the Association of Real Estate Specialists of Ukraine, most purchases are made by members of the military and healthcare professionals.

He noticed that the state program "YeOselia" [an affordable housing loan program – ed.] is exceptionally well-received. This is supported by data from state organizations, which show that as of September 26, a total of 3,471 families have already obtained these advantageous mortgage loans, amounting to almost 5 billion hryvnias since the start of the program in October 2022.

"Over 70% of these individuals are families of military personnel and security forces, eligible for loans at a discounted rate of 3%. This also applies to doctors, teachers, and scientists. Starting August 1, all Ukrainian citizens without a home or needing to upgrade their living conditions can access loans through this program at a rate of 7%. Demand for these loans is rising," Deputy Minister of Economy of Ukraine Nadiia Bihun noted.

The third category includes those individuals who have devoted significant effort towards acquiring real estate, diligently saved up, and ultimately amassed the necessary funds. According to Serhiy Kurhanov, this phenomenon is called "deferred demand."

Nataliia Sokolova also has clients like these. They are individuals who have been planning this purchase for a while and others who have ultimately decided to reside in Ukraine.

The expert explains: "In Kyiv, it's possible to purchase an apartment for 40,000, which would have cost 50,000 before the war. If someone can afford this amount, they could invest. It wouldn't be necessary for them to go abroad because they feel comfortable here and have a job they enjoy. Alternatively, they may be unable to leave due to certain circumstances."

"In addition, people who previously had some savings but lost their home are also attempting to purchase it," Serhiy Kurhanov adds.

Naturally, there are currently more sellers than buyers.

According to Nataliia Sokolova, there are items available for purchase, but there are no buyers due to a lack of funds acceptable to the sellers.

"In Kyiv, numerous apartments are available, and many residents seek to sell at the highest possible price. They hold the belief that affluent buyers will be drawn to their listings. However, those with financial means are currently cautious and not inclined to make any investments. This hesitation is driven by uncertainty about the future," the expert shares her opinion.

Anatoliy Topal, the Vice-President of the Association of Professional Real Estate Managers and a military serviceman, discusses the current state of the secondary real estate market:

"However, it is not the case everywhere," Anatoliy Topal notes. "The current trend is for housing within gated communities that offer exclusive amenities, independence, and safety. The demand for this kind of living is steadily rising, leading to a stabilization of prices. In contrast, there is not as much demand for housing in older Soviet buildings, as many alternative options are available."

The expert also notes that before the full-scale war, there was a high demand for upper floors with panoramic windows; however, this is no longer the case. Instead, there has been a rise in the popularity of tiny houses in the suburbs, also known as townhouses, as people are now seeking greater autonomy in their homes.

*Primary market – housing that is sold for the first time

"Unfortunately, our primary market has become pricier in hryvnias and will continue to increase in cost," Anatoliy Topal believes.

The specialist identifies the following prerequisites for an increase in prices:

• fluctuation in exchange rates, 

• escalating costs of construction materials, 

• growth in price of energy resources, 
• surging prices and a significant shortage of qualified workers. 

According to Anatoliy Topal, the latter is the most crucial factor. "Skilled personnel, whether in the military or abroad, are the reason we are observing an increase in the cost of a square meter, particularly in the Ukrainian currency, hryvnia."

Serhiy Kurhanov, a real estate agent and member of the Association of Real Estate Specialists of Ukraine, believes that the current state of the primary market is unclear:

"The deadlines for completing and opening buildings are currently quite unclear. Several developers have departed from the previously stated terms. Construction has come to a halt on numerous sites. This can be attributed not only to the extensive encroachment of our unreliable neighboring country but also to some uncertainties regarding "Kyivmiskbud" [real estate and construction company – ed.]."

Developers are attempting to uphold the market value of a square meter, but consumers are less eager to make purchases, Serhiy Kurhanov says.

"In the new construction market, apartments in buildings that have been completed and have their legal paperwork in order are performing well. There is greater interest in these units," Serhiy Kurhanov says.

Based on his experience, locals tend to show greater interest in new construction projects in the western regions, specifically in Ivano-Frankivsk and Zakarpattia [the Transcarpatia region – ed.], where construction is booming.

Apartments in them have a distinct aesthetic compared to those in the secondary market and more affordable maintenance costs.

"In newer buildings, even though apartments are significantly larger than standard Soviet projects, there are meters for everything—including heating. As a result, maintaining such an apartment, despite its larger size than those in the resale market, will be more affordable. This is because heating is typically the biggest expense in utility bills," the expert adds.

Serhiy Kurhanov thinks that real estate investments are always relevant. For professional investors, real estate can make up 50-90 percent of their investment portfolio.

"People are still buying now, although not with the same enthusiasm as before, but they buy," the realtor says.

"If you're looking to fulfill your housing needs, just buy. Don't wait for a better deal, buy. I won't comment on the attractiveness of investments because nowadays, it's not determined by the National Bank, the Ministry of Economy, or investment funds, but rather by us, the military personnel."

Therefore, the primary investment we must make daily is supporting defenders!