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Investment in Ukraine Property and Euro in 2012: Is it Really Worth?

The roller coaster that is the Ukraine property market is decisively not for the faint hearted, but with Euro 2012 fast coming, is an investment in Ukraine property worth some consideration?

Facts about Ukraine Property

  • 2000 to 2008: property prices ballooned an incredible 1,000%, with the bulk accounted for by the housing boom of 2005-2008, which was fueled by foreign buyers along with strong economic growth, with GDP galloping along at a 8% clip from 2000 to 2007.
  • 2009: Ukraine was caught up in the economic collapse that swept through the world starting in 2008 and the price of flats in the capital of Kiev contracted by a huge 26.
    5%. GDP took a tremendous hit of 15%, partly due to a collapse in steel, Ukraine’s major product.
  • 2010: the city of Kiev experienced a further decline of 14.6% in flat prices.
  • 2011: the same flats in Kiev suffered an additional drop of 4.4% for the year, although prices improved by 25.7% until November from a year ago, then fell back.
  • April 2012: Kiev apartments jumped by 28.9% to $2,970 per square meter, albeit still 30% off from the peak of 2008.

What can cause Ukraine Property to improve so drastically into 2012?

  • Well, Particularly in light of the fact that flat prices in Kiev kept falling despite an economy expanding by 4.1% in 2010 and a further 5.2% in 2011?
  • The Ukraine economy is also expected to slow to a 3% growth rate in 2012, amidst the backdrop of the Euro zone financial crisis.
  • Well, a widely offered explanation for the run up in apartment prices is the Euro 2012 soccer championships hosted by Ukraine in partnership with Poland, slated to start on June 8 and end on July 1.
  • Speculation is rampant that this major sporting event will spur foreign investor demand for an investment in Ukraine property, as no major restrictions are placed on foreign property buyers and there are no property taxes. Capital gains are furthermore not levied on first property purchases.
  • However, a darkening cloud is gathering, buoyed by the incarceration of former Ukrainian Prime Minister Yulia Tymoshenko by Ukraine President Viktor Yanukovych, which is viewed globally as pure political revenge.

Various European leaders have vowed to boycott Euro 2012, the most prominent of whom is German Chancellor Angela Merkel, although numerous observers have disputed that this stance can influence the political situation in Ukraine. President Vladimir Putin of Russia has argued that the case of Tymoshenko should be separate from Europe’s most prestigious sporting event, as others pointed to the fact the U.S. boycott of the 1980 Moscow Olympics was largely inconsequential.

To their credit, after large numbers of tourist complaints about price gouging at Ukrainian lodging facilities, Ukrainian activists have formed The Friendly Ukrainian initiative to provide free accommodations, translation and other services to foreign guests, such as airport pickups and guided tours. The aim of the group’s program coordinator, Viktoria Svitlova, is to portray how friendly and hospitable Ukraine can be.

This admirable private initiative may well turn the tide on negative perceptions, and make an investment in Ukraine property more palatable, especially for multinationals looking to set a foothold onto what is the bridge between European, Russian and Asian commerce. The World Bank also made the case for Ukraine as having significant upward economic potential, due to its educated work force, considerable domestic market, and natural resources. Fitch Ratings chimed in by declaring that the government budget is performing ahead of target.

Invest in Ukraine property, anyone? Leave  a comment 🙂

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