All Forum Posts by: Sean Almeida

Another update!

In a press conference last week, President Zelenskiy said that the interest rate for mortgages would "soon" be 10%. Very high by Western standards, but with cap rates in the low teens and plenty of room for price appreciation (comparable properties in other East European capitals are almost twice the price) this figure could be interesting for some investors.

Hi Ben,

I am founder and CEO of a real estate agency here in Kiev. I've been doing real estate here for 8 years and have had my company for almost 5 and a half years. We can handle all aspects of residential real estate (purchasing, refurbishment, tenant search, management, etc) with a focus on the historical center of the city.

Let me know if this is still a relevant issue for you.

Best,
Sean

Hi All -  update from the field.

Mortgage interest rates for UAH loans are just now starting to edge down, but they are still mid-to-high teens. However, they are talking about the rates coming down to below 10% in the next year or two.

However, I did hear from one bank that they are offering to loan out 40% of the value of a property only if that property is revenue generating. The manager I spoke with wasn't directly involved so she was not sure what the rate would be if the loan were in foreign currency, nor did she know how exactly the bank would value the property. Real estate here is a notoriously inefficient market, so appraisal prices can vary wildly. 

However, we did recently complete one turnkey project on behalf of a buyer and it looks like the gross rental yield is going to be about 15% (assuming we do sign with the tenant next week), and once we are signed I will approach the bank again to get more details.

Will update when I have more details!

Best,

Sean

Hi All,

Since I posted this, we have created a full turnkey solution for foreign investors. We help the foreigner (individual or company) to buy the property, then we renovate (I have two interior designers/project managers in house), then we rent to other foreigners fixed to hard currency (mostly USD but sometimes EUR), then we manage the property. Most tenants stay for 2-3 years.

Doing this we have seen yields of 11-16%. The gap usually depends on size of the investment, with 11% being smaller investments of around $130-150k all in. The higher yields come from the 3-5 bedroom options that are in high demand among the expat market. 

As for appreciation, we see that the market is slowly starting to creep up as the economy starts growing again and FDI is increasing. We see the market going back to $4k per m2 for a renovated apartment in the dead center, which it was before the war began. Currently when the renovation costs are included we are seeing all-in costs of $1800-2500 per m2.

Credit is still not practical, although the central bank did lower interest rates 0.5% recently. However, inflation is expected to be well below 10% this year, so decent mortgage rates are at least on the horizon. Also, we are in talks with one European bank that will lend up to 40% of the value of a property, but only AFTER it is rented out. They wouldn’t tell me rates or terms until we discuss a specific property, but in any case this is a good sign.

In case there are any doubts about the investment case, a deputy minister of infrastructure came out with a shocking statistic recently:

In order for Ukraine to have the same m2 per capita as the European average, one BILLION square meters of residential real estate needs to be built. And that’s not taking into account that much of the current housing stock is subpar, to say the least. 

Another indicator, this time from the commercial segment, is that the vacancy rate for offices in Kiev is currently 3% (three percent). A couple of million meters are under construction and should be delivered in the next two years, but in the meantime rental rates for office space have reached the European average.

And believe me when I tell you that commercial real estate is way more advanced than residential...

Best Regards, and Happy Easter from Kiev!

Sean 

In theory, yes, but the rates are still extremely high so effectively all purchases would have to be in cash to make sense.

Originally posted by @Greg Scott:

@Sean Almeida  I've lived in Latin America so am familiar with the type of risks you mention.   Personally, yields of 10% don't excite me.  I can easily get that here in the US without the political and currency risk.

Now if you could show I would have 10% yield with a likely 100% valuation pop in a couple years, that gets more interesting.

 Hi Greg, thanks for the reply. Sure, I understand that 10% alone is not going to get most people interested in the city given the risks, but indeed I think there is a strong case for certain classes of properties to double in 5-7 years, on top of the 10+% yields. I could tease this out more, but the main reasons are 1) a down economy, 2) an emerging economy, 3) AAA property locations, 4) lack of credit available, and 5) historical buildings (very sturdy construction, 3-4.5m ceilings, etc) that are very undervalued at the moment for mostly aesthetic reasons that can be fixed quite easily.

Hi all, I am co-owner of a real estate agency in Kiev, Ukraine. We are seeing a huge uptick in interest from foreign buyers looking to do buy-to-let in downtown Kiev. No credit is available, but yields are 10-14%. I'm curious about the general attitude towards these kinds of transaction from American investors and other real estate professionals. Also, I would be very interested to hear from anyone who has dealt with this kind of market who can share some positive or negative stories. I only have real estate experience here in Kiev, so I'm really looking to get a broader overview. Thanks, Sean