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The State of Ukraine's Real Estate Market in 2024: Risks and Opportunities for Post-War City Reconstruction

The full-scale invasion of Ukraine by Russia in 2022 has drastically altered the real estate market.

Direct impacts of the war have resulted in physical damage to real estate assets, leading to a decrease in their value. Over the span of more than two years, Ukraine’s real estate market has suffered losses amounting to $59 billion, primarily in the residential sector. By mid-2023, Russia had destroyed 664 cultural heritage sites.

Indirect consequences include conditions shaped by the war's ongoing presence. The current state of Ukraine’s real estate market, along with key risks and opportunities for post-war city reconstruction, was discussed by Serhiy Shynkarenko, CEO of Enhance Development, for

  • Migration Factor: Risks and Opportunities for Different Regions

The migration factor is one of the most crucial elements in the real estate market amid wartime conditions across Ukraine.

Despite significant damages in Kyiv and the Kyiv region, this area has become the most populated by internally displaced persons (IDPs), spurring an increase in housing demand and prices. Therefore, the migration factor has also presented an opportunity for Kyiv and its surrounding areas.

The overall macroeconomic condition of Ukraine and its forecast, along with the existence of the state housing accessibility program "єОселя," also represent opportunities within the real estate market.

  • Systematic Destruction of Real Estate: Ukraine's War for Its Identity

Real estate is one of the sectors most affected by the war. As of January 2024, the total documented direct losses inflicted by Russia on Ukraine’s housing stock have reached nearly $59 billion.

Regions with the highest number of destroyed residential buildings include Donetsk, Kyiv, Luhansk, Kharkiv, Chernihiv, and Kherson.

The systematic destruction occurring during the war is not random. Buildings that reflect historical and symbolic values are deliberately targeted to instill a sense of despair among the population. Over time, the destruction of cultural heritage aims to erode societal values, traditions, and ultimately, the identity of the community.

As of June 25, 2023, according to the Ministry of Culture and Information Policy, Russian aggression has destroyed 664 cultural heritage sites.

  • Key Factors Influencing Real Estate Prices

The unique characteristics of real estate make the market particularly susceptible to imbalances. These characteristics include fixed location, size, and other intrinsic features that cannot be easily replicated. The lack of substitutability complicates achieving neoclassical equilibrium in the real estate market.

Arbitrage in real estate is expensive, as acquiring property involves transaction and holding costs, as well as a tax burden. Risk aversion, high costs, and low liquidity of real estate compared to other investments make the reservation price of real estate very specific and different for each buyer.

Real estate is seen as the best means of saving during times of high inflation, unstable markets, and an unsatisfactory pension system. It attracts investors in conditions of stock market uncertainty, allowing for risk diversification. Decisions to buy real estate are made regardless of potential rental income.

  • Rebuilding Cities in Post-War Conditions

To achieve sustainability after significant destruction, cities in post-war conditions require urban renewal projects. These projects can only come to fruition through strategic post-war policies. Historical parts of cities often decline, making heritage preservation a priority due to the risk of losing identity.

Post-war communities face severe socio-economic circumstances: abandoned territories, reduced resident incomes, bombed buildings, and destroyed infrastructure.

  • Migration Factor, Real Estate Market Demand, and Housing Prices

It is essential to understand not only real estate market trends but also the risks and opportunities it offers for developing urban recovery policies.

The migration factor has become one of the key elements in the real estate market amid wartime conditions across Ukraine. Population migration mainly affects real estate market demand by changing the city’s scale and age demographic structure, directly influencing housing prices.

Firstly, population migration has led to a decrease in the overall population remaining in Ukraine, but also to an increase in certain regions, particularly Kyiv, Lviv, Chernivtsi, Dnipropetrovsk, and others. The population, as the ultimate consumer of urban housing, directly causes changes in urban housing demand, while population migration usually has a short-term nature, and the supply of urban housing is inelastic over a short period.

Therefore, when the number of people increases in a particular city, demographic scales also increase, driving up housing demand. At this time, the housing market in this area/region/city experiences a deficit, leading to rising real estate prices; if the opposite were true, housing prices would fall.

Secondly, housing prices are significantly influenced by the age distribution of urban residents, such as the proportion of the working-age population and the age of the population.

In Ukraine's real estate market, the migration factor presents an opportunity for regions where the largest number of Ukrainians have relocated, despite statistics showing the most significant destruction in those areas.

For more insights on the opportunities in Ukraine's real estate market and how city reconstruction will proceed after the war, read the full article here: