Ukraine's Real Estate Market: Investing During Wartime Challenges

War has a greater impact on the economic situation than any other type of crisis. However, many experts say that these are good times for development and growth. The peculiarities of investing in real estate during the war were discussed with ZEZMAN Holding experts on the example of past historical crises. Investments can be destroyed or damaged, leading to significant capital losses. However, there is another side to the situation, because it is during the crisis that there is an opportunity to buy real estate at reasonable prices and in promising locations. After the dark times are over, there will be an opportunity to receive good dividends, as real estate will rise sharply in value.

Current situation

Construction of high-rise buildings and private houses has resumed in Ukrainian cities. The main reason for this is the increased demand for real estate, as the population in the regions located in the rear is growing due to the resettlement of Ukrainians from the destroyed cities and suburbs of Kharkiv, Mariupol, Kherson, etc. In addition, experts predict that after the war, Kyiv, Odesa and other major Ukrainian cities will be overcrowded with foreign companies and their employees, who will also need housing and office space.

At the same time, real estate prices are currently the lowest in history. Therefore, from a business perspective, now is the perfect time to invest in Ukrainian real estate. Given the lack of bank financing, cash investors have additional benefits.

For example, at ARTVILLE, the current conditions for purchasing a commercial space of 74.45 square meters are a 10% discount when paying 100%. The down payment is 50% with the possibility of installments up to 18 months. And the installment plan for an apartment is up to 48 months, with a down payment of 25%. The market is not actually consistently low, as it is also affected by internal factors, such as a limited number of new buildings, growing solvency of the population, and government support through the eHouse program. Shelling and the deterioration of the military situation may reduce it again, but not on a sustainable basis. In general, prices are on the rise. Buying real estate during the war can bring good returns. However, such an investment also carries significant risks, as market players openly admit. At the same time, waiting for better times to do so is not guaranteed by anything or anyone and only leads to exhaustion. Today, there are still places where businesses are ready to open new projects, create favorable conditions, and continue to develop - even despite the crisis. This is what creates life in the region and the country.

The biggest fortunes are made during crises - is this true?

Geopolitical tensions, Russia's full-scale invasion of Ukraine, the war between Israel and Hamas, and the confrontation between China and the United States are having a negative impact on the global economy and investment markets. These global things may be beyond the understanding of one particular person, but they affect the market. Investing in real estate is one of the most common ways to save money, generate passive income, and increase capital. Buying properties, renting out premises for living or commercial activities has been a profitable and stable form of doing business for many years.

There are few studies on the impact of war on the real estate market based on the example of World War II. In February 1942, the stock market fell to a historic low. Given that real estate prices are heavily dependent on stock market activity, the sector was experiencing a significant crisis during this period. At that time, it was impossible to sell a New York hotel even for a price equal to its annual profit, and rents in Wall Street office buildings were only a dollar per square meter.

Europe's infrastructure was destroyed by 70%. Despite the devastating consequences, demand for real estate, especially residential real estate, increased sharply after the end of the conflict as soldiers returning from the war sought to set up homes and start families. The cost of properties gradually increased along with the demand for them. Many families lived in temporary housing for years. This problem was solved by the construction of affordable housing estates in the suburbs, initiated by the famous American developer William Levitt. In the late 1940s, Levitt built one house in the suburbs every 16 minutes.

Each of the major conflicts had a significant impact on commercial real estate. Historically, such wars have required a shift in economic production. Instead of investing in traditional goods and services, the American economy ramped up production of war goods. Resources were fundamentally and disproportionately redirected from normal economic activities to the war effort. There was less institutional investment in new office buildings, shopping centers, hotels, etc. Immediately after the Second World War, there was a sharp increase in civilian employment, which led to an increase in demand for commercial real estate. In general, real estate values increased.

Investor's checklist

The process of investing should be done with a cool head, but today there are many more criteria and requests from future residents. ZEZMAN Holding shared its own 10 principles that already form the basis of the housing of the future in their projects:

• Electronic City: integration of digital aspects of residents in one convenient digital platform. That is, how accessible city and home services are to users.
• Engage Citizens: whether and how actively residents can participate in decision-making.
• Educated Community: What access is available to educational resources and initiatives to support continuing education and professional development for all age groups.
• Encompassing Urbanism: whether aspects of urban planning and development are included, taking into account social, economic, environmental and cultural factors for the harmonious and balanced development of urban spaces.
• Economic Development: whether economic growth and sustainable development of cities are stimulated by providing platforms for job creation and improving the well-being of the population.
• Empower Entrepreneurship: open opportunities for businesses by providing access to innovative tools and resources for their development and prosperity.
• EnergyEfficiency: making available energy-efficient solutions and sustainable technologies that reduce energy consumption and minimize the carbon footprint.
• Ecological Sustainability: maintaining an environmentally sustainable environment by protecting nature and improving quality of life through green technologies and sustainable urbanization.
• Enhance Health: how the health and well-being of residents is promoted, and whether access to quality health services, sports facilities, and healthy lifestyle programs is provided
• Evolve City as a Service: whether all the necessary services and facilities are provided within a single business platform, providing a city that is ready to use from day one and provides comprehensive comfort for all

Of course, there are basic criteria for investors that will help reduce risks and preserve capital:

• Zone of relative security: choose regions where there is no active hostilities. Cities with reliable infrastructure that have become new centers of internal migration.
• Reputation of the developer: choose companies with completed projects and transparent conditions. Monitor social media activity and construction progress. Pay attention to honesty and communication with investors.
• Installation and payment terms: check the flexibility of the terms, the payment currency, and the availability of insurance mechanisms. If you choose installment plans, fix the exchange rate and inflation restrictions.
• Energy efficiency and autonomy: choose facilities with generators and solar panels. This is not only convenient, but also increases the value in the long run.
• Infrastructure: pay attention to the availability of shelters, schools, hospitals, transportation, and shops.
• Liquidity and profitability forecast: calculate whether there will be demand for rent or sale of the property in the next 3-5 years. Think about alternative scenarios: long-term lease, resale after winning, relocation.

Preserving your assets during a crisis is not an easy task: currency devaluation quickly eats away at savings, banks are unreliable during a deep economic crisis and martial law, and starting your own business in the current environment requires a lot of courage. Therefore, investing in real estate during the war is the best option for those who do not dare to risk their own money and are looking for an opportunity to save financial assets from inflation.

Сергій Лозовський