Top 3 most expensive Ukrainian cities in terms of apartment prices

A shortage of skilled workers and rising material costs: How housing prices are currently being shaped

It's important to understand that the pricing dynamics in both the primary and secondary real estate markets are complex constructs that take into account both objective market factors and subjective influences that directly or indirectly affect housing prices, as explained by Victoria Bereshchak for RBC-Ukraine.

In the primary real estate market, for example, objective market factors include the construction cost, which comprises the cost of construction and installation works, building materials, as well as associated expenses for services and work by other contractors (architects, designers, consultants, lawyers, etc.).

"Also included here is the cost of land, which is calculated based on location potential, accessibility, recreational elements, concept, format, spatial zoning, apartment layout, and the infrastructure content of the project itself," she explains.

Photo: During wartime, a variety of factors impact housing prices (Vitalii Nosach/RBC Ukraine)

For instance, since the beginning of the year, the average weighted prices for construction services have increased by 30% to 45%, depending on the category of workers. This is attributed to a severe shortage of construction workers who have joined the efforts to defend Ukraine against the invading forces.

"Moreover, there have already been several stages of labor force loss in the construction market. This significantly impacts both the pace and the prices of services. There is a dire shortage of skilled concrete workers, crane operators, electricians, and bricklayers," notes the speaker.

Regarding construction materials, there has been an increase of 20% to 38%, depending on the category. This is primarily due to the loss of production capacities in the southern and eastern regions, changes in logistics, and ultimately significant increases in the cost of raw materials.

Only 50% of the real construction has been restored from the 90% of residential complexes

Among the objective market factors in the primary real estate market, the pace of construction and the degree of housing readiness also play a significant role. The higher they are, the more expensive per square meter. Therefore, it is not surprising that there is currently a noticeable significant imbalance in the market between seemingly similar projects, notes the expert.

"Out of over 90% of residential complexes that supposedly resumed construction after February 24, only about 50% have actually made progress, with slightly more than 30% achieving acceptable construction rates. Currently, acceptable progress means a minimum of 6-8% completion per month or one floor of concrete in warm seasons," says Victoria.

Photo: Lviv leads the city rankings for square meter prices (facebook.com/gpark.city)

Another factor influencing prices is the level of actual demand.

"It is clear that we currently have a significant imbalance due to the war. Certain regions that have taken in a large number of internally displaced persons and have become hubs may boast a higher level of demand, primarily in the western regions and the central part," explains the expert.

However, a restraining factor is the limited purchasing power of the demand that exists at the moment.

"In reality, we are talking about certain segments and formats, primarily the comfort+ segment (multi-functional quarter, city within a city, multifunctional complex), where, while maintaining sufficient construction pace, it was possible to return to 25% of pre-war sales volume. But it should be understood that these are individual complexes. Therefore, current prices in the primary market are significantly constrained by the actual purchasing activity and the ability of Ukrainians," she adds.

The top most expensive cities in Ukraine based on real estate prices

According to LUN data, Victoria Bereshchak names the following cities as the most expensive in terms of the price per square meter:

• Lviv - 48,000 UAH/sq.m;

• Kyiv - 47,000 UAH/sq.m;

• Uzhhorod - 42,000 UAH/sq.m;

• Dnipro - 41,900 UAH/sq.m.

Understanding the pricing logic for secondary real estate in Ukraine can indeed be quite challenging because, very often, there isn't a clear and straightforward logic to it, as Victoria explains.

"There are inflated expectations from property owners, often disconnected from the reality and market value of their properties. Among the relatively more objective market factors are occasional spikes in demand, as we witnessed during the internal migration frenzy in cities like Dnipro, Lutsk, Kropyvnytskyi, Ternopil, Cherkasy, Uzhhorod, Ivano-Frankivsk, and Poltava at the beginning of the full-scale war. However, we no longer observe such tendencies now," comments Victoria.

Photo: Uzhhorod has also made it into the top three cities where housing is the most expensive (screenshot from dom.ria.com)

However, prices in the mentioned hub regions that sheltered internally displaced persons have indeed increased significantly, ranging from 50% to 150%, and have remained at elevated levels.

"It's challenging to pinpoint a median price because it depends on the condition of the apartment – renovations, the state of the building (internal utilities, energy efficiency of the building), the presence of furniture and appliances, as well as markups by owners, which can sometimes reach up to 70% of the market price," notes the real estate market analyst.

If we consider the average weighted prices for more or less similar types of 1-bedroom apartments with an area of up to 45 square meters, the top three leaders are as follows:

• Lviv - 2.2 million UAH;

• Uzhgorod - over 1.5 million UAH;

• Lutsk, Rivne, Ternopil, Chernivtsi - in the range of 1.5 million UAH.

At the beginning of October, the National Bank of Ukraine abandoned the fixed exchange rate of the hryvnia to the US dollar but did not fully float the hryvnia. Instead, Ukraine is now operating under a regime of "managed flexibility." Experts have assessed whether apartments will become more expensive if the US dollar sharply appreciates in value.