Real estate improvement and maintenance costs

In most cases foreign buyers immediately renovate their newly acquired residential property, typically spending $10-15 thousand USD on repairs and construction. Some real estate agencies offer construction overseeing services.In order to build new structures on property acquired, all real estate owners must obtain a building permit. Many locals and foreigners opt to pay building firms (usually around $500 or more) to do the whole process for them — from drawing up architectural plans to standing in line in all the government offices that put their stamps of approval on the plans.

Property maintenance costs in Ukraine are generally very low. Utilities usually amount to $15-30 per month for an average apartment, and there are no property taxes (other than the tax paid when selling real estate).

Foreign owners of real estate in Ukraine often install security systems, especially if they are not renting out their property.

Property that is consistently rented out usually requires periodic repair, which may add up to 5-20% of rent.

Getting money into Ukraine to buy property. Opening a bank account

When buying real estate a 1% tax is paid on the sales amount and another 1% is paid to the Ukraine Pension Fund. Buyers and sellers settle on who is to pay these fees and state this in the sales agreement. Real estate agencies typically charge 3-5% of the property price for their services. Finally, buyers may buy an insurance policy on the property for 1% from their real estate agency.Real estate investors are closely watching politics and the upcoming 2006 parliamentary election in Ukraine. There has been talk of implementing a property appreciation tax of 13% for residents and 26% for nonresidents, effective at time of sale, which could significantly affect the market. This tax would be paid on the difference between the price the property was originally acquired for and the price it was sold for.

Getting money into Ukraine to buy property. Opening a bank account

Up to $15,000 USD may be brought into Ukraine without special documents (until recently it was $10,000). Most foreign property buyers open a bank account in Ukraine and transfer money from abroad. Then money can either be transferred to the seller’s bank account or taken out in cash. Opening a bank account in Ukraine is easy and requires these documents:

• passport
• taxpayer code certificate
• proof of foreign origin of money (if foreigner puts cash in account after opening); a custom’s declaration from entering Ukraine, a bank receipt from exchanging cash or travelers checks, or a bank receipt from receiving cash with a credit or debit card

A good bank to open an account in is PrivatBank. In addition to an easy account opening procedure they have and hundreds of branches across Ukraine and have a convenient Internet transfer system that allows you to transfer money to your account online. Other banks are starting to catch up with PrivatBank in online banking, too.

Documents needed for purchasing real estate in Ukraine

Any foreigner may purchase real estate in Ukraine regardless of residential status or visa type. Foreigners may buy any real estate other than non-privatized property and agricultural lands, however, almost all foreign investors are interested in residential real estate. Just a few documents are needed to transfer residential property in Ukraine:

• passport
• Ukraine taxpayer identification code certificate; this can be obtained in Kiev, or a representative can do this for you with your passport and a power of attorney
• if buyer is married and comes to Ukraine without his or her spouse: copy of marriage certificate, copy of spouse’s passport, and notarized copy of spouse’s consent to buy property in Ukraine

Ukrainian property can be bought through some real estate agencies without the buyer’s physical presence. However, for obvious reasons almost all buyers of expensive property prefer to make the deal in person.

Causes of Ukraine’s real estate boom

Among the causes of the rise in price of real-estate in Ukraine are the following:

• low levels of housing per capita in Soviet times
• Soviet system kept people from moving to big cities, but now they are allowed to
• opportunities and capital concentrated in big cities
• rising income levels in cities and resort areas
• lack of investment alternatives
• mistrust of banks after losing life savings during the inflation and banking crisis of the early 1990s
• increasing accessibility of bank loans and mortgages

This boom has occured in spite of very high interest rates. When these rates finally lower, demand for real estate will likely rise further.

Property appreciation patterns

Property appreciation began in the early 1990s after Ukraine’s economy hit bottom and has been most pronounced in Kiev, Odessa, Lviv, Dnepropetrovsk and other large cities. Soon afterwards prices in resort areas of Crimea began climbing, and now real estate prices in Yalta are often even higher than in Ukraine’s capital Kiev. In the late 90s property values began rising in the Carpathian region and in other desirable vacation areas around the country. There are very few places in Ukraine where no price action has occured since the post-Soviet economic collapse, but in general property prices in villages and small towns around Ukraine remain very low.

Property values show no sign of halting their growth, and real estate analysts generally agree that the fundamental causes of the growth in prices in Ukrainian cities will continue to push up prices for several more years at the least.

How to participate in Ukraine’s burgeoning real-estate market

Many foreign visitors to Ukraine are well aware that Ukraine’s real estate market has been developing rapidly. Apartment prices in Kiev and other major cities of Ukraine have “gone through the roof” in the past several years. Happy indeed are the investors who purchased real estate (apartments) in Ukrainian cities in the early 90s for a few thousand dollars and have seen their property rise in value an average of 20-40% a year ever since. Add to that revenue from apartment rental and you have a very profitable asset!

Many investors made their decision to enter the Ukrainian market after the Orange Revolution (Nov-Dec. 2004), which demonstrated that the country has strong democratic and European leanings and will likely continue moving in this direction. As you will see below, acquiring real estate in Ukraine is not difficult at all.