Is buying property in Ukraine worth it?

Is it a good opportunity to buy real estate in Ukraine before the war ends? Stable markets offer few opportunities, while markets in crisis can offer properties at discounts of up to 80%. Could this be the case in Ukraine?

That's the question we're going to answer in this article.

Ukraine's housing crisis

According to World Bank, 13% of the housing stock was damaged or destroyed in the war between Russia and Ukraine, amounting to more than 2.5 million homes. 

The long-term financing needed for the sector to rebuild is estimated at more than 84 billion dollars. 

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Apart from the war, other factors are contributing to the housing crisis. More than 50% of the houses in Ukraine were built more than 50 years ago and the government's housing fund is short of money to finance renovations and new construction.

The dynamics of low supply and high demand

Due to the dynamics of the war, which affects the eastern side of Ukraine the most, there are massive migrations from these regions to safer places. 

For this reason, in the last 3 years, some Ukrainian regions have seen property prices increase by more than 20%. Below you can see the growth in apartment prices on the secondary market over the last 3 years.

Regions further west have outperformed even the capital Kyiv, as they are seen as safer and more stable. Ternopil, Lviv and Chernivtsi have been seen as good options for poorer people and the middle class.

The capital, on the other hand, has received more investments related to high-end real estate, with bunkers and other more expensive security structures.

Also note that there is insufficient data in the Crimea, Donetsk and Luhansk, in the war, where liquidity for buying and selling is low and prices unstable.

In areas currently occupied by Russia, the Russian government is distributing land titles to citizens in an attempt to repopulate the area. In other words, if everything continues as it is, Ukrainians will lose their property.

Risk x Return

Real estate prices are not falling, on the contrary. And despite this, the risk of investing in a country at war remains extremely high.

It's worth noting that the costs are also high, including more expensive insurance than the European average, constant shortages depending on the region and the risk of your property being confiscated by the invading government.

On the other side, if the war ends, we will see a huge reconstruction effort and possible investment in Ukraine, perhaps even entry into the European Union. However, the country will need to eliminate its chronic corruption problems and diversify its industry, which was partially destroyed in the war.

Exiting the conflict will not automatically turn Ukraine into a rich country and property prices may even fall, as more areas will be available for real estate development.

For these reasons, the risks of buying a house on Ukrainian territory, even in war zones, outweigh any future appreciation, which could take years to arrive and also immobilize capital that could be invested in other assets.

Is it worth buying property in Ukraine now?

The simple answer: not for investment.

If you're only thinking of investing, buying a property in Ukraine can be extremely risky and is definitely not something that proves profitable in a risk vs. return analysis.

For other individual reasons, the analysis is more complex and will depend on each case.

In short, investing in Ukraine right now is not worth it. It's too much risk for an indeterminate return.