Subways of Ukraine are full of commercials offering new apartments. In every train car of Kyiv, for example, there are 15-20 bright posters showing various housing, including cottages in the city and in suburbs. Companies posing the ads obviously try to attract potential clients with relatively low prices (6500-7000 UAH/m2  or 2500-2600 UAH payment per month), though even those unfamiliar with the real estate market understand that the offered prices are way lower than the average level of prices in large cities.

Why metro

Why do they advertise such expensive goods, as real estate, in metro? Subway passengers are not so well off to afford a brand new apartment.

Nevertheless, not even asking an expert opinion, the author of this article dares to challenge this statement. Yes, metro is mostly used by ordinary, middle class citizens, who cannot afford a new apartment even at reduced mortgage rates (20-25% of annual interest rate and minimum 10% of down payment). However, there are passengers for who such rates are not the big deal. The author personally knows such people, and they use metro on various reasons. Someone does not like cars and city traffic, others prefer not to spend money on petrol and spare details. Private housing, on the other hand, is very important for them. Some already have mortgage loans, others are thinking to take despite high interest rates and various extra charges.

As a result, ads in metro appear to be efficient. Workers of site developing companies ForUm has interviewed agree that 2-3 potential clients out of 10 have found their firms through metro ads. For other companies the share makes six out of ten. As for the concluded deals, sales and marketing department head of the construction company "Pearl of Troeshchyna" Viktor Onishchenko informs that about 10% of concluded contracts come from subway ads. Placing advertisement in metro is cheaper - one light box in metro cost $250-300 per month, while one street billboard cost minimum $500-600 per month.

Moreover, investors try at all costs to cover their construction projects in conditions of low demand, thus dominance of ads is obvious. Many projects were started before the crisis, when the real estate market was at its height. Now, even the largest site developing companies are happy to break even.
Experts specify that as in many other cases companies try to attract attention of potential clients at the expense of 'partial information', meaning a lie. And the matter concerns not only unexpected banking fees or rates, but also the apartments in question are. Such low-cost apartments do not have complete finishing, not speaking about furniture, and may have rally poor planning. And, of course, not very well known site developer may appear to be a scammer, violating facility completion deadline at best.

Mortgage perspectives

The Cabinet informs that in the second quarter of 2012 the population income grew by 15% (comparing to the same period of 2011). Moreover, state program on affordable housing is called to increase the demand for real estate. Thus, last year almost 700 deals on affordable housing were made, 240 subsidized loans on youth housing credit program and more than 800 subsidized loans for individual rural site developers were granted.

In Kyiv, for example, more than 18 thousand families have already applied for apartments on affordable housing program. These are low-income families, large families, etc. Nevertheless, former housing minister Anatoly Blyzniuk notes: "I know for sure that many families who have the right to subsidized housing do not want to register, as they fear complicated procedures or hidden dangers. People, the system has changed. The state needs new customers to develop support and compensation programs." 

Speaking about the development of "big" mortgage market, the situation will remain complicated in 2013. Financial resources, attracted by banks, are not cheap and mortgage pay-off period is long. Such conditions limit banks' possibilities to grant inexpensive mortgage loans. Average interest rates for housing vary within 23-25% per annum in hryvnia. However, economist Vitaly Kulik notes that the situation on the mortgage market will depend on the economy recovery, promised by the Cabinet. "If "recovery" plans (GDP growth, inflation control, population income growth) are realized at least partially, the cost of capital on Ukrainian financial markets will go down, and as a result the banks will get cheaper resource for crediting and will reduce interest rates.

It means that positive development of events is possible in 2013. It will be a real deal if at least another 1000 people will be able to afford new apartments following the ads in metro, the real chance Ukraine so needs today.

Andriy Boyarunets


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