Summer has arrived in Kyiv and many people have already left for their annual vacations. Late July through to late August can be an especially quiet time in the Ukrainian capital, but not for real estate brokers who work with expats during this peak relocation season.
Often such clients have big budgets, sign rental contracts for 2-3 years, and prefer to live downtown in the most sought-after neighborhoods. Their search could described as a mad scramble for expat-suitable housing that meets their extensive list of requirements for location, size, layout, renovation quality, amenities, and of course, price.
It is during this “hot season” that the supply deficits and shortcomings of the Kyiv rental housing market for expats really come into focus. If you are thinking of investing in Kyiv’s residential real estate market, the relocation season can provide useful insights when considering which investment properties might offer the best annual yields and returns.
Golden Gate: Expat Central
The area around Golden Gate (Zoloti Vorota metro) is the location of choice for many expats in Kyiv’s upmarket and premium segment. More than 60% of embassies and international organizations are located in this historical neighborhood, which is also home to scores of upscale restaurants and cafes.
Foreign tenants prefer the flatter streets close to the metro station such as Yaroslaviv Val, Reitarska, Lysenka, and Zolotovoritska. Even though many expats may have cars or rely on taxis, often they are not keen on being too far from Golden Gate metro. For particularly demanding tenants, 28 or 30 Yaroslaviv Val, which is close to the Italian Embassy, may already be considered too far away. This is something to keep in mind if you are a property investor considering buying, renovating or letting out an apartment for rental income in this upmarket neighborhood.
Many apartments in the Golden Gate area are in historical tsarist era buildings and have lots of character. However, some tenants prefer the modern amenities you find in new buildings, such a concierge and secure underground parking. There are less than a dozen new buildings in the prime rental area of Shevchenko district within a ten-minute walk from Golden Gate. These are luxury buildings and the rental apartments in them are pricey and in very short supply.
If you have the budget, it is possible to find rental housing near green space in the very heart of Kyiv. Close to Golden Gate is the Fomin Botanical Garden. Apartments on streets like Pyrohova and Leontovycha can offer especially good views of the Botanical Garden. Opposite the National University and close to Lva Tolstoho metro is the small but lovely Taras Shevchenko Park. Lva Tolstoho Street and tiny Tereshchenkivska Street have apartments that look out onto this park.
In terms of total green space, Kyiv is one of the “greenest” capital cities in Europe. It boasts numerous centrally located parks and green areas including beautiful Mariyinskiy Park near the extremely pricey Pecherskiy Lipki neighborhood in the government district. A little bit further out from the center is Hryshko Central Botanical Garden. This area is 1.5km from Druzhby Narodiv metro but boasts numerous modern luxury residential and business complexes. Plenty of new complexes are located around Kyiv’s largest park, Holosiivskyi National Nature Park, and are often close to metro stations.
Demand for expat-friendly detached houses in some of Kyiv’s greener suburbs has dropped significantly since 2014. Many Western companies have extracted their expat country directors, but falling downtown rental rates may also be a factor. An elite 200 square meter apartment in the center of Kyiv might now cost USD 2500-4000 per month compared to USD 5000-6000 prior to the onset of the conflict with Russia.
Other Expat-Friendly Kyiv Neighborhoods
Readers familiar with Kyiv might ask, “What about apartment rentals near Maidan and Khreshchatyk?” Although some expats do choose to live on relatively quieter side streets close to Maidan and Khreshchatyk, the noise, traffic and parking problems that come with living in the very heart of the city make these neighborhoods more suitable for the daily/short-term rentals market. Some expats do elect to live near Teatralna metro station and the National Opera House, but living here can often also be noisy due to traffic and the proximity to Khreshchatyk.
Beyond the very center of town, expat-friendly locations include charming riverside Podil, which can be a bit less expensive than Shevchenko, Pechersk, and upper Holosiiv districts. Nevertheless, the reliability of demand for rental housing in less central areas of town is uncertain, making it difficult to project investor returns.
Expats Returning to Kyiv
There is currently an absolute shortage of expat-suitable 90-100 square meter two-bedroom apartments in the prime rental area of downtown Kyiv. The supply of housing is already noticeably tighter than it was in 2016 and the full rush of the relocation season has yet to begin. While it would be an overstatement to claim that the big budget expat country directors are returning to Kyiv en masse, today there are noticeably more expats who are looking for housing than a year ago.
So what does this mean for prices? As a general rule of thumb, you should budget at about USD 1000 per bedroom in the prime rental area. Why do we not see more investors acting upon the investment opportunities presented by the lack of expat-suitable downtown rental supply? Because of the low carrying costs for holding property, there are simply not a lot of attractive offers on the secondary market at any one time despite a gradual increase in sellers.
Nevertheless, it is currently possible to find prices as low as USD 1,200-1,300 per square meter for downtown apartments in historical buildings with no lift. When properly renovated, such properties can deliver annual yields of 10-12% or more. When told about such opportunities, many surprised foreign investors ask, “Why such a low price? Aren’t location and demand already priced into the market?” The answer is “yes” and “no.” Kyiv’s residential real estate market can be inefficient in many ways, but savvy local buyers will quickly jump on a property that is offered by a motivated seller at an attractive price. Local buyers are usually unconcerned by things like imperfect ownership documents and illegal/unregistered renovations, figuring that they can fix such problems after a purchase. Moreover, the vast majority of local buyers are comfortable with grey market transactions in physical cash, which also appeals to many sellers.
Instead of buying individual apartments on Kyiv’s secondary market, many foreign real estate investors are seduced by the ostensible opportunity presented by the large number of derelict historical buildings in Kyiv’s central districts. Luxury condominium conversions of such buildings with Western-style renovations would greatly increase the supply of quality housing for expats, while preserving the character of these historical neighborhoods. Alas, today most of these buildings have complicated legal histories including disputed ownership, while other buildings have owners who are attempting to get their properties condemned so they can demolish them and build a luxury high rise on prime real estate. This does not mean that conversions and renovations of historical buildings are impossible, but such ambitious projects are only for patient and determined investors who are prepared to work with local experts to overcome significant obstacles.
Despite many of the natural advantages enjoyed by local buyers, sophisticated foreign property investors can bring a lot of much needed expertise to Kyiv’s residential real estate market. Currently, there is a mismatch between what local owners are offering the expat rental market and the preferences of these tenants. Foreign investors are better equipped to meet this market demand by improving both the quality of offerings and property management standards.
It is worth bearing in mind that attractive deals on Kyiv’s secondary market tend to have an extremely short half-life. Foreign investors need an investment process built for speed so that property search, due diligence, and closing can all take place swiftly. This often requires a coordinated local team that includes real estate advisors who can consult on both the sales and rental markets and assist with property management. Investors would also be wise to seek out legal and tax experts who can structure deals, as well as notaries and bankers who can assist with closings and overseas bank wire payments. The Kyiv expat rental market offers a range of opportunities, but it can be challenging to navigate it without local knowhow.