High demand igniting suburban real estate surge

In recent years, Ukrainians seeking to live in the nation’s capital have turned to less expensive options in the suburbs as urban real estate prices skyrocketed to $5,000 per square meter and higher. Demand remains high, but the rush for affordable suburban land by average citizens and speculators alike is pushing prices for suburban lots to extremes too.

Prices surged about 70 percent in 2007, averaging $5,000 per 100 square meters in Kyiv suburbs, driving market demand further into the suburban periphery, said Serhiy Kostetsky, an analyst at SV-Development Company, a leading real estate firm.

“As many of the lots immediately adjacent to Kyiv have already been purchased in the last several years, investors are scouting out more remote, affordable areas,” he said. “These regions further from the capital will become more popular and will, as a result, stimulate price growth.”

suburban_real_estate_ukraineIn recent years, investors bought up most of the best land for residential development in Kyiv,s immediate suburban districts of Kyiv-Sviatoshyn, Vyshhorod and Vasylkivsk .

Prices in one nearby hot spot, the Brovary district, jumped by an astronomical 115 percent to $4,821 per 100 square meters in 2007, according to Kostetsky. Prices will continue to grow in the district closest to the capital, but future price leaps will not be as extreme, he added.

SV-Development estimated land prices will increase by an average of 30 percent in suburban Kyiv this year. High demand has lured a wave of fresh investment into Western-style model suburban housing developments, locally known as cottage neighborhoods. The lionls share of land purchased last year outside Kyiv was for cottage development projects.

In 2007 alone, about 100 cottage villages were under development in suburban Kyiv, compared to 40 the previous year. Growth of about $1,500 to $2,100 per 100 square meters is projected this year in the Borodiansk, Baryshiv, Fastiv and Pereyaslav-Khmelnytsk districts, which are about 40 to 60 kilometers from Kyiv.

Prices can vary significantly depending on specific conditions of a particular district, first and foremost the availability of basic infrastructure, said Viacheslav Sobutsky, an analyst at DEOL Partners, a Kyiv real estate consultancy.

“The Tarascha, Bila Tserkva, and Kagarlyk districts are, for example, expected to cost more due to their proximity to the Dnipro and Ros rivers and scenic nearby forests,” Sobutsky said. “In contrast, much of the most prized land close to Kyiv was sold to the rich, blocking off access to the Dnipro River in many cases, making the neighboring land less attractive.”

The two main Kyiv suburban developers are investment bank Dragon Capital, with projects in the Borodiansk, Boryspil, Makarovsk and Brovary districts; the Yevropa group of companies is currently building the Kyiv Region’s biggest cottage community called Olympic Park, about 19 kilometers from the city along the Zhytomyr highway.

The community’s 290 hectares will consist of 1,030 lots, between 1,500 and 3,500 square meters each, for middle-class homes to be built by 2013. A single Olympic Park plot is priced at $200,000, though the price will increase by about 25 percent in 2008. Experts estimate the project’s cost at more than $270 million.