MA Thesis

The Performance of Residential Real Estate Investing in Ukraine



Published in:

Kyiv School of Economics


residential real estate investing

Real estate as an asset plays an important role in financial activity worldwide for both institutional and private investors. According to Savills World Research, global real estate value is more than USD 250 trillion as of 2017. This number is three times more than real global GDP of that year. Housing, as well as commercial premises is an irreplaceable part of our life, which makes demand for real estate almost eternal. In this study we will particularly focus on residential premises. House or apartment is one of the most expensive purchases for a household during their financial life cycle. It is often costs multiple annual income for an average person. Even though many of residential object are owner-occupied, it is still huge market for investing activity. Firstly, a household periodically sells its residential property to buy more comfortable or affordable one. The investor can act just like this. In the context of situation in Ukraine in late 2021, real estate investing is a stable and well-known way to protect and even significantly increase own capital. From 2016 to 2021, new housing price index in Ukraine increased by more than 30% in dollar terms. Numbers are even better for secondary market – almost 7% of annualized growth. Secondly, there are many households which rent their place to leave. This fact opens another option for investor. According to various sources, real estate renting prices are increasing as well, by approximately 1.6% per year in dollar terms. Combining these two options in one – buying a residential object, rent it out and then sell at a good price can create a profitable investment opportunity with relatively low risks. The purpose of this study is to analyze attractiveness of residential real estate investment in Ukraine, highlight key benefits and flaws, assess risks associated with this type of investment and to setup a model which describes key financial indicators of this investment opportunity. It will create a framework which can be used to analyze investment performance given external conditions, tax regulation and other factors. It can also help to benchmark profitability and risks to other investment options.