11/13/08

Construction Industry

Construction Work in Ukraine Continues to Slow Down

By Katya Shtamburg, Nova Mova staff writer, from Internet sources.

Ukraine’s construction industry and building material market are facing new difficulties, and the pace of work has nearly ground to a halt, according to recent government statistics. Ukraine has been deeply affected by the worldwide financial crisis, and while all areas of construction have been severely impacted, one of the worst hit has been construction of housing.

Demand creates opportunities, but demand has shrunk because few buyers can afford housing loans. And at the moment there are few buyers who can apply for mortgages at current interest rates, and banks have limited capital to make loans. Very few people have cash to buy houses without the help of banks. As a result, developers are scrambling to raise financing for their construction projects, particularly residential, and most are halting work.

Similarly, the high cost and short supply of building materials in the Ukrainian market has left many cities dominated by idle cranes hovering above partially completed projects.  This is especially true in Kyiv, which had been booming, but where the added expense of high labor costs has forced many major construction projects to be suspended.

However, most experts anticipate that the commercial property sector will overcome this first wave of crisis. The quantity of office, retail and warehouse space in Ukrainian cities is among the lowest per capita in Europe. As a result, rental rates for commercial real estate in Ukraine far exceed the European average.

Industry experts expect prices to fall by 20 percent in the secondary and mid-class housing markets by the end of the year. Some are even predicting a 25-percent correction. Another possible scenario is that the construction will increasingly move away from the capital city to the oblast capitals where it is cheaper to build and where demand is growing.

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