Today, domestic investments into real estate and construction represent the main flow of capital injections in Ukraine. Meanwhile, the volume of foreign investments is not as high given the prospects the Ukrainian market offers. The chaotic growth of UkraineвЂ™s investment market is the reason for such a вЂњcoolвЂќ attitude of foreign investors towards the country. This is precisely why only a few investors have the courage to make long term investments into the countryвЂ™s economy. Today, the domestic construction and real estate markets are rife for making a вЂњquick buckвЂќ.
According to the State Statistics Committee of Ukraine, peopleвЂ™s investments into private homes in January-June 2006 was UAH 1.926 bn (US $381 mn); or 4.9% of the total volume of investments attracted to fixed assets. UAH 7.237 bn (US $ 1.43 bn) or 18.5% of the total volume of investments are attracted to real estate transactions, rental and legal services. Over the same period last year, this indicator grew 23.5%. Overall, around UAH 45.437 bn (or approx. US $9 bn) in foreign investments were attracted into the Ukrainian economy in the first six months of 2006, while the volume of investments into fixed assets was at UAH 39.076 bn (US $7.738 bn).
вЂњIn spite of a moratorium on the allotment of land plots for construction over the past six months, around US $280 mn in foreign direct investments (FDI) were injected in the economy in Kyiv alone. This is 1.7 times more than in the same period last year,вЂќ stated Arthur Oganesian, Vice President of the Association of Real Estate Specialists of Ukraine.
In general, the foreign capital in Ukraine in the first quarter of 2006 grew four times faster than in the same period last year. Investments came in from 116 countries, of which ten accounted for 85% of total investments made.
Halyna Maliborska, Director of the Commercial Real Estate Department at Colliers International, said that the main stimulus for foreign investors is high profit margins compared to the markets of Central and Western Europe. Besides, there are not so many serious players on the Ukrainian investmentsвЂ™ market and a chance to be a leader plays the role of an additional вЂњlureвЂќ for western investors.
вЂњToday, foreign investors come to Ukraine to turn a quick buck. The current situation of вЂњthe greater the risk, the greater the returnвЂќ is favorable for this,вЂќ say Vadym Neposedov, General Director of the Ukrainian Trading Guild consulting company.
On the other hand, instability and вЂњsavageryвЂќ of the domestic market, and very often illiterate government policy, scare away the major authoritative foreign companies. Last March, the British analytical company Oxford Business Group, which is studying the markets of Eastern Europe, warned potential investors about the insecurity of investments into Ukrainian real estate. The reason for this was a scandal around the construction projects of ElitaCenter, which revealed the defects of Ukrainian legislation in the sphere of construction investments.
If we want to bring order to the local real estate market, specialists say, we must introduce new rules common for all participants of investments into the construction market, create conditions for equal and fair competition, and provide legislative guarantees to participants in investment tenders and construction companies on the part of the government.
By Yulia Gramotnaya