Cash is King in Crimea

One of the best kept secret’s of the property investment world is the south coast of Crimea. It’s the favored place for Ukrainians and Russians to buy holiday homes and prices are rising strongly, on the back of big rental demand. Whilst the capital Kiev is slowing down, this area is seeing sharply rising prices.

The problem till now for International investors wanting to get make a profit is the absence of international off plan apartments. Gaining all necessary permissions can be bit of a nightmare for developers in Ukraine, which has  restricted supply.

But now, Hanroc Developments Ltd a joint UK and Bulgarian company, is about to offer the first internationally marketed high standard apartments. The Lighthouse apartment project in Sevastopol has progressed faster than the norm in Ukraine, largely due to the involvement by the local Municipality in the project. It is, in effect, being fast tracked.

All apartments have good sized balconies with full on sea view. The developers are reflecting the local classical style of architecture and Roman ruins with a circle of pillars on top, which makes a superb shaded viewing area. It will be illuminated at night to really complete the lighthouse look.

The site is on high ground 6 m above sea level and there is a lower floor with reception and spa centre. There are no compromised sea views for any apartment. And what views. You are surrounded by sun and sea, with a fascinating bay in front. You could spend most of your holiday sunbathing on your balcony and not get bored!

Market analysis

For investors, it is important to outline the market in Crimea and why it might be claimed the Lighthouse development is arguably the best investment opportunity in the whole of Ukraine. A strong assertion, no doubt, but let’s look at a few facts.

Sevastopol is seeing the fastest property price growth of any major place in Ukraine.  For example, according to the consultant company "Planeta Obolon", the rate of price growth in January-June 2008 in Sevastopol was 17.7 to 20%, while in Kyiv only 13.1%. Быстрее всего дорожала жилая недвижимость на Южном побережье Крыма — в среднем, более чем на 30% за первое полугодие.”

And a 50% price increase is estimated for all of 2008. Valery Petrusevich, a specialist in real estate construction Crimean компании «СоюзСтройТехнология», объясняет это тем, что квартиры на Южном берегу Крыма приобретали в кредит не более 10-12% покупателей. company "SoyuzStroy Tehnologiya”, notes in leading Ukraine Business magazine, “Contracts”, that the tightening of credit that has affected the rest of the Ukraine has not had any effect in Crimean south coast. The reason being that only 10 to 12% of buyers use a mortgage.

Cash is King in Crimea! Certainly not like the UK or most “mature” markets.

He goes on to note that buyers are mainly interested in the very good rental returns that can be had in this area. Judging by the high purchase prices in the area – up to 10,000 USD a m2 – rental returns are clearly high. According to an expert in real estate "Planet-Crimea", Sergei Length,

 “During the season (May to September) the owner of an apartment of 50 square squares can make 

$ 4.5 to 15 thousand.”

That’s about return on investment of about 5 years.

In Crimea, prices typically are about 40% higher at end of build than at beginning. For Lighthouse, this will be even more, as Hanroc are offering a batch at low pre-release prices.  And perspective of apartment is critical to price. An apartment facing inland can be 30 to 40% cheaper than sea view. All Lighthouse apartments are front line full on sea view.

Of the flats being built and sold in Crimea, only about 15 to 20% are of the cheaper variety. There’s an increasing emphasis on luxury units. This confirms my view that the South Coast of Crimea is becoming like a Slavic South of France, where status and expense rule.

One particular problem to watch for if you are tempted by another development offer is the tendency of developers to only sell apartments at shell stage. It’s a real expense and hassle for the owner to finish. It can cost +40% to finish off the interior (plastering, electrics, bathroom, kitchen etc).

Of all places in Ukraine, Sevastopol comes 3^rd at 20% increase in 6 months, but it needs to be noted that the other two places are not significant urban areas, just local hot sports starting from a low base and affected by possibly short lived regional factors.

With this strong market, nor surprisingly, land prices are high. This can lead to overly high buildings on the Southern Coast of Crimea, up to 26 floors. This is despite building recommendation of no more than 10 to 12 floors for seismic safety. At the Lighthouse, the developers could have gone much higher, but intentionally chose to restrict to 7 floors. As this looks best and is the right thing to do. Who wants to live in some Benidorm style high rise?

50% off local prices

In the context of the above information and other research, Hanroc’s Ukrainian partners advise them to charge similarly high prices. In effect, to sell all the development at high local prices. Although this may seem the logical thing to do, they do wish to widen their international client base. It’s their intention to find other hot spots in foreign markets and invest in the knowledge that they have support from existing clients.

Therefore, they have decided on a compromise route. Namely, to offer a first batch for sale at the 1750 Euros m2, then raise prices for subsequent releases. The project will be released first to registered ticket holders.  Details at   This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .