In Ukraine, the state program Yoselya has been scaled up since August, and now not only preferential categories can take advantage of it.
For beneficiaries, they kept the rate at 3% per annum, but for the rest they introduced 7%, in addition, they came up with more restrictions for them: they can only buy apartments in houses that are no older than three years (and this is more expensive than in a relatively old house). In addition, preferential mortgages can also be used in apartments that are still under construction, but we are talking only about a small list of selected developers.
The program was expanded to new buildings, but with greater restrictions
Before the full-scale war, Ukrainians who were planning to buy housing could save up to 30% of the market value by investing in real estate before it was put into operation (during the construction phase). A full-scale war has changed the situation: the demand for new buildings is only about 20% of what it was in 2021.
There are many reasons. Firstly, there are high risks of bankruptcy of developers, stopping construction, etc., and secondly, a sharp rise in construction costs (by 40% in dollar equivalent). Developers are almost the most interested in the development of mortgage lending in Ukraine.
The state mortgage lending program Yoselya not only expanded the list of those to whom it provides loans, but also extended to houses that have not yet been built (primary market). True, there are restrictions: “Ukrfinzhytlo” has identified a small list of developers for whose apartments they are ready to provide a mortgage.
For example, in Kyiv you can buy an apartment in a new building under the program only from two developers and in only four residential complexes. In the Family & Friends residential complex (part of the eOselya program), all one-room apartments have already been sold, and for a two-room apartment you will have to pay from UAH 2.43 million (UAH 37.5 thousand per square). For comparison: “Kievgorstroy” has a residential complex, where the cost of a square meter of an apartment is 26 thousand UAH (that is, 30.6% less).
Elena Dmitrieva, member of the Board of Directors of the Confederation of Builders and first deputy head of Globus Bank, notes: as of August 2023, only 10 apartments were purchased in new buildings under the єOselya program. Until recently, it was possible to buy housing only on the secondary market.
In fact, in Ukraine, mortgages exist primarily thanks to government lending. And we are talking about apartments in already built buildings.
“After the start of the eOselya program, more than 2 thousand loans have already been issued for the purchase of housing, mainly on the secondary market, as well as in new buildings that have been put into operation. This is 8 times more than the number of loans issued under the programs of commercial banks,” notes Dmitrieva.
You can buy an apartment under the program if:
- the area of the apartment is no more than 52.5 square meters (an additional 21 square meters for each additional family member);
- for preferential categories (rate 3%) - in regional centers and Kyiv the house must be put into operation no more than 10 years ago, in other cities - without age restrictions;
- for other Ukrainians (7% rate) - the house in which the apartment is purchased must be no more than three years old.
How much will you have to pay for the apartment?
PrivatBank published a payment schedule for a loan in the amount of UAH 900 thousand. So, if you take out a loan at 7% per annum for 20 years, while the cost of the apartment is 1.3 million UAH (for this amount you can buy housing in the regional center), the first payment will be 400 thousand UAH, and you will have to pay 7030 UAH monthly. Costs for insurance, notary, etc. will amount to 23.2 thousand UAH. As a result, you will have to pay UAH 776.5 thousand in interest. That is, if you take 900 thousand UAH, you will have to return 1.6 million UAH with interest.
The rate of 7% of the Euro is several times lower than the market rate (banks offer at 20% and are extremely reluctant to give loans for apartments), but it still forces Ukrainians to overpay for housing by several times. Dmitrieva believes that in order to reduce the lending rate, it is necessary to reduce the discount rate of the National Bank.
“A reduction in the discount rate encourages a significant easing of mortgage conditions. If the discount rate is reduced by at least another 2 percentage points, then on average mortgage rates could fall by 3.5-5%,” she says.
At the same time, not everyone can get a mortgage at 7%. The fact is that so far about 2 thousand people have received a mortgage. And the money that has already been allocated will be enough for no more than 5 thousand mortgages. At the same time, the real need for a mortgage may be tens of times greater.
There is one more obstacle: banks conduct their own assessment of the client and do not give money to everyone. If the client has an official minimum wage, a bad credit history, and no guarantors, he probably shouldn’t count on participating in the loan program. The bank studies the client and tries to make sure that the client will be able to repay the loan for many years.
Mortgage lending can give impetus to the development of construction, however, in conditions of high discount rates, high inflation, and without government support, not a single bank can offer favorable conditions.
