In Ukraine, there is a demand for the purchase of real estate that was damaged by military operations, including partially or completely destroyed housing.
“It’s time to talk about the formation of a separate segment of the real estate market - broken down apartments and houses, or, rather, even documents for them. There are investors who buy such objects in batches and are ready to pay 50-150 dollars per square for the ruins,” real estate market expert and realtor Mikhail Artyukhov told us.
According to him, potential buyers are buying up destroyed houses both in regions heavily affected by the war (Kharkiv, Kherson, Zaporozhye regions and others) and in the suburbs of the capital: in Bucha, Irpen, Gostomel and surrounding villages.
This trend was confirmed by realtor from Irpen Oleg Rosnovsky.
“There are people who are trying to buy real estate for next to nothing. In particular, apartments in Irpen in buildings that will definitely be restored, in Nemeshayevo, Makarov, Klavdievo, where the housing stock was significantly damaged at the beginning of the war,” says Rosnovsky.
“This also happens in the Kharkov region. There are people who are ready to buy almost ruins in villages that were under occupation and on the northern outskirts of Kharkov, where there are many destroyed houses,” Roman Ryabov, the owner of the Kharkov valuation company Delta Consulting, told us.
Realtors say that “investors” are buying up ruins in the hope of receiving government compensation for them and making good money on it.
“The state will pay the market price, which is at least $500 per square meter. That is, it turns out to be a 10-fold increase in investment,” Artyukhov said.
However, before receiving compensation, the new owners still have to circumvent the legislative provision according to which only owners who owned the object at the time of its damage can count on assistance from the state. But, as realtors say, “solvers” have already appeared who promise to “help” in this matter for a fee.
“The compensation system is structured in such a way that everything can be resolved at the level of local authorities,” said the head of the lawyer association “Kravets and Partners” Rostislav Kravets.
We figured out how ruins became a marketable commodity in Ukraine.
They are buying apartments for $2 thousand
. According to Mikhail Artyukhov, recently there have been buyers in Ukraine who are purposefully looking for damaged or destroyed objects and are ready to buy them almost in batches.
“There are requests from investors who understand what to do next with such objects and how they can make good money on them. They are ready to consider apartments in damaged high-rise buildings, individual private houses, even completely destroyed ones. The main requirement is the availability of documents of ownership of such real estate, which allows them to be re-registered to the new owner and make changes to the state register,” says Artyukhov.
According to him, “investors” are scouring literally all over the country, considering options for damaged real estate in areas heavily damaged by the war and in other regions.
In the Kharkov region, according to Ryabov, purchases are taking place in settlements around the city and on its northern outskirts.
Damaged real estate is in particular demand in the suburbs of the capital - Irpen and Bucha. There is a lot of attractive housing for buyers in Makarov, Nemeshaevo, Klavdievo, added Oleg Rosnovsky.
Real estate prices vary. According to Artyukhov, on average, potential buyers are willing to pay $50-150 per square meter, depending on the location of the property. In this case, the degree of destruction is often not taken into account at all. The main thing is the address. For private houses, the area of the land plot is also taken into account: the larger it is, the higher the price.
But there are prices that are much lower. As Ryabov says, people are offered only $2,000 for apartments in damaged high-rise buildings on Northern Saltovka. Based on the fact that the average two-room apartment in old houses is approximately 50 square meters, it turns out that a square meter costs only $40, whereas before the war the price tag reached $700 per square.
“The same movement is taking place in Tsirkuny, north of Kharkov,” Ryabov added.
“On average, the market price per square meter for housing in Ukraine varied from 500 to 1000 dollars per square meter and more. That is, they are now offering ten times less for destroyed objects than they cost before the war and destruction,” Artyukhov noted.
Refugees are giving away houses for pennies
According to realtors, buyers of destroyed housing mostly give requests to intermediaries to find such objects - so that they monitor the market, select suitable apartments and houses and negotiate with the owners for a quick buyout.
“Owners of destroyed real estate rarely put it up for sale themselves, because they are not sure that anyone might show interest in it. But many of those who are offered real money for ruins agree to sell even for pennies, as long as they pay right away. Many owners now live in Europe and have already given up on their ruins. Therefore, we are ready to sell the apartment even for 2-3 thousand dollars,” realtor Nikolai from Kherson told us.
But on specialized sites you can also find advertisements for the sale of damaged real estate from the owners. For example, on metrazh.com.ua a house is offered in the “picturesque place” of Izium - 44 square meters and 6 acres of land - for only 1.5 thousand dollars (34 dollars per square).
“The house is partially damaged after the occupation and requires repairs,” warns the seller.
In the same locality they offer a house even cheaper - 50 square meters per thousand dollars, that is, 20 dollars per square. Among the advantages of the property, the owner indicated only the presence of a cadastral number, noting that the structure requires repairs.
At the same time, the owners of destroyed housing in the suburbs of the capital, according to Rosnovsky, are in no hurry to sell it for pennies.
“Even in the high-rise buildings that were heavily damaged by enemy attacks, there are no apartments for $50-$150. If anything is put up for sale, the price tag for damaged housing is high, only slightly lower than the market average,” Rosnovsky noted.
But if a person urgently needs money, especially if the family has already settled in Europe, then he is ready to give in. Realtors say that the price tag can be reduced to $100 per square meter. That is, up to 5 thousand dollars for an apartment of 50 square meters. Whereas the same 50-square-meter apartment in a surviving building in Irpen costs an average of 40-45 thousand dollars.
How much can you earn
? Why do buyers invest in ruins?
“The motivation is different. Some investors buy destroyed real estate for restoration, with the goal of later making money on resale. Some are interested in land and documents for a residential building, under which they can build a new facility without paperwork. But the majority still count on compensation from the state,” says Mikhail Artyukhov.
We are talking about the state program “eRecovery”, under which owners of housing damaged or destroyed after February 24, 2022 can count on compensation. The program covers apartments, private houses, garden and country houses, rooms in dormitories, as well as unfinished objects to which the arrivals arrived.
Payments are already being made to repair damaged housing. They were issued to more than 13 thousand applicants (and more than 50 thousand applications were submitted). In September, officials reported that the “first billion” had been paid out under the eRecovery program. Based on the fact that at that time 12 thousand families received money, the average payment is a little more than 80 thousand hryvnia. But you can get up to 200 thousand hryvnia. Which, at first glance, is not much. But a potential buyer of a house in Izyum for a thousand dollars, having received compensation for repairs, would already be able to earn twice as much and at the same time retain the property.
True, you cannot receive money in your hands using eRestoration - purchases of building materials in certain stores and repair work are paid for.
But there are other programs for restoring damaged residential properties - from local authorities. We are talking mainly about high-rise buildings in which damaged apartments are being repaired at the expense of local budgets or grants. And their owners, without investing anything, can count on the complete restoration of their homes. And later it can be sold at market value.
As Oleg Rosnovsky says, in Irpen, in a building that will definitely be restored, apartments are sold not for pennies at all, but almost at the market price.
But those who managed to purchase apartments in it earlier, when it was not yet known how soon everything would begin to be rebuilt or whether they would begin at all, can count on a good profit in the event of further sale of housing in an already completely restored building.
Since there are a lot of damaged houses in Ukraine and it is unclear how soon it will be time to repair them, not all owners are ready to wait. This is what the buyers are counting on, offering to re-register “illiquid assets” for them for pennies.
As for completely destroyed housing, the law provides for the issuance of housing certificates for it. They will allow you to purchase housing in return in any region of the country; it can be purchased in full for a certificate or by paying the remaining amount.
At the end of September, housing certificates were opened in Die for review, and in November they began to be issued to people.
As stated by the head of the Rada Committee on the Organization of State Power and Local Self-Government, Elena Shulyak, as of November 22, 772 certificates have been generated for a total amount of about 1.6 billion hryvnia (that is, an average of 2 million hryvnia per certificate). The total area of housing subject to compensation is 58.1 thousand square meters. That is, the state valued a square meter at about 28 thousand hryvnia, which in general is not much, but choosing new housing for that kind of money is still possible.
In any case, this amount is much more than what buyers are offering for destroyed housing. They give 40-50, maximum 150 dollars per square, that is, from 1600 to 6 thousand hryvnia.
At the beginning of November, the Cabinet of Ministers allocated 2.5 billion hryvnia for housing certificates. That is, there is still money for the program.
But for those who buy destroyed housing, one nuance is important. It is unclear whether there is a chance of receiving compensation, because at the time of destruction the owners were different.
“There may be problems with this: according to the law, compensation is due to the owner who was listed in the state register at the time of the destruction of the housing. But there are loopholes. Decisions on compensation are made by local commissions, and, as practice shows, you can negotiate with them and receive compensation of up to $500-600 per square meter. Even if the day before I bought this property for $20 per square meter,” says Rostislav Kravets.
Realtors said that “resolvers” have already appeared through which you can get approval from the commission for a housing certificate.
“The commissions actually work very poorly in most regions. People wait for their visit for months, while they continue to live in destroyed and dilapidated houses. But if you have connections, you can arrange everything in a day. As a rule, special intermediaries raise commissions; they ask for a service from a thousand to 5 thousand dollars, and even more from the owners of destroyed mansions,” realtor Ivan, who works with properties in the Kyiv and Chernigov regions, told us.
Interestingly, the Cabinet of Ministers recently expanded the list of those who can claim compensation for destroyed housing. In addition to the owners, the list also included co-owners of apartments and houses. They can file separate claims and claim their share of the compensation. The amount of compensation for each co-owner will be determined by the same local commissions. That is, in theory, another loophole appears when the owner of a destroyed house can sell not the entire object, but only part of it, and thus both he and the new “co-owner” will receive compensation.
Time will tell how all this will work in practice. But, as realtor Ivan noted, “Enterprising Ukrainians who have money and connections among local officials are creating super profitable businesses right now.” For 10 thousand dollars you can buy 5 apartments in damaged buildings, and then, without investing a penny, sell them for at least 100 thousand or even more, says the realtor.
