Ukraine faces numerous challenges in multiple sectors of its real estate market. The impact of a turbulent century of history largely under the Soviet Union is still felt today, and Soviet policies have had long-lasting negative effects on both housing and commercial real estate. David Kezerashvili develops real estate projects both in his native Georgia and abroad, including projects in Ukraine. We sat down with him to discuss his insight into the current Ukrainian real estate market and its direction.
Building progress while honouring tradition
Kezerashvili supports the modernisation of real estate in Ukraine while still respecting its architectural history through his development company Unlock Group. His company modernises older buildings in Ukraine for office and retail use. Through careful analysis and implementation, modern facilities with the latest technologies and conveniences are made available to growing businesses in Ukraine while allowing cities to retain their traditional aesthetics.
Kezerashvili tells us, “The historic buildings of Ukraine include many marvels of architecture that provide tremendous value to the nation’s citizens. There is no question that progress must be made, and innovation must be allowed to continue. Modernising existing buildings allows for Ukrainian cities to maintain their history while encouraging progress.”
The current state of Ukraine’s housing market
Ukraine is traveling towards a housing crisis that is being spurred on by government inaction and inefficiency. The transition from the Soviet era to privatisation has been an arduous process that has faced many roadblocks. The government of that time, and even today, did not have effective strategies for implementing privatisation or how it would affect the future of the real estate market.
Kezerashvili explains, “Like in so many other former Soviet nations, the housing in Ukraine is underdeveloped and in a worrying state of disrepair. The administration there seems unwilling to implement effective policy changes to remedy these problems and shows no signs of changing.”
With so many buildings in disrepair, the estimated cost to modernise housing in Ukraine would eclipse the national budget. One of the most significant difficulties is the distribution of ownership of flats among the many co-owners of the building. The government has reiterated in a 2015 regulation that it is those co-owners who must carry out building repairs, preventing larger management organisations from forming.
Because of the lack of organisation, many repairs that are undertaken are not done by professionals. Rather than modernising, the Ukrainian people must instead patch and prop up crumbling architecture with only the goal of keeping a roof over their heads. With a significant portion of the Ukrainian public already living on subsidies, there is simply no pathway for them to modernise buildings.
The key benefits of modernisation
Modernisation is not a simple matter of affording citizens more comfortable homes. Ukraine has one of the highest energy use per capita in the world. This is in large part due to the poor condition of many buildings. Where modern facilities have superior heating and cooling systems, along with more effective insulation, these older buildings are a constant drain on energy efficiency.
Kezerashvili says that “For both residents and businesses, the poor condition of their buildings contributes to an ongoing loss due to energy efficiency. The same money that could go into modernisation is instead lost to excessive heating costs.”
A large part of what Kezerashvili seeks to accomplish with his efforts in Ukraine is developing greater energy efficiency in existing buildings through modernisation. By replacing outdated heating and cooling systems, insulation, plumbing, and electrical work, any building can provide significant energy savings. A Soviet-era building that hasn’t been modernised can consume up to 70 percent more energy than a modern structure.
Government efforts continue to stumble
In 2017, the Ukrainian government did establish a number of laws intended to improve the quality of this ongoing problem. However, very little has been accomplished since their adoption. Significant delays have resulted in little to no progress being made across Ukraine. These delays come from a lack of coordination between departments and between different levels of government.
Kezerashvili has seen similar problems in his native Georgia and tells us, “Even when they have elected to attempt a solution to a problem, governments often fail at execution. It has become clear across all transition economies that excessive government interference into markets has adverse effects, rather than benefits.”
When surveyed, over 70 percent of Ukrainian residents had not even heard of any of the purported programs for improving energy efficiency through building modernisation. The core concept is that aid from the national level will be implemented through regional and local agencies, but this simply hasn’t happened.
One of the more promising aspects of the program is a system for energy audits that rates buildings on their efficiency. In other nations that implement similar programs, a high rating will lead to a higher value on the market. It would seem that this less intrusive system is a more appropriate role for the government to play.
“There is always the tendency among government officials to implement stricter controls and regulations in order to influence economic trends, but it is clearer now than ever that the best thing they can do is ensure freedom within the market and provide wider access to more reliable information.” – David Kezerashvili