Ukraine

Country Profile

© Chris Wevers. UNDP, "How to Prevent a Housing Collapse in Ukraine" (2011).

Ukraine’s population has been steadily declining, from its peak at 52.2 million people in 1993 to 45.7 million people in 2011. Its urban population has also declined over the same period, from 34.7 million people to 31.5 million. However the share of the urban population rose from 67% to 69%. [1] Home ownership is estimated at 68.9% in 2010. [2]

Before independence, all multi-family housing in Ukraine was owned by local governments and state-owned enterprises. Privatization of apartments began in 1992 with a decree allowing families a one-time right to purchase the flat they occupied at little or no cost. [3]

Initially there were several obstacles to privatization: the additional financial burden of the real estate tax, poor maintenance of communal areas, an underdeveloped housing and finance market, and the absence of a title check system or title insurance. However privatization increased dramatically by the end of the decade. By 2000 over half the residential space in Kiev had been privatized. [4]

Approximately 70% of Ukraine’s 19.3 million dwelling units are located in multi-family housing, which house more than 80% of the population. Most residential buildings were constructed during the Soviet era between the 1950s and the 1990s; roughly one third needs renovation. Poor condition of utility infrastructure such as heating pipes leads to energy consumption levels well above European averages. [5]

New housing construction is mostly done by the private sector. House prices increased significantly in the mid-2000s (35-40% in 2005 alone). The key driver appeared to be developer margins rather than construction costs. A few large firms with close ties to city administrators dominate construction markets in urban areas. [6]

Private ownership of land was formalized in the Land Code adopted in 2001, which took effect in 2005. [7] The Law on Mortgages was passed in 2003. Currently the register of mortgages (separate from property registry) is fully electronic and centralized. [8] However in the case of default the Law on Mortgages conflicts with the 1983 Housing Code, which prohibits eviction. Court proceedings for enforcement and foreclosure are highly uncertain, costly, and time-consuming. [9] 

Despite these risks, mortgage lending grew to 10.9% of GDP by 2009. [10]  Part of this trend was a rapid credit growth from 2006 to 2008. [11] Over 60% of outstanding mortgage loans are held by the top 5 Ukrainian lenders – Privatbank, Raiffeisen Bank Aval, Ukrsotsbank, Ukrsibbank, and Nadra. [12]

Interest rates vary by currency, from 9.3% for loans in US dollars to 16.4% for loans in Ukrainian hryvnia in 2011. The same year nearly 80% of all outstanding loans in Ukraine were originated in US dollars. [13] The average loan-to-value ratio in 2010 was 60% -- down from 85% in 2006. [14] Loan terms typically extend from 10 to 20 years. However it is not uncommon that loans are repaid in 3-5 years. [15]

Ukraine was greatly affected by the global financial crisis. In 2009 the economy contracted nearly 15% and the hryvnia was rapidly devalued against the US dollar. [16] Non-performing loans increased from 0.9% before the crisis to 5.1% in 2009. Ukrainian banks with the largest mortgage loan portfolios before the crisis were also the ones with the highest shares of non-performing loan values at the beginning of 2011. [17]

As a result of the crisis banks effectively stopped lending from October 2008 until the end of 2009. [18] Total outstanding mortgage loans declined 21% in 2010 as loans were repaid or restructured. The share of outstanding loan amounts in foreign currencies fell from 90% in 2008 to 82% in 2011. [19] Banks began lending again in 2010 under stricter conditions and with higher interest rates. [20]

Before the crisis, the main source of funding for mortgage loans in Ukraine was short-term deposits. Three banks carried out pilot issues of covered bonds and securitization of mortgage loans, but these instruments were not actively used following the crisis. [21]

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[1] The World Bank. World Development Indicators Database. Web. 15 Oct. 2012.

[2] The European Mortgage Federation. Hypostat 2010. Nov. 2011.

[3] PADCO. Housing Indicators in Ukraine. . Apr. 1994, pg. 11.

[4] Dyad’ko, Yenvhenia, and Roseman, Gary. The Current State of Ukraine’s Mortgage Market. Housing Finance International. March 2007.

[5]  Remiga, Oksana. How to Prevent a Housing Collapse in Ukraine. UNDP. Jul. 2011.

[6] Andersen, Lief, and Hilz-Ward, Reavis. Improving the Conditions for Residential Mortgages in Ukraine: An Analysis of Mortgage Lending Opportunities and Selected Interventions. Housing Finance International. Sept. 2006.

[7]  Roseman, Gary. Ukraine’s Developing Mortgage Market. Southern Business Review. Spring 2003.

[8] European Bank for Reconstruction and Development. Commercial Laws of Ukraine. Mar. 2011, pg. 17.

[9] Dübel, Achim, et. al. Consumer Protection Issues in Mortgage Lending in Ukraine: Case, Scope and Implementation Strategy for Regulation. Sep. 2006, pg. 36.

[10] Euromonitor. Ukraine in 2030: The Future Demographic. April 2012.

[11] IMF. Staff Report for 2008 Article IV Consultation. May 2008, pg. 44.

[12] National Bank of Ukraine. Data from Financial Statements of Ukrainian Banks. Web. 8 Oct. 2012.

[13] National Bank of Ukraine. Monetary Statistics. Web. 8 Oct. 2012.

[14] The European Mortgage Federation. Hypostat 2010. Nov. 2011.

[15] Andersen, Lief, and Hilz-Ward, Reavis. Improving the Conditions for Residential Mortgages in Ukraine: An Analysis of Mortgage Lending Opportunities and Selected Interventions. Housing Finance International. Sept. 2006.

[16] Central Intelligence Agency. The World Factbook: Ukraine. Web. 8 Oct. 2012.

[17] Euromonitor. Ukraine in 2030: The Future Demographic. April 2012.

[18] Euromonitor. Consumer Lending in Ukraine. Oct. 2011.

[19] National Bank of Ukraine. Monetary Statistics. Web. 8 Oct. 2012.

[20] The European Mortgage Federation. Hypostat 2010. Nov. 2011.

[21] The European Mortgage Federation. Hypostat 2010. Nov. 2011.