Boston, MA -- (SBWIRE) -- 08/22/2012 -- The Ukraine Real Estate report examines the Commercial Office, Retail and Industrial segments throughout the country in the context of a property sector whose continued recovery is increasingly under threat.
With a focus on the principal cities of Kiev, Kharkov, and Dnipropetrovsk, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the Euro 2012 football tournament on a market which is losing momentum. The key growth areas driven, investor activity and the construction industry are also explored On the back of stagnating exports, rising import bills, a crippled banking sector and our expectations for a hryvnia devaluation, we have downgraded our real GDP growth expectation for Ukraine to 2.5% in 2012 (from 4.1%) and 4.2% in 2013 (from 4.7%). While the ongoing global growth slowdown is largely to blame, domestic economic mismanagement by the government is also damaging growth prospects. A weakening global growth picture bodes ill for Ukraine's export-dependent economy and a faltering domestic demand picture underpins our lower growth expectations for 2012, with negative knock-on effects on demand for real estate.
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- We expect rental growth to remain flat over 2012., although we do see a recovering level of demand for, in particular, high quality property in the office and retail space.
- The short term opportunities on offer as co-host for Euro 2012 will give a welcome boost to consumer driven subsectors. However, we do not believe Ukraine will avoid the tournament curse which has seen other emerging market hosts of sporting tournaments experience a deep and sometimes prolonged dip in construction industry growth in the quarters following the tournament (South Africa being a case in point). Consequently, we have pencilled in a sharp slowdown for 2012 (2.3%) and a dip into recession in 2013 (-0.2%).
- Some Ukrainian property companies have never fully recovered from the global financial crisis and may still hold too much debt. If a downturn persists or worsens, they may be vulnerable.
- We have downgraded our FX forecasts for the hryvnia, anticipating a devaluation to UAH9.0000/US$ in H2 2012. We believe that building pressure on the balance of payments dynamics (including capital flight, domestic FX accumulation and FX-denominated repayments) will erode international reserves and expect a moderate devaluation as a result.
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