Real Estate Market of Ukraine: Practical Aspects and Trends (SpringerBriefs in Geography) 3031312473, 9783031312472

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SpringerBriefs in Geography Sergiy Kobzan · Olena Pomortseva

Real Estate Market of Ukraine Practical Aspects and Trends

SpringerBriefs in Geography

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Sergiy Kobzan · Olena Pomortseva

Real Estate Market of Ukraine Practical Aspects and Trends

Sergiy Kobzan O. M. Beketov National University of Urban Economy in Kharkiv Kharkiv, Ukraine

Olena Pomortseva O. M. Beketov National University of Urban Economy in Kharkiv Kharkiv, Ukraine

ISSN 2211-4165 ISSN 2211-4173 (electronic) SpringerBriefs in Geography ISBN 978-3-031-31247-2 ISBN 978-3-031-31248-9 (eBook) https://doi.org/10.1007/978-3-031-31248-9 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Introduction

A very important task at present is to conduct in-depth research of the real estate market. The real estate market reflects how the economy of the region or the country as a whole works. All changes in the economy affect the dynamics of the real estate market and, conversely, the dynamic development of the real estate market affects the rapid growth of certain sectors of the economy. 2021 showed that, despite the pandemic and economic crisis, the demand for housing increased by 30–35% in the primary and 30% in the secondary real estate markets. Real estate market research is a complex process. The real estate market consists not only of buildings and land—but it is also a complex powerful mechanism that depends on many factors. Real estate market research is related to modern technologies, such as geographic information systems (GIS)—technology, research of modern databases, development, and construction of necessary models, solving infrastructure optimization and more.

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Contents

1 General State of the Real Estate Market in Ukraine . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 6

2 Real Estate Market: Trends and Developments . . . . . . . . . . . . . . . . . . . . 2.1 Distribution of Real Estate by Types . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Research of Peculiarities of Rent Market Development . . . . . . . . . . . 2.3 Research of the Market of Small-Sized Housing . . . . . . . . . . . . . . . . 2.4 Research of the Primary Real Estate Market . . . . . . . . . . . . . . . . . . . . 2.5 Research of the Land Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 9 13 22 30 42 47

3 Practical Aspects: Development of a Method of Modeling the Most Attractive Location of a Real Estate Object . . . . . . . . . . . . . . 3.1 Research of Modern Trends in the Location of Shopping and Entertainment Centers and Art Spaces . . . . . . . . . . . . . . . . . . . . . 3.2 Methods of Calculating the Attractive Location of Real Estate . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Determinations of the Optimal Location of the Real Estate Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Analysis of the Population Density of the City of Kharkiv . . . . . . . . 4.2 Analysis of the Location of Shopping Centers in the City . . . . . . . . . 4.3 Analysis of the Socio-economic Condition of the Administrative Districts of the City . . . . . . . . . . . . . . . . . . . . . . 4.4 Provision of Infrastructure to the Population . . . . . . . . . . . . . . . . . . . . 4.5 Analysis of Transport Accessibility in the City . . . . . . . . . . . . . . . . . . 4.6 Creation of Visual Models in the Design of Geodatabases . . . . . . . . 4.7 Examples of Building Visual Models . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49 50 63 75 77 78 80 82 84 85 87 88 91

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Contents

5 Factors of Influence on the Real Estate Market . . . . . . . . . . . . . . . . . . . . 93 5.1 Construction and Real Estate Market . . . . . . . . . . . . . . . . . . . . . . . . . . 93 5.2 Research of Dynamics of Change of Cost in the Real Estate Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 6 Prospects for the Development of the Real Estate Market in Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 7 The Situation on the Real Estate Market Because of Russia’s War Against Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 The Situation on the Real Estate Market as of Spring 2022 . . . . . . . 7.2 The Situation on the Real Estate Market as of Summer-Autumn 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Results of 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

119 121 127 141 144

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Abbreviations

1-room 2-bedroom 3-bedroom article BGD CPT model DB GIS m. m2 max MCI model min MLS RI ser Shopping center Shopping mall UAH

One-room apartment Two-room apartment Three-room apartment Article Geodatabase Central Place Theory model Database Geographic information systems City Square meter Maximum Multiplicative Interactive Choice model Minimum Multi-listing system Research Institute Average Shopping center Shopping and entertainment center Ukraine hryvnia

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Chapter 1

General State of the Real Estate Market in Ukraine

Abstract The purpose of this chapter is to define real estate as land and land improvements, namely buildings, structures, infrastructure facilities, etc., located on a plot of land. The fact that the land is inextricably linked with the objects located on it is determined. To substantiate this statement, the authors reviewed the relevant laws of Ukraine and highlighted the main characteristics of real estate. The authors set the task of studying land as the most important element of real estate. The task set by the authors was carried out with the help of a detailed analysis of normative acts and relevant laws of Ukraine. As a result, discrepancies were identified in the definitions of the terms “real estate” and “immovable property”, as well as the main components of real estate. Such definitions as “immovable property” and “immovable property” are reflected in the relevant schemes. It has been proven that land is the most important element of real estate, which is why the description of any real estate object must necessarily be related to land. In this chapter, the authors considered the real estate object, which includes not only land but also improvements, as a product of the interaction of all factors of production. Each of these factors contributes to the value of the property. The acquisition of rights to any real estate must consider the acquisition of the right to land. This is one of the important circumstances that determine the value of the land. And this problem does not have an appropriate legal solution in Ukraine today. Keywords Geographical information system · Commercial real estate · Land plot · Location · Real estate · Real estate market · Real estate · Real property visual model

The rapid development of the real estate market is necessary for the functioning of market relations, both in certain areas of the economy and in the economy of Ukraine as a whole. The real estate market does not exist as a separate component but exists in an economic environment where all the physical properties of the market and its main characteristics are revealed. Let us focus on the definition of real estate, because real estate together with monetary resources is the basis of any real estate market.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_1

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1 General State of the Real Estate Market in Ukraine

“Real estate is the earth as a physical object and everything that is closely connected with it (located on it)” [1]. Real estate, tied to a certain place on earth, always has the impact of the environment—neighboring buildings, structures, transport routes, the environmental situation in the area, etc. The location of real estate is one of its main characteristics, which significantly affects such economic parameters as price, liquidity, and profitability of real estate. Location is an important economic characteristic of real estate. Real Estate Real estate is land and land improvements related to changes in the quality characteristics of land, in particular the placement of houses, buildings, and infrastructure. Land is a specific means of production that operates in all sectors of the economy. As a means of production, land is characterized by certain features that directly affect the assessment of its value: • • • • • • •

is not the result of previous work; spatially limited; is not replaced by other means of production; has a fixed location; not prone to wear when used properly; territorially diverse; each specific land plot is characterized by a specific, only for its possible usefulness; • in all spheres of human activity (except agriculture and forestry) land acts mainly as a spatial operational basis. The earth is inextricably linked with the objects that are located on it: houses, buildings, roads, reclamation systems, and other material elements created by human labor (improvements). The peculiarities of the land as an object of evaluation determine the dependence of its value on the qualitative characteristics and properties, legal regime, location, as well as market conditions. Buildings and structures as real estate are characterized by several features: • are connected to the ground and cannot be moved to another place without causing irreparable physical damage; • wear out; • in the process of estimating their value, it is advisable to use generalizing technical characteristics, for example, 1 m2 area, 1 m running length, 1 m3 volume, etc.; • the real estate market is developing quite dynamically, and the law of supply and demand is the strongest, which promotes the use of average prices for the evaluation of similar objects.

1 General State of the Real Estate Market in Ukraine

3

Because land is one of the main wealth of society, ownership of which determines the property and social status of various groups, an effective mechanism for legal regulation of various socio-economic relations between legal entities and individuals regarding possession, disposal, and use land (lease, sale, distribution, organization of use, protection, etc.). Currently, the real estate market of Ukraine has reached the stage of civilized relations. Realtors from different regions approve and develop joint plans for cooperation in the real estate market. The All-Ukrainian Multilingual System (MLS) of the Association of Real Estate Specialists of Ukraine (ASNU) is functioning, developing, and improving. In regions, independent interaction of realtors in local real estate markets. Professionals in the real estate market and just its participants are interested in the existence of market and civilized relations in the real estate market. These are realtors, notaries, appraisers, buyers, sellers, and other participants in the real estate market. Realtors are concerned about: (1) (2) (3) (4) (5) (6)

multifactor analysis of the real estate market; real estate market monitoring; real estate market forecasting; high-quality and professional real estate appraisal; legislative support of a full-fledged real estate register; financing of real estate transactions and ensuring legal settlements in real estate transactions; (7) modern technologies in real estate activities. According to the Civil Code of Ukraine (Article 181. Immovable and movable property), “Immovable property (immovable property, real estate) includes land plots, as well as objects located on a land plot, the movement of which is impossible without their depreciation and change of their purpose”. The real estate regime may be extended by law to aircraft and ships, inland waterway vessels, space objects, as well as other things, the rights to which are subject to state registration. Movable things are things that can move freely in space: • law of Ukraine “On Mortgage”—“Real estate (real estate)—it is land, as well as objects located on the land and inextricably linked to it, the movement of which is impossible without their depreciation and change of their purpose” (Article 1). • law of Ukraine “On the fee for mandatory state pension insurance”—“Immovable property is a house or part thereof, apartment, garden house, cottage, garage, other permanent building, as well as other objects that falls under the definition the first group of fixed assets in accordance with the Law of Ukraine “On corporate income tax”. • law of Ukraine “On Personal Income Tax”—“Immovable property (real estate)— are objects of property that are located on land and cannot be moved to another place without losing their quality or functional characteristics (properties)”.

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1 General State of the Real Estate Market in Ukraine

Thus, we highlight the following features of real estate: (1) objects are located on land and are inextricably linked to the land (i.e., they do not exist separately from the land); (2) relocation of such objects is impossible without damaging them or changing the muddy purpose. These signs are basic and should be considered together. In addition to the Code, other regulations that determine the status of a particular type of real estate should be considered. At the same time, number of regulations do not contain specific references to the ownership of a particular real estate object; however, analyzing the rules governing the relationship to these objects, we can conclude about their legal status. The Code divides real estate into residential buildings, buildings, structures, etc. Developed real estate includes: • land (land plot); • improvement (improvement) of land; • real estate accessories. Henry S. Harrison gives the classic definition of real estate—real estate is land as a physical object and all that is firmly connected with it. Real estate includes the land itself, the space above the ground and the space below the ground. Real estate is any property consisting of land, as well as buildings and structures on it [2]. Land—As a description of any real estate object, it must include the connection of this object with the land plot. Acquisition of rights to any real estate must include the acquisition of land rights. Land improvements. Land improvements are understood as any actions with land changes, which can act as improvements of the land because of work carried out on it (reclamation, drainage, complex engineering preparation of buildings) and buildings and structures built on land. Real estate accessories (fixtures). Accessories are movable things attached to immovable property (land, buildings) and are an integral part of it (technologically or by law, contract). That is, a thing intended to serve another (main) thing and connected with it by a common purpose is its property. Belonging is always related to the main thing, which can be additionally established by the contract. The main difference in the definitions of immovable property and immovable property is presented in Fig. 1.1. The land is the natural basis and the first part of any real estate object. It is the commitment to the land that creates the main definition of real estate. The same plot of land can be built differently in the architecture, use, and purpose of the building. But one thing is impossible to change their commitment to a particular place on earth. Real estate objects can differ significantly from each other, geographically and at the same time be close in economic terms (refers to areas with the same level of business activity, with the same social composition of the population, etc.).

1 General State of the Real Estate Market in Ukraine

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Fig. 1.1 Differences in the definitions of real estate and real property

The importance of location as a factor that determines the value of the real estate gives the problem of certainty of the rights of real estate users, and land has significant economic meaning. Theoretically, the right to land means not only the right to the surface of the earth but also what is below and above the ground, although in practice this right is limited. Thus, according to the legislation of most European countries, subsoil rights belong to the state, and airspace rights are limited. The land is the most principal element of real estate, which is why the description of any real estate must be related to the land. Acquisition of rights to any real estate must include the acquisition of land rights, one of the important circumstances that determine the value. Making improvements is an extremely principal factor that directly affects the nature of the real estate. Recall that one of the most common approaches to the study of economic processes in economic theory—is the approach in terms of factors of production. There are three of them—labor, land, and capital. Making improvements qualitatively change the nature of real estate—it becomes the product of the interaction of two factors of production. The legitimate question of the nature of real estate is becoming quite practical here—is it enough, for example, to reimburse the developer for his construction costs when reselling an unfinished object, or is he entitled to claim something more? In conditions of a free circulation of land, the answer to this question is given by the market itself. It is the permission of free circulation of land plots that will allow realistically assessing the contribution of land and capital to “improved” land plots. In countries, the availability of a package of design and estimate documentation for a building tied to a plot of land is already an improvement, and land with this improvement, entering the market, has a different price than just land. Ukrainian legislation does not yet have an exact answer as to what is sufficient to consider a plot of land as a site “with improvements”.

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1 General State of the Real Estate Market in Ukraine

Fig. 1.2 Main components of real estate

By all external signs, the ownership of the property will not be described in the contract as such (for example, details of the decoration of the premises), it gives the seller the full right to separate it and turn it into a completely “movable” property. One of the important conditions when concluding contracts for the alienation (full or partial) of real estate is an accurate description of this property with all its accessories. The presence (absence) of accessories is a factor that affects the value of the property. The description of the property must indicate its affiliation. Let us define the main components of real estate in the diagram Fig. 1.2. Real estate, which includes not only land but also improvement, is the product of the interaction of all factors of production, each of which contributes to the value of this property.

References 1. Kobzan SM (2019) Real estate market formation: practical aspects and features of evaluation. Monograph. Jurinkom Inter, Kyiv, 212 p 2. Kobzan SM (2019) Primary real estate market research. Municipal utilities. Series: Tech Sci Archit 152:95–101

Chapter 2

Real Estate Market: Trends and Developments

Abstract The purpose of this chapter is to determine the level of interaction between the country’s economy and the real estate market. That is, how changes in the economy affect the dynamics of the development of the real estate market and how the dynamic development of the real estate market affects the growth of certain sectors of the economy. The investigated trends in the real estate market in 2021 and the beginning of 2022 determined that, despite the pandemic and the economic crisis, the demand for housing on average in Ukraine increased by 30–35% in the primary and 30% in the secondary real estate markets. The authors investigated the peculiarities of the development of the modern real estate market in Ukraine. In this chapter, the authors present practical studies of the real estate market of Ukraine with examples of the dynamics of the development of various objects. The authors investigated the peculiarities of the development of the rental market. The rental housing market is dynamic today. The rental market affects the real estate sales market and has a significant impact on the future strategies of developers within the urban economy of each individual settlement. The chapter classifies the apartment rental market according to parameters that significantly affect prices in the studied segment. These parameters affect the market value of the real estate. As a practical implementation, an information-digital map of the dependence of the average rental price of “hotels” and 1-room, 2-room, and 3-room apartments on the location was developed using GOOGLE MAP and using the example of the city of Kharkiv. The authors proved that the housing market is developing despite the unstable economic situation, the devaluation of the hryvnia, and the decrease in the income of the population. It is illustrated that the cost of renting an apartment depends on the location (this factor became especially relevant in wartime), the condition of the building, the transport infrastructure, and the condition of the real estate object itself. This section analyzes the market of small housing as a new social phenomenon in large cities in Ukraine. It has been proven that the primary real estate market is not sufficiently transparent in the general system of the country’s economy. It functions only in interaction with the secondary market of real estate and is developing very rapidly due to the existing high demand for newly built real estate in central areas and areas located near transport highways and metro stations. In this chapter, the authors also analyzed the market value of the land plot, which is directly proportional to the city’s infrastructure.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_2

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2 Real Estate Market: Trends and Developments

Keywords Commercial real estate · Cost · Developer · Geographical information system · Geographical model · Home ownership · Land plot · Location · Modeling · Municipal economy · Primary real estate market · Real estate · Real estate market · Secondary real estate market

The real estate market is a means of redistributing land, buildings, structures, and other real estates between owners and users by economic methods based on competitive supply and demand. The real estate market is regulated through the mechanisms of a market economy and with the participation of all market participants. The real estate market in the classical sense and a market economy is: • object; • subject; • a mechanism that ensures the functioning of the real estate market. The mechanism of the real estate market can be defined as a system of economic and legal relations arising from the interaction of commodity and money circulation. The main objects in the real estate market are: • land (land plots); • residential real estate; • commercial real estate. Entities operating in the real estate market are individuals and legal entities. Individuals—participants in real estate relations: • • • • •

buyers; sellers; notaries; realtors; appraisers. Legal entities—participants in real estate relations:

• • • • • • • • •

real estate agencies; public administration bodies, including the state property fund; local self-government bodies, in particular, the communal property fund; technical inventory office; banks; judge; insurance companies; housing and communal structures; passport desks.

2.1 Distribution of Real Estate by Types

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Government agencies and organizations in the real estate market perform regulatory functions, which can be expressed in various forms, including: • legislative establishment of rules and restrictions; • distribution of natural resources, state buildings, and structures and their ownership, lease, or use; • control over the use of real estate (land, forests, water, etc.); • stimulating the privatization and nationalization of enterprises and other facilities; • investing in vital areas (housing, roads, energy), etc.

2.1 Distribution of Real Estate by Types Let us consider the distribution of real estate objects by type. For example, the Civil Code provides the following division (part two of Article 331): “The right of ownership of newly created real estate (residential buildings, buildings, structures, etc.) arises from the completion of construction (creation of property)”. We can divide real estate as: • residential buildings; • buildings; • buildings. Real estate is also divided into: 1. housing; 2. commercial. Residential real estate is divided into: 1. 2. 3. 4. 5.

apartments; rooms in a hotel-type house (hotel rooms); parts of apartments (resettlement); dwelling houses; townhouses. The property is divided into:

1. primary; 2. secondary. Consider the primary and secondary real estate markets. Secondary real estate market Apartments on the secondary real estate market can be conditionally divided into three classes: • luxury housing; • middle-class housing;

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2 Real Estate Market: Trends and Developments

• social housing. The basis is the following characteristics: • • • • •

apartment area; ceiling height; house material; location and surroundings; internal planning.

Primary real estate market The Ukrainian Construction Association approved the classification of housing, the development was led by leading experts in the domestic real estate market [1]. Architects, representatives of construction, investment, development companies, government officials, realtors, and others took part in the survey. According to the developed classification, housing is divided into 5 classes: • • • • •

social; housekeeper; business; premium; deluxe. In the real estate market of Kharkiv for example, there are three main classes:

• elite class; • business class; • economy class. The characteristics of each class are listed in Table 2.1. Table 2.1 Definition of classes of residential real estate Characteristic

Elite class

Business class

Economy class

Construction technology

Monolithic frame, brick

Monolithic frame, brick

Monolithic frame, brick, composite (prefabricated houses)

Location

Central and close to the center districts

central and close to the center districts

Number of apartments in the house

1–30

More 100

Number of apartments on the floor

To 4

To 8

Roof height

Higher 3 m

2.7–3 m

2.7–3 m

Architectural project

Individual

Individual

Serial

Apartment area

52–400 m2

52–400 m2

39–100 m2

Parking

Necessarily

Necessarily

May be

More 10

2.1 Distribution of Real Estate by Types

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The higher the class of housing, the greater the provision that is considered mandatory. In addition to the technical parameters of the house, it is also necessary to consider the motivation of buyers, what guides the buyer when choosing a home. The term townhouse is from the English townhouse (town—city, house—house) and translated means “city house” or mansion. The only correct spelling has not yet been developed, so there are different spellings as a townhouse or townhouse, and separately: townhouse or townhouse. The term townhouse is used as a term for a row house. A townhouse is a few separate houses that have common walls, foundations, and roofs. A normal townhouse has 2–3 floors, but there are no “neighbors” above you because all floors belong to one owner. This results in significant savings on building materials and general utilities, so the cost of a townhouse is much lower than a single cottage. At the same time, the townhouse retains all the advantages of a country house – a separate entrance, a garage for a car, and a small own plot of land under your house and next to it. Townhouses can group into duplexes and triplexes (2 and 3 townhouses, respectively), and larger structures, but always the land under the townhouse and the facades are owned by the owner. This is the main difference between a city apartment in a high-rise building and a townhouse. Similarly, a townhouse does not have “common” entrances, stairwells, etc., but owners of the houses can pay dues for the maintenance of some public areas, such as roads, swimming pools, and parks. The layout of the townhouse allows the rational use of heat and water supply and sewerage. Therefore, the cost of a townhouse is lower than the cottage not only in the cost of its purchase— the monthly operating cost of townhouses is also significantly lower. This explains the growing number of people wishing to buy a townhouse and the growth of offers from developers. Commercial real estate Classification of commercial real estate in Ukraine was developed by the Association of Realtors (Realtors) of Ukraine in 2009. Commercial real estate consists of segments: • • • • •

office real estate; commercial real estate; warehouse real estate [2]; industrial real estate; hotel real estate.

Office real estate is one of the most active segments in the commercial real estate market is the office segment. This segment is divided into three categories: • professional office space; • semi-professional office space; • unprofessional, basements of residential buildings, ground floor apartment offices.

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Professional office space includes business centers or office centers. Semi-professional office space includes premises in non-residential buildings. They are characterized by small rental rates, located, as a rule, in administrative buildings and premises of former research institutes. Quite widely represented on the market and in demand by small businesses. Most of them have repairs, services, and infrastructure of the Soviet times (security at the level of the guard at the checkpoint, absence, or limited park). Non-professional office space, basements of residential buildings, ground floors of apartment offices. Most often, such offices are located on the ground floors of residential buildings, in apartments with “office renovation”, and usually not transferred from residential to non-residential. They are popular with representatives of small and medium-sized businesses from among companies operating in the field of services or for the placement of “closed” type offices. Land Consider the classification of lands. In accordance with the Land Code of Ukraine, 9 categories of land are defined, as well as reserve land [3]: Land categories: 1. The lands of Ukraine according to the main purpose are divided into the following categories: • • • • • • • • •

agricultural lands; lands for housing and public buildings; lands of nature reserves and other nature protection purposes; health-improving lands; recreational lands; lands of historical and cultural significance; land for forestry purposes; lands of the water fund; lands of industry, transport, communications, energy, defense, and other purposes.

2. Land plots of each category of land that are not provided for the ownership or use of citizens or legal entities may be in reserve. Commercial real estate is divided into: 1. 2. 3. 4. 5. 6.

office; warehouse; trade; production; hotel and restaurant; another.

2.2 Research of Peculiarities of Rent Market Development

13

2.2 Research of Peculiarities of Rent Market Development The rental market is currently little studied. There are no studies on the interaction between the rental market and the sales market. Regarding the study of the rental market of residential real estate, it is developing rapidly due to the constant demand for rental housing [4]. In addition, the rental market is changing very dynamically, which is constantly affecting the real estate market and has a significant impact on future strategies of developers within the municipal economy of each settlement [5]. Reconstruction of old residential buildings, re-equipment of large residential apartments, and new construction of modern demand-oriented houses are very active in Kharkiv. Today, this direction has constant development. A significant number of homeowners are profit oriented. But when buying residential real estate, constantly calculate the profit from renting [6]. In urban planning and urban planning, it is essential to consider the prospects and development of such a market segment as the rental market of residential real estate [7]. The relevance of the study is to determine the prospects for the development of the modern urban economy, considering the development of the rental market. The rental market is a very important component of the residential real estate market in the city of Kharkiv [8]. Therefore, the issue of research on the apartment rental market is relevant and will be deeply analyzed in the future. The rapid development of municipal infrastructure is very closely linked to the development of the real estate market. It is the modern real estate market that is the basis for the development of the urban economy [1, 2, 9]. Despite the crisis in the economy, the real estate market continues to grow. The rental market is developing very rapidly. Construction companies are developing the primary real estate market to suit the needs of customers who want to make the most profit. Developers are forced to design housing that will be in demand in the real estate market. Researchers such as Shalaev, Guselnikov, Voronin, and Sarah Schmidt are studying these problems [1, 7, 10–12]. We will conduct a study of the residential real estate rental market. To achieve this goal, the following tasks are set: • analyze the rental market; • develop an improved classification of segmentation in the residential real estate market; • to study the factors that affect the cost of rent; • to develop a GIS model of the impact of the cost of rent depending on the area of the city; • build a detailed table of the dependence of the cost of rent on the location; • to study the interaction in the real estate rental and sales market within the framework of urban development.

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2 Real Estate Market: Trends and Developments

The real estate market of Kharkiv is currently experiencing increased activity. The increase in activity in the rental market is determined [6]. A study of residential real estate rental analytics in Kharkiv was conducted in September 2020. An analysis of rental prices for hotels and 1-, 2-, and 3-room apartments in Kharkiv was conducted. With the help of GOOGLE MAP, a map of the dependence of the average cost of renting hotels and 1-, 2-, and 3-room apartments in the location in the districts of Kharkiv for September of this year was developed. It was determined that the lowest cost of renting a hotel [13] is in N. Budynky (UAH 2500), the highest in the Center area, Nagirny, Derzhprom, and Oleksiyivka district (UAH 8600). The lowest cost of renting a 1-room apartment is in Zhukovsky, Shishkovka, HTZ, Rohan (UAH 3800), and the highest is in the Center and Oleksiyivka areas (UAH 10,000). The lowest cost of renting a 2-room apartment is in Zhukovsky, Shishkovka (UAH 5500), and the highest is in the Center area (UAH 18,000). The lowest cost of renting a 3-room apartment is HTZ, Rohan (UAH 5500), and the highest is in the Center area (UAH 23,000). For the period from March to June 2020, a period of declining rental prices due to the pandemic and a significant decline in demand was recorded. And already in August, rental rates began to return to baseline and even rise. With the further growth of demand for rental housing, further, there is increase in the cost of rental rates. The price of renting apartments is quite different in different areas. The rental price is influenced by the following factors: • • • • • • • • • • •

trends of growth or decline of the general state of the real estate market as a whole; seasonality; the remoteness of the district from the city center; availability of transport interchange; ecology, in the area where the object is located; developed infrastructure; level of housing comfort; duration of the lease; number of rooms; availability of repairs; type and condition of the building in which the housing is located.

Classification of different segments of housing in the modern city 1. by location: • • • • • •

remote areas—factory buildings; remote areas—housing; middle zones in non-residential buildings; middle zones in housing; areas close to the center and the center in non-residential buildings; areas close to the center and the center in residential buildings.

2.2 Research of Peculiarities of Rent Market Development

15

2. by living area: • large rooms over 20 m2 ; • medium size from 10 to 20 m2 ; • less than 10 m2 . 3. in the presence or absence of a bathroom and kitchenette: • • • •

private bathroom, kitchenette separated from the bedroom; its bathroom and kitchenette area in the room (studio); own bathroom and the mini kitchen is missing; shared bathroom, shared kitchenette.

4. according to design features: • superficiality; • material of walls and ceilings, general features of planning (corridors, entrances, number of rooms on the floor); • design features (shape and size of the room), the presence and size of the c/ node, the presence and size of the kitchen, and the presence of a balcony; • general condition of entrances, common corridors, and adjacent territory; • availability of autonomous heating and the total cost of utility bills; • number of apartments, rooms, and neighbors on the floor and in the entrance; • the general level of social groups reflects their standard of living. The classification of the apartment rental market was carried out according to the parameters that significantly affect the prices in the studied segment. They can increase or decrease the market value of such real estate [7]. The residential real estate rental market is significantly affected by all factors that affect the economic situation in the country, namely the unstable economic situation, the devaluation of the hryvnia, declining incomes, and the pandemic. Today, the apartment rental market is quite developed and has trends for further development. Demand for rental housing is constantly growing in Kharkiv and other large cities of Ukraine. With the help of the study of the residential real estate rental market in Kharkiv, important components of the rental market at prices for each of the districts of the city were identified. These components and the dependence of the average cost of renting hotels and 1-, 2-, 3-bedroom apartments on the location in the areas of Kharkiv are reflected using the model shown on GOOGLE MAP. Figure 2.1 shows a map of the dependence of the average cost of renting apartments on the location. For the period from March to June 2020, a period of declining rental prices due to the pandemic and a significant decline in demand was recorded. And already in August, rental rates began to return to baseline and even rise. With the further growth of demand for rental of residential real estate, a further increase in the value of rental rates is possible [6]. Based on statistical data on residential real estate rental, obtained from the residential real estate rental market, a map was created for the maximum and minimum prices for hotels and 1-, 2-, and 3-room apartments in Kharkiv as of September 2020.

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2 Real Estate Market: Trends and Developments

Fig. 2.1 Map of the dependence of the average cost of renting an apartment on the location

The following calculations are based on the results of own research. The data on the real estate market for 2020, obtained from the database of the Khian real estate agency and the UVEKON geoportal, were considered. Figure 2.2 shows the average cost of rental rates by district. We can see that the minimum rental price is UAH 5488 per month in the HTZ area, and the maximum is UAH 12,363 per month in the Center. Areas that are most in demand for rent in Kharkiv are metro area “Scientific”, metro “Student”, metro “Heroes of Labor”, metro “Cold Mountain”, metro “Botanical Garden”, metro “Botanical Garden”, metro “Alexeyevskaya”, and “Victory”, “Victory Defenders of Ukraine”, and “Sports”. The diagram of the minimum, maximum, and average prices of hotels in the city of Kharkiv is developed. The average cost of renting residential real estate per 1 m2 was calculated and a table of the dependence of the value of a particular segment of the real estate market on the location. Table 2.2 shows the calculation of the average cost of renting residential real estate per 1 m2 .

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Fig. 2.2 The average cost of rental rates for apartments by district

From the research on the rental market, we can conclude that the average cost of rent in the city of Kharkiv is $ 187 according to data for October 2020. Most prices range from $ 115–$ 500 [13, 14]. The dynamics of hotel rental prices from the minimum to the maximum are shown and are shown in Figs. 2.3, 2.4 and 2.5. Based on the above diagrams, the minimum price of hotels is UAH 2500 around New Houses, and the maximum—Saltivka 8600 UAH. Figure 2.6 shows the dynamics of changes in the average cost of rent by the district. In Kharkiv, one-room apartments and hotels remain the most popular housing for rent [13], and the cost is shown in Fig. 1.8. In second place are two-bedroom apartments, and the cost is shown in Fig. 1.9. The lowest demand among tenants is three-room apartments, and the cost is shown in Fig. 1.10. Figures 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 and 2.9 show the author’s calculations of the maximum, minimum, and average values of real estate rental value. The authors had enough data of a statistical series to calculate not weighted averages, namely average rates for renting real estate. In addition, groups of districts are summarized in the figures so that in each group there are enough data sufficient for conducting research and formulating conclusions. A study of the residential real estate rental market in Kharkiv was conducted. The results of the research show the dependence of the cost of housing on the location and analyze the minimum, average, and maximum rental prices for 1-bedroom, 2bedroom, 3-bedroom apartments, and hotels.

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2 Real Estate Market: Trends and Developments

Table 2.2 Calculation of the average cost of renting residential real estate per 1 m2 The area

Gostinki

1-room apartment

2-room apartments

3-room apartments

Average price for 1 m2

Gagarina

211

203

182

131

182

Zhukovsky, Shishkovka

184

131

141

131

147

N. Budinki

158

203

164

115

160

Novozhanovo, Moskalivka

221

203

148

154

181

Odessa

226

172

159

123

170

Oleksiivka

237

250

205

192

221

P. Field, Sosnova Girka

211

234

182

131

189

Mon. Saltivka

212

178

144

114

162

Saltivka

326

203

182

146

214

Sportyvna, Zakhisnikiv Ukraine

216

219

180

145

190

HTZ, Rogan, Skhidne village

184

141

148

115

147

Cold Mountain

263

213

181

138

199

Central market, Pivdenny 245 railway station

147

125

131

162

Center, Nagirniy, Derzhprom

326

250

284

380

294

Average price per 1 m2 according to Kharkiv

230

196

173

149

187

Fig. 2.3 Dynamics of changes in 1 room hotel rental prices depending on the area

2.2 Research of Peculiarities of Rent Market Development

19

Fig. 2.4 Dynamics of changes in 2 room hotel rental prices depending on the area

Fig. 2.5 Dynamics of changes in 3 room hotel rental prices depending on the area

Research of the residential real estate rental market in Kharkiv: On average, apartment rental prices increase from 5 to 15% annually [15]. About 20% of the value is usually added by the location, condition of the house (new building) and transport infrastructure, and the condition of the real estate object.

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2 Real Estate Market: Trends and Developments

Fig. 2.6 Dynamics of change in the average cost of rent by district

Fig. 2.7 Dynamics of the cost of renting 1-bedroom apartments

2.2 Research of Peculiarities of Rent Market Development

21

Fig. 2.8 Dynamics of changes in the cost of renting 2-bedroom apartments

Fig. 2.9 Dynamics of changes in the cost of renting 3-bedroom apartments

Conclusions 1. a study of the rental housing market was conducted. Defined rental rates: minimum, average, and maximum cost. Charts of rent cost dependence on segment and location are constructed. 2. the housing market is developing despite the unstable economic situation, the devaluation of the hryvnia, and declining incomes. The cost of renting an apartment depends on the location, condition of the house, transport infrastructure, and the condition of the property.

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2 Real Estate Market: Trends and Developments

3. the hotel rental market is developing very actively. In Kharkiv, in most cases, buy small apartments and hotels for investment purposes (income from further rent). 4. with the help of GOOGLE MAP, a map of the dependence of the average cost of renting hotels and 1-bedroom, 2-bedroom, and 3-bedroom apartments in the location of the districts of Kharkiv was developed. The lowest cost of renting a hotel was determined – in N. Budynky (UAH 2500) and the highest cost is in the Center, Nagorny, Derzhprom, and Oleksiyivka districts (UAH 8600). 5. it is determined that due to demand, the cost of hotels is equal to, and in some areas exceeds, the average cost of renting 1-bedroom apartments. The central areas may even be equal to the cost of renting a 2-bedroom apartment.

2.3 Research of the Market of Small-Sized Housing The market for mini-apartments and hotels can be considered a new social phenomenon. Many social groups can buy a mini-apartment [16]. The residential real estate market is at a difficult stage now. The economic crisis has had a strong impact on stakeholders [9, 15]. Today, we have those developers who are forced to reduce the cost of housing, and buyers have less money to buy real estate. Reconstruction of old houses, factories, unfinished buildings, and, simply, new construction of modern houses with comfortable studios is very active in Kharkiv. Today, this direction is developing rapidly. Houses with mini-apartments exist in almost all parts of the city. Urban planning must consider the development of this market segment and its impact on various social groups [6, 17]. Developers in Kharkiv are building and have already built the following residential complexes with miniapartments: • • • • • •

sparrow hills; Alexeyev’s Watercolors; Bestuzhiv Gardens; cozy courtyard; spruce yard; caramel and other projects.

The number of such facilities in Kharkiv is currently about 40. The market for mini-apartments in Ukraine is a very unexplored social phenomenon. The market for mini-apartments is of great importance for urban development and has high uncertainty in further development [6]. Therefore, the issue of the development of the market of mini-apartments raises many difficult questions for urban development in the future and affects its development. Mini apartments are now actively bought by the following social categories of people: • lonely young people striving for independence; • young families; • retirees, to save on utility bills;

2.3 Research of the Market of Small-Sized Housing

23

• creative people, for use under a separate workspace (workshops, photo studios, small offices, etc.); • investors to receive an additional rental income. Currently, in Ukraine the real estate market of Kharkiv increased activity in this segment of real estate as mini-apartments. Studies show that the cost range of 1 m2 for such facilities is very large and ranges from 300 to 1000 US dollars [15]. Which is 2 times lower than the average market prices for typical apartments. Analysis of the primary and secondary markets of mini-apartments: The houses in which the mini-apartments are located can be characterized as: • new—built from zero cycles and in a new place; • reconstructed from the former dormitories—internal reconstruction; • reconstructed from commercial buildings, such as former factory management buildings (internal reconstruction); • reconstruction with a superstructure of floors; • reconstruction with an extension of premises (as a rule—large areas). Mini apartments in reconstructed houses are of great interest to stakeholders. Let us classify mini-apartments. Mini apartments can be classified by: I. By location. • • • • • •

remote areas—factory buildings; remote areas—housing; middle zones in non-residential buildings; middle zones in housing; areas close to the center and the center in non-residential buildings; areas close to the center and the center in residential buildings.

II. By living space. • large rooms over 20 m2 ; • medium size from 10 to 20 m2 ; • less than 10 m2 . III. In the presence or absence of a bathroom and kitchenette. • • • •

private bathroom, kitchenette separated from the bedroom; its bathroom and kitchenette area in the room (studio); own bathroom and the mini kitchen are missing; shared bathroom, shared kitchenette.

The classification of mini-apartments was carried out according to the parameters that significantly affect the prices in the studied segment [18]. They can increase or decrease the market value of such real estate [5]. The price is significantly affected by such a parameter as the ratio of total and living space.

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2 Real Estate Market: Trends and Developments

The following factors have been proposed [19] that affect the cost of miniapartments. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

location (distance from transport, distance from public infrastructure); superficiality; material of walls and overlapping; general design features of planning (corridors, entrances, number of rooms on the floor); private design features of the plan (shape and size of the room); the presence and size of the bathroom; the presence and size of the kitchen; the presence of a balcony; general condition of entrances, common corridors, and adjacent territory; availability of autonomous heating and the total cost of utility bills; number of rooms and neighbors on the floor and in the entrance; the general level of social groups, which is their standard of living.

In Ukraine, the market for mini-apartments (gostinka) has emerged and is developing due to the unstable economic situation, the devaluation of the hryvnia, and declining incomes. Today, renting apartments is expensive, so mini-apartments are the best option for affordable housing. Many people buy mini-apartments as temporary housing. The real estate segment has high profitability for investors. The cost of 1 m2 of mini-apartments depends on the investment attractiveness of the regional center. The number of mini-apartments under construction is growing in large cities of Ukraine, especially in Kyiv and Kharkiv. The analysis of the market showed that such apartments are in demand among stakeholders today. Factors increasing demand for mini-apartments: • • • • • • •

unstable economic situation; reduction of the money supply of the population; distrust in the banking sector; high utility bills; high taxes on real estate within a large area; increased functionality; comfort for 1–2 people.

In Kyiv, more than 10 residential complexes provide mini-apartments. These are such residential complexes as “Smart House”, Residential Complex “Comfort Town”, Residential Complex “Bright”, Residential Complex on Levadnaya, Residential Complex “Own Apartment”, Residential Complex “Zhulyany”, Residential Complex “Yeniseiska Sadyba”, Residential Complex “Henesi House”, and Residential Complex New England. The minimum cost of a mini-apartment in Kharkiv is from $ 9000, and in Kyiv— from $ 12,000. The cost of a mini-apartment from the beginning of construction to the stage of delivery of the house increases by about 2000–4000 $ is 20–30% [14].

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25

In Kharkiv, mini-apartments in new homes are sold without repair and in Kyiv— with complete repairs, often with equipment. The peculiarity of the market of miniapartments in Kharkiv is that there are two-level mini-apartments (smart apartments). There are none in Kyiv. Hotel is a type of living space, which is a small one-room apartment. In Kharkiv for 2019, there are more than 20 developers involved in the construction of hotels and “smart” apartments. The most famous developers are “Story City” and “Samson Grad”. It is the developer “Story City”, a “pioneer”, and a legislator in the hotel class. The company has already built: “Sparrow Hills in the Fields”, “Sparrow Hills-8”, and “Bestuzhevsky Gardens-2”. Two residential complexes have been commissioned and are functioning, the Bestuzhevsky Gardens and the French Quarter. The number of residential complexes is increasing every year, in 2020–2021 15 complexes have been commissioned and are already operating. The most famous and popular are: “LCD French Quarter”, “RK Netechenskaya”, “RK Kontorskaya”, “RK Park Quarter”, “RK Swallow’s Nest”, “RK Swallow’s Nest”, “RK Green Park”, and “Park Quarter”. A popular area for hotels is the Saltivka micro-district, the Akademika Pavlova metro district. Another popular area is “Saburova Dacha”, which houses such complexes as: “ZhK French Quarter”, “RK Park Quarter”, and “RK Green Park”. Also, residential complexes are already in operation or under construction in the following areas: Pavlivka, Central Market, Horse Market, Lower Center, North Saltivka, and Gorky Park District. Hotels can be in the following houses: • • • •

new buildings; reconstructed from the former dormitories; reconstructed from commercial buildings; reconstruction with a superstructure of floors.

Consider hospitable houses with a minimum apartment area of 11–25 m2 . Let us start with the most famous developer “Story City”. The complex “Sparrow Hills in the Fields” is being built in the area of Klochkivska Street—on the street. Merry and lane. Shevchenko. They provide both full-fledged apartments and hotels. The average price per here is UAH 16,042. The minimum apartment (18 m2 ) will cost 308,700 UAH or $ 13,249. The Bestuzhivsky Sady complex is being built near the French Boulevard at the address: st. Bestuzheva, 11. This is the second phase of the complex. The first phase of the complex was completed a year ago. Delivery of the complex is 2nd quarter of 2020. The average price per m2 is UAH 22,854. The cost of a minimum apartment (11 m2 ) is UAH 202,642 or $ 7505. The four-story residential complex “Netechensky” is located near the park Strelka, at the address: Netechenskaya embankment, 15. The house was put into operation. The average price per m2 is UAH 20,100. It was possible to buy a one-room apartment in 2020 for UAH 378,000 thousand. or $ 14,000. In general, the minimum cost in the handed-over new buildings starts from $ 1000, and the maximum cost reaches $ 32,000.

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2 Real Estate Market: Trends and Developments

“Park Quarter”—reconstruction of the building of the bicycle plant, at the address: Moskovsky Ave., 118. Developer—the company “Story City”. “Park Quarter”—a residential complex consisting of 6 houses of the economy and business class from 3 to 7 floors, which houses 1000 apartments of different sizes—from 25 to 60 m2 . The average cost per square meter in the “Park Quarter” is UAH 10,500 per sq. m. The hotel of 28 m2 will cost the buyer 293 thousand UAH. or $ 11,720. with a fixed rate of UAH 25 for $ 1. The Swallow’s Nest complex consists of three sections. The complex is in the village Pisochyn at the address: st. Transport, 116a. The area of apartments here is 23 m2 . The complex was put into operation. The average price for the complex is UAH 1800. per m2 . The minimum cost of the hotel (16 m2 ) is UAH 220,000. or $ 8200. The Panorama hotel complex is a reconstruction of a Soviet administrative building. Located near the champagne factory at Velyka Panasivska, 115. The area of apartments here is from 10 m2 . The complex was put into operation. The average price for the complex is UAH 15,400. per m2 . The minimum cost of the hotel (10 m2 ) is UAH 154,000. or $ 5700. Paris hotel complex. Reconstruction of the buildings of the Avtramat plant (former Porshen plant). Located around French Boulevard at the address: Saltovskoe Highway, 43. The average price of the complex is UAH 15,700. per m2 . The minimum cost of the hotel (15 m2 ) is UAH 236,000. or $ 8700. “French Quarter – 2”. Restoration of the same areas of the Avtramat plant. He is building the same company as Paris, but the sales departments are different. Located next door, at Saltovske Shosse, 43. However, the price per “square” is slightly higher. The average price for the complex is UAH 16,500. per m2 . The minimum cost of the hotel (20 m2 ) – is 330 thousand UAH or $ 12,200. “Academician’s House” is in Saltovka, in the private sector, on the second line from the street. Academician Pavlov, at the address: st. Akademika Pavlova, 283. The five-story comfort-class building is represented by apartments of 26 m2 . The house was put into operation. The average price for the complex is UAH 18,500 per m2 . The minimum cost of the hotel (26 m2 ) is UAH 480,000. or $ 17,800. ZhK Slovyansky is an eight-story complex of SMART apartments, located near the South Station, at the address: st. Malinowski 7. The house is handed over. The average price for the complex is UAH 20,000. per m2 . The minimum cost of the hotel (24 m2 ) is 480 thousand UAH. or $ 17,800. The average cost of 1 m2 of hotels in residential complexes in Kharkiv in May 2020 compared to December 2020 is shown in Fig. 2.10. Research of the rental market shows that, for a long time, 78 mini-apartments were exhibited in Kharkiv. 32 mini-apartments have been exhibited in Kyiv for a long time. You can rent a hotel in Kyiv for 3500 8500 a month. In Kharkiv—UAH 2000—5000 per month. The average price for renting a hotel in Kharkiv is UAH 4500 according to May 2020. Most prices range from UAH 3500 to UAH 5800. Demand for such apartments in Kiev is twice as high as in Kharkov. The graph of the average rental price of hotels in Kharkiv is shown in Fig. 2.11.

2.3 Research of the Market of Small-Sized Housing

27

Fig. 2.10 Dynamics of dependence of the average cost of 1 m2 of hotels in residential complexes of Kharkiv in May 2020 compared to December 2020

Fig. 2.11 Schedule of the average rental price of hotels in Kharkov

Table 2.3 shows the dynamics of changes in the average cost of renting a hotel in the main areas in the city of Kharkiv as of May 2020. In Kharkiv, one-room apartments remain the most popular housing for rent. In second place are two-bedroom apartments. The lowest demand among tenants is 3-room apartments. In Shevchenkivskyi, Moscow, and Kyiv districts, apartments are most often offered for rent. It is more difficult to find housing in Novobavarsky and Industrialny—there are fewer offers there than in other parts of Kharkiv, but at the same time, it is the cheapest in these areas. In Kharkiv, a 1-room will cost from UAH 6600 per month on average, then you can invest UAH 4500.

28 Table 2.3 Dynamics of changes in the average cost of renting a hotel in the main areas, the city of Kharkiv as of May 2020

2 Real Estate Market: Trends and Developments

Region

Value

Value range

New houses

UAH 3700/month

Value range

Odesa

4500 UAH/month

3200–4500 UAH

Pavlove Pole

UAH 5500/month

Value range

Defenders of Ukraine

6000 UAH/month

3500–5000 hryvnias

UAH 5000/month

Value range

Saltovka

4500 UAH/month

3500–6800 UAH

UAH 3000/month

Value range

6000 UAH/month

4500–6500 UAH

UAH 5000/month

Value range

Stara Saltivka

The cost of renting hotels from minimum to maximum depending on the area is shown in Fig. 2.12.

Fig. 2.12 The cost of renting hotels from minimum to maximum depending on the area

2.3 Research of the Market of Small-Sized Housing

29

Fig. 2.13 Rating of Kharkiv districts by the average cost of rental rates

The rating of Kharkiv districts by the average cost of rental rates is shown in Fig. 2.13. On average, apartment rental prices grow from 5 to 15% annually. About 20% of the cost is usually added by location, condition of the house (new building), and transport infrastructure. Thus, the market for mini-apartments in Kharkiv is more developed than in Kyiv. More mini-apartments are being bought in Kharkiv to rent it out than in Kyiv. The whole market of mini-apartments (hotels) in Ukraine is actively developing. Prospects for urban development of the market of mini-apartments For the sale of mini-apartments in the absence of increased demand in the market, the owners of renovated houses and new buildings mini-apartments, resort to marketing levers to stimulate demand [6, 15]: • provide installment payment; • make a discount on repairs; • hold various actions (for example, furniture as a gift). It should be noted that some of these items have not been sold for a very long time. The cheapest mini-apartments are for sale in the HTZ area—from $ 4000. The average offer price of one-room mini-apartments with their bathroom is $ 8000, with a shared bathroom—$ 6000. The average cost of mini-apartments ranges from $ 3000 to $ 16,000. Mini apartments in renovated houses can be bought from $ 8000 to $ 17,000 (400–700 $/m2 , area 10–36 m2 ). You can buy a mini-apartment with renovation for $ 1000/m2 . The graph of the average rental price of mini-apartments in Kharkiv for 2019 is shown in Fig. 2.14.

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2 Real Estate Market: Trends and Developments

Fig. 2.14 The average rental price of a mini-apartment in Kharkiv, 2019

It can be concluded that the value range of 1 m2 in this segment of real estate varies within very significant limits. From $ 300–$ 700 and even up to $ 1000/m2 . [15]. The market for renting mini-apartments has a range of $ 77–$ 193. The market for mini-apartments is the most promising for investment in the structure of the city [20]. Conclusions 1. The researched market of small-sized housing can be considered a new social phenomenon in large cities of Ukraine. The question of a new segment of the real estate market in urban development projects is highly relevant. 2. In Ukraine, the market of mini-apartments (hotels) arose and developed due to the unstable economic situation, the devaluation of the hryvnia, and declining incomes. The cost of 1 square meter of mini-apartments depends on the investment attractiveness of the regional center. 3. The whole market of mini-apartments (hotels) in the big cities of Ukraine is actively developing. In Kharkiv, in most cases, buy small apartments for further rental. 4. Today, investing in a mini-apartment and renting is very profitable to do. The capitalization rate (rate of return on capital) will be 12–16%. The payback period for such an object will be about 7 years. 5. The value range of 1 m2 in this segment of real estate is from $ 350 to $ 1200. The market for renting mini-apartments has a range of 70–300 US dollars for a mini-apartment.

2.4 Research of the Primary Real Estate Market Studies of the real estate market, namely the land market [21], and the primary real estate market [5] show that this is a rather complex issue. Market research, especially primary real estate, is not conducted. Most authors are limited to market analysis [11].

2.4 Research of the Primary Real Estate Market

31

It should be noted that information on the primary real estate market is very difficult to obtain by researchers and is virtually closed. Such researchers as Popov A. and Riltseva V. are directly indicated [22]. The real estate market, both secondary and primary, depends entirely on the level of development of the country and the level of economic development of the basic spheres of the economy. The primary real estate market is highly dependent on energy prices, building materials prices, and construction costs. And the primary real estate market reflects the processes that reflect the development of the construction industry. The level of income of the population—potential buyers of the real estate market—has a significant impact on the primary market [9, 15]. The development and prospects of the primary real estate market are very important for understanding the further dynamics of the entire real estate market. This issue is very important to consider in the interaction of primary and secondary real estate markets [21]. The study of the primary real estate market raises many questions, precisely because the market is not transparent. Most developers hide the figures for sold housing [14], thus stimulating the market and, in fact, producing an artificial deficit. Researchers have access only to figures that characterize the number of housings built, the number of housings commissioned, and the number of mortgages before construction. There is no statistical information on the number of sold homes in a specific period. Factors influencing the primary real estate market: • • • • • • • • • • •

inflation rate; stability of the hryvnia exchange rate against foreign currencies; GNP growth rates; the level of wages received by the population; bank rates on mortgage lending; energy prices; prices for construction materials; prices for construction and installation works; the cost of land; the cost of additional costs for land allotment and design work; the cost of connection to the main networks (water, sewerage, heating, electricity, gas).

Conduct a study of the primary real estate market of Kharkiv and compare the primary real estate markets of other cities. To achieve this goal, the following tasks are set: • investigate the proposals in the primary real estate market; • investigate the demand in the primary real estate market; • investigate the dynamics of changes in the cost of new buildings in Kharkiv since 2016;

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2 Real Estate Market: Trends and Developments

Fig. 2.15 Total volume of commissioned housing in m2

• identify the features of the primary real estate market; • identify factors influencing the primary real estate market. Construction volumes The total volume of construction are presented in Fig. 2.15. Competition in the market Figure 2.16 shows the total number of residential complexes (HC) in Kyiv, Kyiv region, Lviv, Odesa, Kharkiv, and Dnipro by years, from 2014 to 2017. Stage of readiness of residential complexes The total number of residential complexes in Kharkiv since 2010 is 223 [5]. Figure 2.17 shows the degree of readiness of residential complexes according to the criteria: built, under construction, project, or suspended. The proposal in the primary real estate market is shown in Fig. 2.18. Classification in the primary real estate market The largest market share, namely, 40% of new buildings (71,956 m2 ) are currently being built in Kharkiv and are classified as economy class. Now such housing is very popular with potential buyers of apartments in the primary market—primarily because of affordable prices. According to research, 24% (42,864 m2 ) is premium class and 22% (39,520 m2 ) is business class, 12% (20,879 m2 ) is comfort and 2% (3579 m2 ) belongs to the class deluxe. Let us define classes in the primary housing market.

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33

Fig. 2.16 The total number of residential complexes

Fig. 2.17 Degrees of readiness of LCD in Kharkiv since 2010

Economy class Today, we have 38 new economy-class buildings. Such houses are being built in all districts of Kharkiv—from the center to the outskirts. But most of these LCDs are concentrated in the Industrial area, as well as around Cold Mountain. Today, the most budget option for buying a home in the “economy” class is UAH 9500 per m2 , while the most expensive housing 22,923 UAH per “square”. In August, the average cost per square meter in this segment was UAH 12,643. As for the features of economy-class houses, as a rule, standard solutions are used for their construction. There are no special requirements for finishing, infrastructure, landscaping, and the rest. Everything is done according to the minimum norms prescribed by law. Save on almost everything.

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2 Real Estate Market: Trends and Developments

Fig. 2.18 Offers in the primary real estate market

Comfort class If we talk about comfort class, then the requirements will be higher, for example, more expensive decoration of apartments or security measures (fencing around the house, CCTV cameras, concierges). The main difference from economy class may be that the house may have improved planning and engineering solutions. In the “comfort” class in August, the average cost was UAH 14,854 per m2 . As for the comparison with July, the price increased significantly by 19%. This is the biggest jump in segments this summer. 28 new buildings in the portal catalog are comfortclass LCDs. The lowest prices in such houses are at the level of UAH 10,100 per m2 . The most expensive option for buying a home is 26,000 UAH. per m2 . Most of the new comfort-class buildings are being built on Saltivka, along Moskovsky Prospekt and st. Klochkivska. Business class In August, the average price in this segment was UAH 18,572 per square meter. And compared to July increased by 1%. Business-class new buildings are often built to the individual order of the developer. They have atypical facades. The building project itself is always individual, with its architectural idea. 31 business-class houses are being built in Kharkiv. Such LCDs are scattered throughout the city. Many of them are being built in Saltivka, and some businessclass buildings are currently being built in the central part of the city and nearby areas. The most budget option for buying a home in the class “business” is 13,000 UAH. for “square”. In the most expensive business-class house, the price per square meter is UAH 39,500.

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35

Premium and deluxe class Premium and deluxe classes are elite and the most expensive housing. The area of apartments in such houses averages 120 m2 . The fact is that such complexes should have a well-maintained area, a well-thought-out security system, and a large parking lot. Construction technology and materials must also be at the highest level. As for the location of the house, there are differences. Luxury new buildings should be in green, quiet, sleeping areas, away from work, and business areas. At the same time, in Kharkiv and many cities of Ukraine, the location of the house in the city center adds to its construction class and cost. In world practice, the requirements for luxury real estate are very high and only a few houses fall into this category. In our city, some developers classify their houses as “premium” and “luxury” [6, 15]. Today, 18 new buildings can be classified as “premium” in Kharkiv. As for prices, in August, compared to July, the price fell by 0.1% and amounted to UAH 32,671 per m2 . The price varies from UAH 20,000 per m2 (the most budget option) to UAH 56,000 per m2 (the most expensive). Most premium houses are being built in the center and the Pavlovo Pole area. Speaking of deluxe, we note that today in the city only two houses fall into this category. They are being built in the very center—on Sumska. It was possible to buy an elite apartment in August 2020 for an average of UAH 40,365 per m2 . It should be noted that the classification of housing classes is more recommendatory. The new building may have features of one class or another. The decisive factor is the cost of housing because it depends on the class of the developer who can set the appropriate price. At the same time, if we look at the cost of square meters, the price of an apartment in a house of economy class can often be higher than comfort. Housing in new business-class buildings can be no more expensive than “comfort” apartments. The definition of the class remains on the conscience of the developer [21]. Demand for residential complex classes Demand in the primary real estate market for residential complexes depending on the class is shown in Fig. 2.19. In April 2019, sales began in building 3 of Rohatynsky residential complex, building 15 of Levada residential complex, and building 1a of Luch residential complex (Developer—Zhytlobud-1). Zhytlobud-2 has opened sales in Sect. 1 of building 2 of the Parkovy Kvartal residential complex and has started construction and sale of apartments in the Podvirya residential complex (Podvirky village, Dergachiv district). A comparison of demand in the primary real estate market depending on the class in the cities of Kharkiv, Kyiv, and Odesa is shown in Fig. 2.20.

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2 Real Estate Market: Trends and Developments

Fig. 2.19 Demand in the primary real estate market depending on the class

Fig. 2.20 Comparison of demand in the primary real estate market depending on the class by cities Kharkiv, Kyiv, Odesa

Cost of new buildings and the dynamics of price changes Figure 2.21 characterizes the dynamics of changes in the value of new buildings in Kharkiv since 2016 in UAH. Figure 2.22 shows the dynamics of change in value of new buildings in Kharkiv since 2016 (US dollars). The weighted average offer price of apartments in new buildings in Kharkiv in April 2019 in UAH decreased by 1.1%—to UAH 19,225, in US dollars increased by 0.9% to $ 722/m2 . [11]. The dynamics of changes in the value of 1 m2 in the primary real estate market of Kharkiv in hryvnia and in dollars is shown in Fig. 2.23.

2.4 Research of the Primary Real Estate Market

Fig. 2.21 Dynamics of change in value of new buildings in Kharkiv since 2016 (UAH)

Fig. 2.22 Dynamics of change in value of new buildings in Kharkiv since 2016 (US dollars)

Development prospects Stagnation in the market for new buildings in Ukraine is forecasted [8].

37

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2 Real Estate Market: Trends and Developments

Fig. 2.23 Dynamics of change in the value of 1 m2 in the primary real estate market of Kharkiv in UAH and USD

In the next six months, the volume of housing construction in Ukraine may be reduced by a third. More than 30% of projects throughout Ukraine, the start of which was scheduled for the III–IV quarter of 2019, may be postponed. Now in the Ukrainian construction market, it is very important to understand whether the ongoing reforms will continue, especially in the field of reforming the State Architectural and Construction Inspectorate and the introduction of strict restrictions on construction in densely built-up housing estates in central Ukrainian cities [6]. The volume of construction in January-April 2019 compared to the same period in 2018 increased by 28.1%. The volume of construction products produced (construction works performed) by Ukrainian enterprises in January-April 2019 amounted to UAH 38.6 billion. 1% and 8.6%, respectively. The first quarter in Kharkiv and area 90,200 m2 of the total area of apartment houses are put into operation. The total area of housing commissioned in January– March 2019 compared to the same period last year decreased by 1.7 times. A segment of the primary housing market Commissioning Priority areas of investment in the real estate market of Kharkiv are determined by the current market situation, the socio-economic situation in the country, and the region. The largest investment activity in the real estate market is concentrated in the residential real estate segment. Over the last 10 years, about 2.7 million m2 of housing has been commissioned in Kharkiv. Figure 2.24 shows the dynamics of housing commissioning in Kharkiv since 2008 [8]. Currently, the primary market in Kharkiv and the nearby suburbs (Pisochyn) sells apartments in 108 houses/sections, which are part of 60 residential complexes. 25% of facilities (buildings/sections) have already been commissioned, and 51% are scheduled for commissioning in 2018.

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39

Fig. 2.24 Dynamics of commissioning of housing in Kharkiv

Figure 2.25 shows the structure of supply in the primary market of residential real estate in Kharkiv by sections of buildings [11] Since the beginning of 2018, the market supply has been supplemented by new residential complexes: Leonardo Residential Complex (Megainvestbud), Diplomat Residential Complex, German Project on Valentine’s Day Residential Complex (Construction Group), Teatralny Residential Complex and Zh. Dynamivska, 1 (Zhytlobud-1), RK Stolychny (Kharkiv StroyCity), RK Na Zernovy (Zhytlobud-2), as well as new residential buildings/sections in already built residential complexes Luxembourg, “Peace”, “Levada”, “Azure”, and others. The structure of the market offer is dominated by economy and comfort-class houses. Figure 2.26 shows the structure of supply in the primary market of residential real estate in Kharkiv by class.

Fig. 2.25 The structure of supply in the primary market of residential real estate in Kharkiv by number of houses

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2 Real Estate Market: Trends and Developments

Fig. 2.26 The structure of supply in the primary market of residential real estate in Kharkiv by class

In Kharkiv, the number of large residential complexes under construction and even entire neighborhoods is growing. Complex construction is becoming more interesting than point building for both construction companies and future residents. The largest project—ZhK “Peace” is implemented by the company “Zhytlobud1”. Along with one of the city’s main thoroughfares, Moscow Avenue, construction is underway on three sections, each of which has already built 19–25 nine-story buildings. In the category of complex buildings are also residential complexes “Saltivsky”, “Levada”, “Newton”, “Rogatinsky” (“Zhitlobud-1”), “Meridian”, “Prolisok” (“Zhitlobud-2”), “Lazurny” “Gradstroy”) and others [8]. Since the beginning of this year, premium-class apartments have become more expensive, while economy-class prices have fallen slightly. Figure 2.27 shows the dynamics of changes in the price of apartments on the primary market by class of Kharkiv since the beginning of 2018. Table 2.4 shows the price range in the primary residential real estate market in Kharkiv. Thus, we can see that the economy-class housing for 8500 UAH. There is the greatest demand—more than 50%. The main demand is for economy and comfort apartments (81%). About 60% of the structure of demand – is one-bedroom apartments. At the same time, there is a tendency to reduce the demand for one-bedroom apartments as the class of the house increases. Figure 2.28 shows the dynamics of changes in the value of apartments in the primary market by class [8]. The main demand is for economy and comfort-class apartments (81%). About 60% in the structure of demand—one-bedroom apartments. At the same time, there is a tendency to reduce the demand for one-room apartments in moderation and increase the class of the house.

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41

Fig. 2.27 Dynamics of changes in the value of housing in the primary real estate market Kharkiv since the beginning of 2018 Table 2.4 Price range in the primary residential real estate market of Kharkiv

Price per UAH/ Price per UAH/ The structure of m2 m2 the demand % Elite

25,200–58,800

900–2100

5

Business

17,000–51,800

600–1850

14

Comfort

10,350–25,000

370–890

28

8500–20,500

300–730

53

Economy

Fig. 2.28 Dynamics of changes in the value of apartments in the primary market by class

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2 Real Estate Market: Trends and Developments

Conclusions The primary real estate market is not transparent enough in the general system of the country’s economy. The primary real estate market operates only in conjunction with the secondary real estate market. The primary real estate market is developing very rapidly due to the existing high demand for newly built real estate in the central areas and areas located near highways and subway stations.

2.5 Research of the Land Market One of the main areas of priority capital investment is land. Land can be bought, sold, leased, and thus generate income. When it is necessary to evaluate a land plot, the market value of the land plot is usually determined [5, 23]. The process of land valuation is the valuation of real estate, where the assessed object is not only the land as part of the surface but also the boundaries of the land, the space under and above the land, and the environment near the land [6]. The market value of land depends on its location and the influence of external factors, on supply and demand in the market. Market valuation of land depends on the expected amount, timing, and probability of income from its operation for a certain period with the most efficient use of land without considering income from other factors of production attracted to the object for business activities. Research the land market to determine the features of the evaluation of commercial land To achieve this goal, the following tasks are set. Investigate the proposals within the city and calculate the average value of commercial land. Identify the features of the assessment of commercial land. Determine the scheme of research and evaluation of commercial land for the calculation of market value. A land plot is a part of the earth’s surface with established boundaries, a certain location, and certain rights about it. Ownership of a land plot extends within its boundaries to the surface (soil) layer, as well as to water bodies, forests, and perennial plantations located on it, unless otherwise provided by law and does not violate the rights of others. Ownership of land extends to the space above and below the surface of the height and depth required for the construction of residential, industrial, and other buildings and structures [9]. Thus, the study of commercial land (used for commercial purposes) can be conducted according to the following criteria: • lands of industry, transport, communications, energy, defense, and other purposes. Land industry; • lands of industrial parks; • lands of transport;

2.5 Research of the Land Market

• • • • • • • •

43

lands of railway transport; lands of maritime transport; lands of river transport; lands of road transport and road management; lands of air transport; lands of pipeline transport. Communication lands; lands of the energy system; land defense. The following documents are required for research and evaluation of land:

• a document establishing the boundaries of the land plot (state act on land); • cadastral plan of the land plot; the category of the land plot about its intended purpose; • information on permitted use; • information on land restrictions and information on the availability and condition of utilities. Land market and its features Appraisers consider the value in the context of real estate markets, so market research is an important part of the appraisal procedure [15]. Real estate markets differ from markets for other goods and services in economic characteristics and behavior of buyers and sellers, as well as characteristics in the circulation of goods. In the process of determining the value of land (market value), the land market appraiser allows developing criteria for the study, selection, and analysis of the identity of similar land plots. To determine the market value, the appraiser must very honestly research and analyze the market of such land [6, 15]. It is important to understand the relationship between land and real estate. Definition of real estate by the legislation of Ukraine Civil Code of Ukraine in Article 181. Immovable property (real estate, real estate) includes land, as well as objects located on land, the movement of which is impossible without their depreciation and change of purpose [23]. Given the above legislation, we can identify the following features of real estate: (1) Objects are located on the land and are inextricably linked with the land, they cannot exist without land. (2) Relocation of these objects is impossible without their depreciation and change of their purpose. The Land Code of Ukraine defines a land plot in Article 79. A land plot is a part of the earth’s surface with established boundaries, a certain location, and certain rights about it. Ownership of a land plot extends within its boundaries to the surface (soil) layer, as well as to water bodies, forests, and perennial plantations located on it, unless otherwise provided by law and does not violate the rights of others. Ownership of land extends to the space above and below the surface of the height and depth required for the construction of residential, industrial, and other buildings and structures [9].

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When calculating the market value of land, it is necessary to investigate these features of the land market [5, 6, 15]: • Objects on the land market are difficult to standardize, sort, and buy according to samples because each land plot has a specific location and physical characteristics, and value of the plot still depends on the external environment • The supply on the land market is inappropriate and within the administrative unit acts as a fixed value, limited by nature. This is one of the features of the earth as a freely unreproduced commodity. Demand is less elastic than in other markets and largely depends on the location of the site. Supply and demand are usually unbalanced, and the possibility of balancing them with prices is limited [24]. • The land market as a commodity may be land rights. Land plots have a fixed position. Land transactions involve many legal formalities and require documentation and state registration. Therefore, land market transactions involve significant costs for verification of property rights and registration. • The land market is not open and transparent, so market information is not as open as in the securities or consumer goods markets, as land transactions are often confidential. • Land transactions require relatively large investments, so the development of the land market is highly dependent on the capabilities of bank mortgages, namely the ability to obtain loans for the purchase of land. • The land market is characterized by a high degree of state regulation by legislation and certain prohibitions. The land market is characterized by very low liquidity compared to developed countries [12]. This is due to the process of formation of land legislation, the division of state ownership of land, the formation of the State Land Cadaster, the underdevelopment of many market segments, and the long ban on the alienation of agricultural land. The market value of land is formed in the process of interaction of supply and demand. The interaction of supply and demand expresses the interdependence between the growing demand for land in the process of socio-economic development of society and the natural limitations of their supply. The market value of land is formed under the influence of the following groups of factors: 1. Economic factors that depend on the macroeconomic situation and the economic situation in the region. 2. Political factors. Factors are related to the political situation in the country. 3. Market factors. Market factors include supply and demand and its market elasticity and other factors inherent in a properly functioning real estate market as an element of a market economy. 4. Socio-demographic factors (population size and density). 5. Factors due to state regulation of the land market (legal regulation of the land market).

2.5 Research of the Land Market

45

6. Factors that reflect the physical characteristics of the site and the impact of the environment—it is necessary to consider the impact of these factors: • the remoteness of the site from the city center, cultural facilities, and consumer services of national importance; • provision of centralized engineering equipment and landscaping, transport accessibility to places of employment; • the level of development of the sphere of cultural and household services within the site, neighborhood, and quarter; • a historical value of buildings, aesthetic and landscape value of the territory; • state of the environment, sanitary and microclimatic conditions; • engineering and geological conditions of construction and the degree of susceptibility of the territory to destructive natural and anthropogenic influences. 7. External factors. Thus, the ratio of supply and demand is a basic factor that determines the market value of the land. Procedure for research and evaluation of land [15]. Determining the market value of land includes the following stages: • acquaintance with the object of assessment, the characteristic conditions of the agreement for which the assessment is conducted; • determination of the evaluation base; • submission of proposals to the customer regarding the essential terms of the evaluation contract; • agreeing to evaluation; • acquaintance with the object of assessment, collection, and processing of source data and other information necessary for the assessment; • identification of the object of evaluation and related rights, analysis of possible restrictions and reservations that may accompany the evaluation procedure, and use of its results; • selection of the necessary methodological approaches, methods, and evaluation procedures that most fully meet the purpose of the evaluation and the selected base specified in the contract for evaluation, and their application; • coordination of evaluation results obtained using different methodological approaches; • preparation of a report on the valuation of the property and a conclusion on the value of the object of valuation on the date of valuation; • finalization of the report and conclusion on the value of the object for the new valuation date. Features of land valuation The market value of land that does not contain land improvements, land that contains land improvements and is considered conditionally free from land improvements, or

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2 Real Estate Market: Trends and Developments

land that contains land improvements, the most effective use of which is liquidation, is determined based on an analysis of the most effective use [14]. The most efficient use of land that contains land improvements and is considered conditionally free from land improvements may not coincide with the most efficient use of land that contains land improvements [11]. In this case, the determination of the market value of the land assumes a conditional change in the method of its use to achieve the most efficient use. In this case, the costs of restoration of such land may be considered (excluding costs associated with the elimination of land improvements). If the calculation result obtained using such a procedure is negative, the market value of the land plot is assumed to be equal to one hryvnia. If the most efficient use of land improvements is their elimination and the costs associated with it exceed the value of land containing land improvements, the cost of such land improvements is equal to the cost of liquidation, determined by National Standard No. 1, and market value land is defined as conditionally free of land improvements [6]. Valuation of land plots is carried out using income and comparative approaches based on the analysis of information on the amount of rent and sale price (supply) of similar land plots, if necessary—considering the cost of land improvements. In the case of determining the market value of the land with its most efficient use, the land is considered conditionally free from land improvements. In the case of determining the market value of land in its existing use, the land is considered conditionally free from land improvements [14]. In the absence of information on selling prices (offer prices or rent) of such land plots, the assessment of the land plot assumes a conditional change like its use to one that provides income from its most efficient use. To assess the land used as agricultural land, gross income to determine rental income is calculated based on the analysis of the dynamics of the typical crop yield (according to soil fertility within the land, crop yields in terms of relevant agricultural groups of its sales) and prices on the market. Costs that are considered when calculating rental income include production costs and the profit of the producer, which are typical for the regional market [12]. To assess the land covered by forest vegetation and intended for forestry, rental income is calculated by deducting production costs and profit of the producer for the period of turnover from the gross income projected from the use of forest resources [22]. The value of land plots within which natural and artificial closed reservoirs used for economic activities are located is determined by the procedure established for the assessment of land plots containing land improvements [14]. Practical results of research of lands of commercial use. Surveys of commercial land were conducted within the city of Kharkiv and near the ring road. As a result of research, the lands for industry, transport, communications, energy, defense, and other purposes were analyzed [5, 8, 22]. This is the category of land that is most often used for commercial activities [21]. As a result of research, the following results which are shown in Table 2.5 were received.

References

47

Table 2.5 Dependence of land value on the size, location, and category of land N

Square/acres

Value/$

Value/$/acres

Value/UAH

1

114

427,500

3750

11,362,950

Value/$/acres 99,675

2

200

40,000

200

1,063,200

5316

3

60

70,000

1167

1,860,600

31,010

4

36

80,000

2222

2,126,400

59,067

5

63

58,000

921

1,541,640

24,470

6

14

32,000

2286

850,560

60,754

7

63

53,800

854

1,430,000

22,698 138,667

8

23

117,381

5217

3,120,000

9

200

285,000

1425

7,575,300

37,877

10

200

100,000

500

2,658,000

13,290

Average value

1644

44,388

Thus, 10 land plots located in different parts of the city and not far from developed places and highways were analyzed and the average market value of 1 hectare was calculated. Conclusions Analyzing the market for commercial land, we see that these objects have a high price because there is a constant demand for such objects. Land plots located in areas with developed infrastructure have the highest market value and are the most attractive to potential investors. The market value of a land plot is directly proportional and depends on the infrastructure located next to it, namely access roads, electricity supply, water supply, sewerage, gas supply, and others.

References 1. Kobzan SM (2018) Trends and prospects for the development of the warehouse real estate market in Kharkiv: municipal utilities. Ser Tech Sci Archit 144:87–93 2. Kobzan SM et al (2021) Research of peculiarities of rent market development: municipal utilities. Ser Tech Sci Archit 161:116–123 3. Petrushina V, Boitsova M, Kobzan S (2006) Real estate transactions. Monograph. Factor Publishing House, 632 p 4. Kobzan SM, Popov AV, Ryltseva VV (2017) The real estate market: from realtor to investor. Monograph. FLP Panov A. N., Kharkiv, 128 p 5. Pomortseva O, Kobzan S, Yevdokimov A, Kukhar M (2020) Use of geoinformation systems in environmental monitoring. In: The international conference on sustainable futures: environmental, technological, social and economic matters, vol 166 6. Kobzan SM, Pomortseva OE (2021) Real estate market research using GIS: trends and prospects ´ 3:151–156 for development. Collect Sci Works Λ OGΣ

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7. Pomortseva OE et al (2016) Features of the study of geographic information systems in higher education. Inf Process Syst 2:220–226 8. Voronin VO, Lantse EV, Mamchin MM (2014) Real estate market analysis: methodology and principles of modern valuation. Monograph. Magnolia, Lviv, 304 p 9. Kobzan SM (2019) Real estate market formation: practical aspects and features of evaluation. Monograph. Jurinkom Inter, Kyiv, 212 p 10. Shalayev VM, Ivanova IB, Drapikovsky OI et al (2012) Trends in the real estate market of Ukraine. Realities and forecasts, Real Estate Market of Ukraine 2009–2013. Monograph. Art Economy, Kyiv, 240 p 11. Kobzan SM, Pomortseva OE (2021) Construction and real estate market: problems and trends: international scientific-practical conference «An integrated approach to science modernization: methods, models and multidisciplinarity» Vinnytsia, UKR—Vienna. Aut Grail Sci 1:497–504 12. Bugaychuk ES, Kobzan SM (2017) Hotels and mini dimensional apartments: analysis of the market of similar property modern aspects of real estate market formation: domestic and international experience. In: International scientific-practical conference: ministry of education and science of Ukraine, Kharkiv. National. University of Municipal Economy, pp 27–32 13. Kobzan S, Nesterenko S (2020) About new aspects of the development of the market of mini apartments in Ukraine. In: The international conference on sustainable futures: environmental, technological, social and economic matters (ICSF 2020), vol 166. https://doi.org/10.1051/e3s conf/202016609002. 14. Rating of development of cities of Ukraine. http://www.ipa.net.ua 15. Institute of Economic Affairs of the Council of Political Consultations (2018) For the consolidation of the state agency for investment and management of national projects in Ukraine. Rating of the Privatization of the Ukraine, Kiev, 390 p 16. Factors of the investment security of the Middleslide (2018) World Investment Forum. http:// www.itukraine.org.ua/events/svitovyy-investyciynyy-forum-2-4-kvitnya-2017-dubay-oae 17. Indicators of the indirect cost of housing construction by regions of Ukraine: Order of the Ministry of Regional Development and Construction of Ukraine 04.02.2009 №. 56. Pricing in construction: a collection of official documents and explanations vol 2, p 158 18. Googin B, Mirvis PH, Rochlin SA (2008) Beyond good company: next generation corporate citizenship. Palgrave Macmillan, Boston, 288 p 19. Meteshkin K, Shipulin V, Nesterenko S, Kobzan S (2020) Features of underground real estate use: infrastructural and regional aspects. Geodesy Cartogr 69(1) 20. Query Statistics (2022). https://www.facebook.com/GalynaBuchko 21. Peychev K, Yu L, Kobzan S, Levkov V (2013) Land operations, 3rd ed. Factor Publishing House, 1040 p 22. Anoprienko TV, Mamonov KA, Kobzan SM (2016) Analysis of the real estate market and real estate business technology. Monograph. FLP Panov A. N., Kharkiv, 158 p 23. GOST 30494–2011 «Residential and public buildings. Indoor microclimate parameters». http:/ /online.budstandart.com/ua/catalog/doc-page.html?id_doc=66378 24. Factors influencing the choice of the location of the shopping center. Professional real estate development and construction. http://www.sozidateli.com/

Chapter 3

Practical Aspects: Development of a Method of Modeling the Most Attractive Location of a Real Estate Object

Abstract The purpose of this chapter is to conduct a study of aspects of modeling the most attractive location of real estate objects. As a result of the conducted research, an algorithm was developed for the method of modeling the most attractive location of the real estate object. The proposed algorithm will allow you to choose the right place for the location of the future real estate object. And consider the specifics of the object, which is important for assessing its profitability. The authors proved that the construction of visual models for analysis is one of the most important stages of choosing the optimal location of real estate. The authors made conclusions about the common features of the location of cultural centers (art centers) and shopping centers, since one of the most important factors affecting the location is profitability. In this chapter, the authors analyzed all popular models for calculating the most attractive location of a real estate object. The authors proposed a method of choosing the most attractive location for such objects. Thus, it was determined that the authors’ use of such methods as “calculation by trade area”, “multiple regression method”, and “gravity method” leads to the best results. Keywords Administrative district · Competitive environment · Consumer preferences · Geographical model · Geoportal · Municipal economy · Population density · Probabilistic model · Real estate market · Shopping mall · Socio-economic factor · Transport accessibility · Visual model

Since this monograph deals with the problems of the real estate market, it is necessary to study in more detail the problem of planning the location of real estate. Especially when it comes to specific objects, such as shopping and entertainment centers (malls), and art centers. For the most part, the preferred option is when the source data for the construction of real estate are the ownership of the site. This approach can lead to not getting the best possible option and creating a non-viable object. And it does not depend on the object profile. There are many examples to prove this, especially in terms of cultural and public facilities. That is why it is necessary to pay more attention to the study of areas and analysis of factors accompanying the development. Such a preliminary

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_3

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analysis of the territory is key to creating successful objects. That is, you must first carefully select the site for construction, considering many factors, depending on the future direction of the property. The most obvious modeling of the attractive location of a real estate object can be illustrated by the example of large objects, such as art spaces or shopping malls, which is why the authors focused their attention on developing a modeling method for these objects.

3.1 Research of Modern Trends in the Location of Shopping and Entertainment Centers and Art Spaces The entertainment industry includes enterprises (organizations, institutions), whose main activity is related to meeting human needs for entertainment. The entertainment industry, solving multifaceted problems (especially education, the formation of optimism, education, recreation, and development of human culture), in essence, forms and develops a personality. By filling part of his free time with entertainment, a person restores himself. Shopping centers are also included in the sphere of public services. Several enterprises, organizations, and institutions provide entertainment in the form of their non-core activities. In addition to hotels, there are recreation areas and historical sites. The entertainment industry should also include nightlife, which also finds its fans among tourists. Discos or club “parties” are a favorite attraction of young people. An example is the well-known skeleton of Ibiza, which demonstrates the relevance of this type of recreation. Modern nightlife is impossible to imagine without nightclubs. They topped the list of the most popular vacation spots for residents of both large and small cities. In 2015–2016, documents were introduced that must be considered when organizing any mall (shopping and entertainment center), regardless of its size, form of ownership, type, and range of services [1]. According to the classification, an entertainment center is a specialized institution in the interests of consumers. No special conditions are provided for such enterprises, all general restrictions apply to them in full. Note the main ones: • any entertainment facilities can be in residential and public buildings (including separate ones), on the territory of railway stations, shopping malls, offices, and cultural and entertainment centers; • access roads and pedestrian access with information signs should be provided to the enterprise. The surrounding area should be illuminated, and tidy. There must be a car park near such establishments, which cannot be located inside the yard; • if the institution is in a residential building, it is necessary to comply with all building codes for the permissible level of noise, and vibration [2] for residential

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buildings. Separate entrances and exits, including emergency ones, are arranged with instructions on how to act in emergencies. When placing a club in an ordinary residential building, there are difficulties with the transfer of premises to non-residential. The Housing Code does not require the consent of all residents. However, to arrange a separate entrance area, it is often necessary to occupy a plot of land belonging to a residential building, to reconstruct common areas. The issue is decided individually, sometimes you can limit the decision of the general meeting (redevelopment), in another situation—will require the consent of the owners (reconstruction). It is not allowed to place shops for cooking in basements and semi-basements. Production should not worsen the living conditions of the occupants of the house (noise, odors, vibration, electromagnetic fields). Unloading of products and other raw materials from the entrances to the apartment building is not allowed. This requires the equipment of the reception point from the end of the building, where there are no windows, or from the street. Garbage and food waste must be stored in separate containers on an asphalt (concrete) site not closer than 25 m from the entrance, and playground, and these containers must be cleaned when filling 2/3 of the volume. Exhaust ventilation should be installed separately from the general house above the roof level by 1 m. The pipe of this height should be attached to the wall of the house. Thus, it can be concluded that the law does not prohibit the organization of catering and entertainment establishments, including night-time establishments, in residential buildings. However, a more efficient placement in a special separate building will save you from possible complaints and numerous inspections. The entertainment industry in Ukraine is developing and growing at a gradual pace. It is characterized by periods of slowdown and decline, as well as gaining momentum and growth. Crisis period 2014–2016 pp. negatively affected the activities of this industry. According to the research and analytical company Nielsen [3] in September 2021, the six largest cities of Ukraine are Kyiv, Lviv, Odesa, Kharkiv, Zaporizhzhia, and the Dnipro operated 1558 units of bars, pubs, and nightclubs. In terms of cities, the TOP-3 includes Kyiv—523 institutions, Odesa—330 institutions, and Lviv—175 institutions. As for Kyiv, the Fast Food type predominates here—59.3%, confirming the status of the business center of Ukraine, and the share of nightclubs is only 11.6%. The share of the club industry in Odesa is the highest—17.8%, and in Lviv, it is 13.5% (Fig. 3.1). It is known that the attendance of entertainment facilities directly depends on the welfare of the population, as the costs for these purposes do not belong to the category of priority. In general, the cost of visiting cultural and entertainment facilities, including food, is a little over 7% of the budget of the average household. The increase in entertainment expenditures is constrained by the growth of other types of expenditures of the population, which have a higher priority. Thus, in the first half of 2019, the share of household expenditures on food purchases and payment of utility

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Fig. 3.1 Number of entertainment enterprises in the six largest cities of Ukraine

tariffs amounted to 68.9% [4]. With a further increase in these payments, the average citizen will be forced to allocate more money to them by reducing entertainment costs. A gradual recovery from the economic crisis and a steady trend in the development of technology can be associated with a return to visiting the mall with the full range of relevant entertainment and sporting events. Despite the complexity of the political situation in Ukraine, the hectic pace of people’s lives requires the creation and expansion of facilities and places for leisure and recreation. At one time, this led to the emergence of many shopping malls, which contain several basic functions— shopping, entertainment, and food, which are convenient and therefore in demand by the population. As for mono-oriented institutions, they include the Yermilov Center in Kharkiv. This is a center of contemporary art, located in one of the buildings of KhNU. Karazin (Fig. 3.2). With two floors, the center has opened new options for modern art, from classical exhibitions to modern concerts, from recitations to professional performances and performances. The room looks in the style urban, which allows you to hold classic exhibitions, focusing in a minimalist hall on the works and, if necessary, with a set of simple measures to transform the space into another style. AVEC Gallery is the largest non-governmental art site in Eastern Ukraine (Fig. 3.3). The project was created in 2000. During its work, the Gallery has not changed its priorities—to acquaint with the works of art of different eras and peoples, to educate young people in the spirit of tolerance and patriotism, as well as to support young and mature talented artists.

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Fig. 3.2 Yermilov Center

Fig. 3.3 AVEC Gallery

AVEC supports and systematically organizes exhibitions of contemporary artists, and collections that represent the art of the past rather than the present often appear in the gallery. Comparing the Yermilov Center and AVEK, you can see a change in the vision of art in 10 years—from classics to art houses, from museums to garages, basements, or hangars. Due to the strong interdependence between transport and the city, the main tasks of urban transport systems should be correlated with the desired characteristics and types of planned real estate. The inefficiency of the transport system, especially chronic congestion on the road network, as well as the poor quality of pedestrian

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connections and public transport, lead to a deterioration in the quality of life in urban areas, even during periods of population growth and urban expansion. The city center suffers first. Suburban areas are facing more and more serious problems: a suburban resident needs a car to leave the house, so many groups of the population find themselves in traffic isolation. At the same time, the severity of congestion is increasing, with all the ensuing consequences for the environment. The reaction to this trend and the deepening crisis was the development of the concept of “a city convenient for life”. It is in such terms that the main task facing urbanized areas is now increasingly formulated. The report “Projects of Public Spaces” [5] emphasizes the presence of “an acute interest in spaces convenient for living, as people are increasingly aware of the inconvenience of the spaces in which they live, work and spend their free time”. The concept of “comfortable to live” in the city means the desired quality of life for its citizens, including opportunities for various forms of social activity, attractive public spaces, and ensuring an adequate level of privacy combined with inclusion in the urban community. It is difficult to find precise formal definitions for the category of “a city convenient for living”, but everyone can understand how convenient the urbanized territory in which he lives is. Accordingly, everyone can quickly feel that the city is not functional, that it is overloaded with problems, and that there are no signs of social and cultural life. Due to its multifaceted impact on the functioning of the city, and its social and environmental aspects, the transport system is a basic element that makes the city comfortable to live in. An efficient transport system is one of the important elements of a city that is convenient for living. It is very difficult to name a general concise definition of an efficient transport system, as efficiency depends on the conditions of each city. However, in most cases, the transport system must meet such general requirements to be considered efficient: • provide services to all areas where there is a demand for transport services; • to be accessible to all groups of the population: in the city and suburbs, all age categories, all economic groups, most categories, few mobile citizens, etc.; • provide local access to long-distance communication terminals – airports, railway, and bus stations, adjacent to long-distance highways; • have satisfactory quality characteristics such as speed, safety, reliability, and comfort; • anticipate reasonable costs and properly set tariffs; • ensure the functioning of an efficient distribution network throughout the city; • provide communications and services effectively combined with a humanitarianoriented urban environment and lively streets, be adapted to the specific needs of residential, business, and shopping areas, historic sites, monuments, etc.; • stimulate the formation of the desired forms and directions of urban development; • work with the minimum possible negative externalities.

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As representatives of the sphere of cultural development and leisure, the future art center will have similar social functions with the enterprises of the entertainment sphere, the largest of which are shopping and entertainment centers with similar goals of obtaining and retaining as many visitors as possible. For this reason, consider the factors of the location of the shopping center (mall and mall). Shopping center (gallery, passage, shopping and entertainment complex, shopping complex, mall)—a group of trade enterprises that are managed as a whole and are in one building or complex of buildings. According to the International Council of Shopping Centers, a shopping center can be considered a group of architecturally integrated retail companies run by a single company, provided with parking, and located on a specially planned site. The main factor in the success of retail is location, as it is responsible for generating human flows. The mall, located in an inconvenient place for buyers, will never be in good demand, respectively, will not pay off the invested funds of tenants and landlords. There are different methods of assessment, but each of them includes the following stages: search (all sites), assessment (each site is compared with a set of certain criteria), and selection (best site). It should be borne in mind that in our reality the first stage is not always possible. Often the developer has no choice: either he considers several similar plots, or he receives the plot together with the project, which he must finalize considering the peculiarities of the location. That is why experts in our country when assessing the site for the construction of the mall consider it as a “fait accompli” and evaluate its pros and cons, and the concept of the mall and its format is formulated based on the results. Given that the mall is a set of retail businesses, the process of studying the location and deciding on the location of the shopping center can be used methods to assess the location of the retail facility. The geographical location of the site, its physical characteristics—this point should also consider the attractiveness of the site in terms of its location on the city map: what area it is and how it is characterized by citizens, within which streets the site is located, which residential areas are in the immediate vicinity. One of the most important indicators of the level of infrastructure development in the district is the accessibility of the facility for potential visitors. That is, it is not enough to identify the number of buyers in the surrounding area, it is necessary to estimate how many buyers are physically able to visit the mall. Therefore, it is always necessary to conduct a marketing study of availability. The following factors are studied: the volume and structure of passenger flows and vehicles. The volume is characterized by such an indicator as to the total passenger traffic of the observation area. To determine this indicator, as a rule, the method of direct observation is used. Measurement of total passenger traffic is carried out on weekends and weekdays. The observation area should include streets adjacent to the building site. When measuring pedestrian flow, observers record the density of the flow per unit time, direction, and source of flow (subway, buses, taxis, personal transport). The structure of passenger traffic is the ratio of observation units—motorists, public transport, and pedestrians.

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Analysis of transport accessibility of the site. The accessibility of the facility by public transport is considered. The more areas of the city have a direct connection with the site, the more attractive it is to accommodate the mall. Analysis of site availability. It is customary to distinguish 3 zones: pedestrian—up to 10 min, transport—5–7 min. and pedestrian and transport 10–15 min. Traditionally, there is an idea that the approach of the mall to the central areas is the most profitable for the seller, as it increases the capacity and intensity of the flow of purchases. Meanwhile, the latest experience in the organization of retail trade and the location of trade enterprises provides convincing examples in favor of the advantages of another approach: on the outskirts, at a considerable distance from the city center, and the place of residence of buyers. Thus, we can say that in terms of location of retail outlets can be divided into two approaches: • attraction to the central areas of the city—the approach of “flows”; • location of the largest shopping malls on the outskirts—the approach of “traffic” [6]. Distinctive features of the “traffic” approach are the location of discounters in hypermarkets on the outskirts of the city. Prerequisites are: • availability of well-organized parking; • the widest product range, when you can buy everything in one place; • low prices, which is possible due to the realization of the effect of the scale of trade. Consider the existing shopping centers and art centers, which were located on the principle of the approach “traffic”—entertainment center “Radmir Expohol” in Saltivka near the metro station Academician Pavlov (Kharkov). The Radmir Expohol Concert Hall can accommodate up to 5000 people (Fig. 3.4).

Fig. 3.4 Radmir Expohol Concert Hall

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Fig. 3.5 DAFI shopping mall in Kharkiv

Dafi shopping mall in Saltivka, near the Heroes of Labor metro station (Kharkiv). Duffy Construction and Investment Company has been operating since 2003 and is one of the largest participants in the Ukrainian commercial real estate market. Currently, it owns two shopping malls of the same name in Kharkiv and Dnipro, and the total asset is more than 100,000 m2 of built-up area. Daffy Mall (Fig. 3.5) in Kharkiv was put into operation in 2008. This time, too, did not do without innovations. First, the construction and investment company Daffy was one of the first in Ukraine to implement a retail park project, the main idea of which was to concentrate separately located shopping centers of various specializations in one area. Until recently, there were no giant shopping and entertainment centers in the center of Kharkiv, precisely because the city center is a concentration of trade to serve “flows”. But in 2021 a new modern shopping center “Nikolskiy” was opened (Fig. 3.6), which became one of the largest shopping centers in Kharkiv, with a total area of 105,000 m2 , and features more than 150 stores. This is a vertical mall with one gallery and has direct access from the metro station Maidan Constitution on the ground floor. Based on this, we can conclude that global trends in leisure and trade consider shopping malls not just as a complex of culture and leisure, but as the so-called Molly, classifying them into: • establishments where, along with retail space, there are establishments aimed at creating and promoting cultural or artistic values; • establishments where the functions of trade are accompanied by the functions of entertainment, health, or sports (cultural and sports complexes, recreation centers, entertainment, and recreation centers).

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Fig. 3.6 Nikolskiy shopping mall

Entertainment centers in the system of shopping areas form a separate group of entertainment complexes. The entertainment component is inherent in most commercial facilities of modern society, as it significantly increases the competitiveness and attractiveness of the institution. In this regard, it is advisable to consider the typology of shopping malls by their urban location and territorial features, namely: • in cities; • in rural settlements. According to the classification of State building codes [7], cities are divided into: • • • • •

the largest (over 800 thousand inhabitants); large (500–800 thousand inhabitants); large (250–500 thousand inhabitants); medium (50–250 thousand inhabitants); small (up to 50 thousand inhabitants).

The corresponding classification of rural settlements—from the largest (more than 5 thousand inhabitants) to small (less than 0.2 thousand inhabitants). At the same time, it should be considered that in the largest, and largest cities, in addition to the central (main) citywide entertainment complex, there should be entertainment complexes of district importance in view of transport and pedestrian accessibility. They are usually located at the intersection of highways and pedestrian paths, in public centers of the city and district and operate, usually in the structure of the mall.

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The entertainment industry in big cities is gaining momentum every year, and at the same time, there are few researched issues that have become particularly relevant in recent years in connection with the coronavirus pandemic—namely, the “fashion” for a healthy lifestyle. That is, the modern entertainment complex is the idea of concentrating various forms of recreation. A distinctive feature of the entertainment centers is the comprehensiveness of services provided: cinema, games area, bowling, billiards, fitness room, gym, fast food area, and restaurant courtyard, which should unite the overall concept. Entertainment complexes are quite complex and, at the same time, unique leisure facilities. Numerous functions, concentrating in the activities of such institutions, create a huge number of different configurations. In addition, the process of implementing these functions is carried out under the constant influence of various external factors, which must be considered when analyzing the activities of such institutions. The market of entertainment centers in Ukraine began to form actively from 2005 to 2006, when, in addition to separate small rooms for computer games at cinemas, full-fledged children’s entertainment facilities began to be created. The format of children’s entertainment centers as a part of trade objects soon appeared, which was developed and gained popularity in the person of such operators as “Gameland”, “Plasticine”, and “Hurricane”. These facilities were created on the area leased by the operator in the mall. They are separate areas with an area of 800–1500 m2 with cafes, entertainment centers, and premises. The crisis of recent years, for objective reasons, has slowed down the rapid development of existing network operators, as well as the emergence of new ones. This is partly due to a certain decline in the profitability of entertainment facilities. At the same time, most of the shopping facilities built at that time already had an entertainment component in their plans, as objectively this significantly increases the competitiveness and attractiveness of existing malls. Family leisure centers, where adults can spend time in addition to children, have also become quite popular in recent times. The most striking examples of such centers, which combine shopping malls with entertainment, sports, gastronomic, and health and where not only young people but also parents and children can spend time, are the Dream Town shopping mall in Kyiv. Under one roof are combined supermarket, fitness club, skating rink, rollerdrome, water park, bowling, billiards, contact zoo, cinema, food court, and various services (Fig. 3.7). To the considered features of entertainment establishments, it is expedient to add still classification on placement in buildings, namely: • • • •

in separately located buildings created for leisure; as a part of buildings of public and shopping complexes; in built-in premises attached to residential buildings; in existing buildings and structures with their re-profiling and adaptation for entertainment establishments.

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Fig. 3.7 Appearance of interiors and exteriors of Dream Town shopping mall in Kyiv

The former is located mostly in public centers and recreation areas, the latter – in entertainment complexes of city and district importance, and the third – in the centers of neighborhoods and large housing estates. The latter option of accommodation, which may relate to a variety of urban situations and areas, is becoming more common abroad due to the large number of buildings that have lost their original function and the economy of urban areas. An example is the Vienna Gas Meters (Austria) (Fig. 3.8) [8]. At the turn of the nineteenth and twentieth centuries, Europe’s largest coke oven storage facilities were built on the outskirts of Vienna. It was intended for the needs of the city. Gasholders were used to store and pump coke oven gas until the 1980s. Since then, the use of natural gas, and the need for storage have disappeared. Unique buildings were abandoned, fell into disrepair, and began to gradually collapse. In 1995, the city authorities decided to breathe new life into Gasometers. As a result of the architectural competition in 2001, residential complexes were built, where in addition to apartments, in each of the four buildings there are offices and entertainment facilities. Above each of them is a glass dome and in the interior—gardens, paths, and flower beds. In the lower part of the buildings, where entertainment facilities are located, some passages allow you to move from one gasholder to another

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Fig. 3.8 Appearance of interiors and exteriors Vienna Gas Meters (Austria)

without going outside. Above the entertainment area are offices, and even higher living space. There are more than 600 apartments and about 200 dormitory rooms for students. Tourists are allowed access only to the lower part of the buildings, where there is a concert hall for 3500 seats, a cinema, a shopping center, the city archives, a school, a kindergarten, and many other institutions. In Europe, a great deal of attention is paid to art, which is why the most famous centers of contemporary art tend to scale. Visitors are greeted by giant halls that were previously used as industrial centers. The two best examples are the Tate Gallery in the United Kingdom and the Pompidou Gallery in Belgium [9]. The British Tate (Fig. 3.9) is one of the ten most visited museums in the world every year. Its modern branch preserves art from 1900 to the present day. In addition to the main exhibition, large-scale retrospectives of contemporary art are regularly held here. The peculiarity and advantage of the museum is its unique architecture. Tate has a famous “Turbine” hall, which was built for the generators of the power plant located here (the building changed its purpose). Due to the huge area and volume of space, works of non-standard sizes are exhibited here. The building of the Brussels Pompidou (Fig. 3.10) is a former car park of the Citroën plant, which, fortunately, has been little remodeled: visitors climb from hall to hall not on stairs, but on wide races, which were used for smooth descent of cars. A similar foreign trend in the implementation of new life in the old building was able to get the Malyshev plant in Ukrainian Kharkiv. Inspired by the international experience of transforming abandoned industrial zones into fashionable and modern urban spaces, in December 2015 it was decided to create a plant in Kharkiv to produce emotions—the art plant “Mechanics. Another Earth” (Fig. 3.11). Today, the Mechanics Art Factory has three factory lines with educational projects, gastronomic studios, media, showrooms, entertainment, and sports workshops. Because of this, the space is never without visitors. Systematically, the third line of the entertainment plant hosts music groups and holds various festivals and conferences.

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Fig. 3.9 British “Tate”

Fig. 3.10 Pompidou Center

The tendency to plan art spaces can be described in one word—revitalization, from the Latin interpreted as “Return to life”. In architecture and urban planning, it is a reappraisal of the role of an abandoned object, building, or space, and its restoration with an old or new purpose. Large industrial or warehouse facilities had high-quality transport and communal infrastructure, which facilitates the process of revitalization of the solution of very important tasks of providing facilities with water, heat, electricity, roads, etc.

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Fig. 3.11 Art Factory “Mechanics. Another Earth”

Analysis of foreign experience in the formation of entertainment facilities in the adaptation of existing buildings and structures shows the economic feasibility and viability of such an approach. When forming entertainment centers should address the issues of their rational, functional, spatial, constructive, technological, and engineering organization. That is, in the sleeping areas of large cities and large residential areas (neighborhoods) it is advisable to have entertainment facilities in complex with institutions of other profiles—sports, culture, education, and art. At the same time, for tourist and resort cities, the structure of entertainment facilities should be more developed with a location in recreation areas. The construction of the so-called Malls, which combines shopping and entertainment facilities with some different leisure opportunities in Ukraine is not accidental— it is a natural process. Its opportunity has been provided by many socio-economic factors, which in combination have led to a mall boom in Ukraine since 2001. Such factors include globalization processes, investment attractiveness of the territory, the level of income, the level of urbanization of the territory, and the presence of large cities.

3.2 Methods of Calculating the Attractive Location of Real Estate Having concluded the common features of the location of art centers and shopping centers on the orientation of the regular consumer, the methods of choosing the most attractive location of these objects have common features in the methodology of calculating the best location. One of the most important factors influencing the location will be the profitability of the enterprise.

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The following methods can be used to calculate future potential and potential profits from a new property: • calculation of the trade zone—determining the maximum distance that can be traveled or traveled by the consumer; • comparison of location characteristics; • multiple regression method; • gravitational method. The most common and well-known approach is the Huff model [10]. This model is a kind of gravitational model, which comes from Newton’s theory of gravity. Huff’s model is based on the hypothesis that the attractiveness of a particular shopping center depends on the size of its shopping hall and its distance from the consumer. For different groups of goods, remoteness affects the consumer differently. The parameter of degree of gravity can also be a generalized parameter of the attractiveness of the object: the price level, range, and availability of parking for vehicles, not only the area of the object. The model allows for determining the relative proportions in which consumers are distributed among trade areas. For the buyer, the location of the object is crucial when choosing an object. There is an area around each store, the residents of which prefer this store. This area is called the “trade zone”. Applebaum and Cohen noted that “knowledge of the store’s shopping area is crucial for making smart investments in-store improvement, product management, product promotion, customer engagement, and customer service”. The size of the trade zone and the density of its population determine the potential value of demand. It is extremely important to estimate the size of the retail area not only for existing stores but also when designing new outlets when the company is expanding its market presence. However, the choice of the buyer is influenced not only by the territorial proximity of the store from the place of residence but also by many other parameters of consumer perception of the store. Based on their preferences, the buyer chooses the best store from those located near the place of residence. To determine the parameters of the shopping area, it is necessary to consider the joint influence of the territorial factor and the parameters of consumer perception of the store. That is, a “shopping area” is nothing more than a sphere of active influence of an individual object of management, which can be both a shopping center and an art object. Factors of choosing a store by the buyer To determine the area of influence of each shopping center located in the city, it is necessary to study the behavior of customers when choosing a store. When studying the behavior of customers and their motives for choosing should pay attention to the following factors. Consumer preference factor. Each buyer is guided by a set of criteria when choosing a store. To explain the behavior of customers, it is necessary to identify which criteria determine the choice of store and which parameters of the store customers pay the most attention to. In addition, you should evaluate the requirements of buyers to the

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values of the parameters of the store. The buyer will not come to the store, and the parameters of which do not meet some minimum requirements. Object location factor. It should be borne in mind that the distance from the shopping center to the area of residence plays an important role in the choice. The farther it is from a person, the better should be the values of the parameters that attract visitors. The area of influence of the shopping center is the area in which visitors consider the object the most attractive, considering the parameters of all competitors and the distance to it. To explain consumer behavior, it is necessary to assess the requirements for the store based on its location. Proper management of the parameters of the shopping center allows you to expand its area of influence and increase customer loyalty in this area. Factor “Competitive environment”. The behavior of consumers in choosing the type of leisure is influenced by the presence of competitors. When there is a choice, the buyer changes the priorities and selection criteria. For the object under study, it is necessary to find out how well the competitors meet the requirements of the buyers. It is also necessary to study the opinions of buyers from the areas of influence of competitors and assess the extent to which the studied object meets the identified requirements. Accounting for the influence of competitors allows you to assess the market situation, its opportunities, and potential threats from competitors. To study the behavior of consumers in the choice of leisure, considering the above factors, some models have been developed, which are called “models of spatial interaction”. Models of spatial interaction can be divided into two major classes: • geographical; • probabilistic. Geographical models are used to formalize the procedure of drawing on the city map areas of influence of competitors. The boundaries of their zones are determined based on the mutual location of shopping centers in the city. The basis for probabilistic models is the assessment of the object’s compliance with the requirements of consumers from different parts of the city. Probabilistic models allow determining the probability with which the consumer from each district of the city will go to a particular store. The calculated probability of human behavior is used to determine areas of influence and determine the place in the market of competitors. Geographic search models Geographical models involve plotting the boundaries of the areas of influence of shopping centers directly on the map of the studied city. Information on the mutual location of competing enterprises is used to construct the boundaries of zones of influence. Consider the most famous geographical models. Central point model. The Central Place Theory (CPT) model is used to assess the retail space of retail stores within a city, although it was created to study the patterns of location of large and small cities in the country. Crystallizer and Lesch developed

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Fig. 3.12 Type of map of shopping areas of shops

a CPT model commissioned by the German government to explain the movement of people shopping between settlements. When implementing the CPT model, each store is assigned a rank depending on, for example, the size of the retail space and the variety of the range. The rank of the store can be interpreted as the “size” of the store. The center of the lower rank is a small shop near the house, and the center of the higher rank is a hypermarket. The boundary of the trade zone of the store is determined based on two factors: the rank of the store and the distance to it from each point of the studied city. The construction of borders of trade zones occurs in several stages. The planned shopping center can be compared to second or third-class stores. In the first stage, the city map is marked on hexagons (cells). In the center of each hexagon is a shop. The entire hexagon around the store is considered its shopping area, as it is in the center of the hexagon to its residents closest to shopping. Figure 3.12 shows a view of the map of shopping areas in the first stage. The shopping areas of all stores are the same area, regardless of the rank of the store. In the second stage, shopping areas are built based on rank. In stores of the first (lower) rank, the shopping area is a hexagon, which was identified in the first stage. The following rule applies to higher-ranking objects. The shopping area of a store of rank n is a hexagon, its tops are stores of rank n-1. Shopping areas are being built sequentially, step by step. In the first step, trade zones of shops of rank 2 are built, in the second step, trade zones of shops of rank 3 are built, etc. The type of map of trade zones of shops considering their ranks is shown in Fig. 3.13. Fig. 3.13 Image of the shopping area of stores

3.2 Methods of Calculating the Attractive Location of Real Estate

67

Fig. 3.14 Finding the point of indifference between stores

The application of the model allows for analyzing the division of the city into zones of influence considering the size of competing firms and industries. Reilly’s retail gravity model. Reilly’s model of retail gravity, also known as Reilly’s law of retail gravity, has gained widespread popularity. Reilly conducted a sociological study of the movement of shoppers from small towns to larger cities for shopping. In developing the model, an analogy with Newton’s law of gravity was used for two bodies of different masses at a known distance. Reilly’s retail gravity model can be formulated as follows. Between stores A and B is area C. The number of customers who came from area C to store A or B for purchases is directly proportional to the size of the store’s retail space and inversely proportional to the square of the distance to the store. The sales area of store A is RA , and the sales area of store B is RV . Area C is located at DA from A and DB from B. From area, C to shop A go shopping RA person, and shop B go RB person. The number of customers from district C who go shopping in stores A and B is subject to the ratio Fig. 3.14: RA = RB

(

PA PB

)

( −

) DB . DA

(3.1)

This approach was developed in the Reilly-Converse model. This model allows you to find the so-called point of “indifference” between two objects, from which the visitor is equally likely to go to any of the two considered establishments. It is assumed that the coordinates of the point of indifference may be based on information about the distance to the store and its retail space. Figure 2.14 shows the scheme of finding the point of indifference using the Reilly—Converse model. The distance DA from store A to the point of indifference is calculated by the formula: DA =

D AB / 1 + PPBA

where DA DAB PA PB

is the distance from object A to the point of indifference; the distance between stores A and B; retail space of store A; retail space of store B.

(3.2)

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3 Practical Aspects: Development of a Method of Modeling the Most …

The calculated coordinates of the points of indifference are the basis for drawing the boundary of the area of influence of the shopping center. Model Betty. Betty’s geographical model of spatial interaction serves to divide the city into shopping areas of shopping, considering their attractiveness to customers. When determining the boundary of the zone of influence of each object of attention, two parameters are considered—the distance from the buyer’s place of residence to the object itself and the assessment of its attractiveness. The use of the “distance” parameter in the model assumes that the consumer prefers to visit the place to which he can get faster. Therefore, the area of influence of the shopping center should be those points of the city that are closer to it. In the Betty model, distance is taken as precautionary proximity to the store. The attractiveness of a point influences its choice by the consumer. The more attractive the center for the consumer, the greater the distance the consumer is willing to cover when hiking. A population survey is conducted to determine the attractiveness of each shopping center. Survey data are processed using regression analysis. Betty suggested using Thyssen test sites to construct the boundaries of areas of influence. The Thyssen test site is defined as follows. Let the points aii = 1 … n, j = 1 … n be placed on the plane. Each point ai corresponds to point X such that the distance from point X to point ai is less than or equal to the distance to point ai for i is not equal to j, or formally. Dx ai ≤ Dx aj for all j /= i, where Dx ai is the Euclidean distance from point X to point ai . Points in the plane are associated with a point from polygon A. Points on the boundaries of polygons are equidistant from the centers of polygons (points ai ). The introduced concept of the Thyssen landfill expands the possibilities of defining the shopping area of the store. To determine it, Betty used both distance and weight, which were used to assess the attractiveness of stores. Each TC a corresponds to the value of ωai > 0, which is called “weight”. Figure 3.15 shows a diagram for determining the coordinates of point P, which is located on the border of two landfills associated with stores A and B. The constructed boundary will divide the shopping areas of stores A and B. Given Reilly’s approach, the formula for finding the boundary point of two shopping areas in the Betty model has the form Fig. 3.15 Finding the boundary points of two weighted Thyssen polygons

3.2 Methods of Calculating the Attractive Location of Real Estate

69

β

𝞏A 𝞏 Bδ = D αA P D αB P

(3.3)

where is the length of the segment AP; the length of the segment BP; weights of stores A and B. They are selected in proportion to the size of the retail space of stores A and B; α sensitivity factor characterizes the attitude of consumers to the distance to the store; β and δ are the coefficients of the attractiveness of stores A and B. DAP DBP β 𝞏A

The values of the coefficients α, β, and δ are calculated by regression analysis based on the results of surveys of buyers in the study area. The distance from store A to any point P on the border of the shopping area is calculated by the formula: ( DAP =

β

𝞏A 𝞏 Bδ

) α1 DB P

(3.4)

This relationship establishes the property of the border points that separate the shopping areas between stores A and B. The construction of the boundaries of the shopping areas is performed using algorithms for the selection of Thyssen landfills. Betty’s model allows you to build the boundaries of the shopping areas of competing stores, considering their geographical location and attractiveness. Probabilistic search models Probabilistic models of spatial interaction allow to determine the probabilities of choosing a store by buyers living in a particular area of the city. The city is divided into districts, which in general do not reflect the administrative division of the city. A survey of residents of each district is conducted. In the process of the survey, consumers’ opinions about competing centers are clarified on several qualitative parameters. Based on the data collected for each object, the probability that the “average” resident of the study area will choose a particular store is calculated. The obtained values of the probabilities of consumers coming to the store from different areas allow you to assess the potential demand and plan the marketing activities of the mall, considering the position of the store among residents of different areas of the city. Lewis’ axiom of consumer choice. Lewis’s axiom of consumer choice is the first probabilistic model. He argued that when choosing a store, the consumer considers subjective assessments of the attractiveness of alternative stores. This statement can be formulated more strictly. The possibility for the consumer to choose one of the alternative leisure centers is the ratio of the usefulness of a particular shopping

70

3 Practical Aspects: Development of a Method of Modeling the Most …

center to the sum of the benefits of all alternative centers. Formally, the axiom can be represented by the expression: Ui j Pi j = Σ M

k=1 Uik

,

(3.5)

where Pi j Ui j Σ M

k=1 Uik

N M

the probability that the buyer from an area i will come to the art center j; assessment of the attractiveness of shopping center j for the buyer from the district i; the sum of the values of the assessments of the attractiveness of all available centers for the consumer from an area i; the number of districts of the city; is the number of stores in the study.

According to Lewis, the attractiveness of a shopping center can be understood as consumer perception. Using the introduced model, Lewis proposed to find out the fate of consumers in the area who visit each of the alternative centers. To solve this problem, it is necessary to assess the attractiveness of each object among buyers from different parts of the city. Further development of the Lewis model was aimed at improving the attractiveness of stores. Huff model. Huff’s model combines the methods proposed by Reilly and Lewis. In Huff’s model, the assessment of the attractiveness of shopping center j for a buyer from district i—is defined as the ratio of the size of the shopping area of shopping center—j to the estimate of time spent on the road from district i to shopping center— j. Estimation of time costs is calculated as a static function of the fixed travel time. The degree of λ reflects the degree of sensitivity of consumers to the time spent. Huff first assumed λ = 2, using an analogy with the Reilly model. After additional research, it was found that the sensitivity estimates of consumers of different products do not match. Thus, in the study of furniture buyers, an estimate of sensitivity λ = 3.19 was found, and for outerwear buyers λ = 2.7215. The value of sensitivity λ is determined using regression analysis methods based on consumer surveys. Formally, the determination of the attractiveness of the shopping center by Huff is reflected in the ratio: Ui j =

Sj Tiλj

where S j is the shopping area of the art center j; T ij travel time from district i to shop j; λ is the parameter of consumer sensitivity to distances.

(3.6)

3.2 Methods of Calculating the Attractive Location of Real Estate

71

The probability of arrival of the buyer from the district i in the shopping center j is determined by the following ratio: Sj Tiλj

( ), Pi j = Σ Sj M J =1

(3.7)

Tiλj

where Pij is the probability of arrival of the buyer from the district i in the shopping center j; S i area of shopping center j; T ij travel time from district i to shopping center j; N the number of districts of the city; M the number of centers-competitors in the study; λ is the parameter of sensitivity to distances. To determine its value, it is necessary to conduct a survey of consumers in several areas, find out which shopping center they would prefer to go to, and then make a regression equation and find λ. In practice, when the sensitivity factor λ is known, the Huff model allows you to calculate the market share of each object without a time-consuming survey of buyers. Nakanishi-Cooper model. The Nakanishi-Cooper method develops Huff’s approach and is known among marketers as the Multiplicative Interactive Choice (MCI) model. The MCI model, like Huff’s approach, allows you to determine the probability of a customer visiting a store based on Lewis’s axiom, which is described in the following expression. The MCI model is fundamentally different from Huff’s approach. A set of parameters that describe the attractiveness of the shopping center is set in the study. The estimation of attractiveness in this model is calculated using a multiplicative function given by the values of the parameters of the perception of the shopping center. βk

Ui j = ⊓sk=1 Aki j

(3.8)

where s N M U ij Akij βk

is the number of attractiveness parameters; the number of districts of the city; the number of stores in the study; attractiveness of art center j for a resident of district i; is the kth parameter of attractiveness of art center j for a resident of district i; is the coefficient of sensitivity of consumers to the kth parameter of attractiveness. The values of the sensitivity coefficients are calculated from the results of surveys using regression analysis methods.

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3 Practical Aspects: Development of a Method of Modeling the Most …

The probability of arrival of the consumer from the district i in the shopping center j is calculated by the formula: βk

⊓sk=1 Aki j

Pi j = Σ M

j=1

βk

⊓sk=1 Aki j

,

(3.9)

The possibility of setting a set of parameters of the attractiveness of the shopping center in the MCI model in the framework of the study led to its widespread popularity. McFadden’s model. The McFadden Model (MLM), like the MCI model, develops Huff’s approach and uses Lewis’s concept of the probability of choosing a store based on its attractiveness. However, in this McFadden model, the assessment of the attractiveness of the shopping center is defined as an exponential function of the values of the attractiveness parameters. The attractiveness of shopping center j for consumers from district i according to McFadden’s model is described by the following expression. s Σ ( ) Ui j = exp Vi j , Vi j = Ai jk ,

(3.10)

k=1

where V ij —is the assessment of the attractiveness of shopping center j for a resident of district i; ( ) exp Vi j (3.11) Pi j = Σ M ), ( Q=1 exp Vi Q The market research using the McFadden model involves significantly less data than the MCI model. This is because the McFadden model does not use sensitivity coefficients for attractiveness parameters. When implementing this model, it is enough to collect the opinions of residents of the studied areas about the studied parameters of attractiveness. Fotheringham model. The Competing Destinations Model (CDM) is a modification of the MLM model. Like previous approaches, Fotheringham’s model uses Lewis’s axiom to calculate the probability of a buyer coming from area i to mall j. Fotheringham identified the store’s attractiveness to consumers using so-called centralization measures. Fotheringham defined the degree of centralization as a function of the average distance between the store under study and other alternative stores. The measure of centralization was introduced in the CDM model based on the assumption that the relative location of alternative objects influences the consumer’s choice of a shopping center. It is known that some consumers choose to implement the object

3.2 Methods of Calculating the Attractive Location of Real Estate

73

that is closest to others. Other consumers, on the other hand, prefer an object that is far away from others. But it can also be assumed that the provisions of the shopping center on other alternatives do not affect consumer choice. The probability of consumer arrival from area i in shopping center j in the CDM model is calculated as follows: ( ) C θj exp Vi j Pi j = Σ M (3.12) ( ), θ j=1 C j exp Vi j Σ j/=k dk j , (3.13) Cj = M −1 where N M exp (V ij ) d kj Cj θ

is the number of districts of the city; the number of shopping centers in the study; attractiveness of shopping center j for consumer from district i; is the distance between the centers j and k, for all k other than j; a measure of centralization, the average distance from the shopping center j to other centers; a measure of the dependence of consumer preferences on the neighborhood with shopping malls—alternatives.

Data to find the values of attractiveness parameters are established in consumer surveys and are used to calculate the coefficient by regression analysis. The study of the value of the coefficient allows us to assess the impact of centralized measures on consumer preferences. If θ > 0, then the farther the shopping center is from competitors, the more it attracts customers. If θ < 0, the shopping center will benefit from the proximity to alternative stores, buyers will go where the objects are located close to each other. If θ = 0, then the location of the shopping center relative to competitors does not affect consumer choice, and then consumer choice is made based on individual characteristics of the shopping center. In this case, the Fotheringham model is equivalent to the McFadden model. Rust and Dont model. The Rast and Dont models [11] differ from the MLM model in a more accurate way of calculating attractiveness. The accuracy of the model is increased by applying the calculated model error. The attractiveness of shopping center j for a resident of district i is calculated by the formula ) ( Ui j = exp αdi j + Yi j β + δi j where N

is the number of districts of the city;

(3.14)

74

M Uij d ij α Y ij β δ ij

3 Practical Aspects: Development of a Method of Modeling the Most …

the number of objects in the study; the attractiveness of shopping center j for a buyer from district i; is the distance from the buyer from district i to the art center j; is the coefficient of sensitivity of consumers to distance; is the vector of values of other parameters of shopping center j from the point of view of the consumer from area i; is the vector of consumer sensitivity coefficients to Y ij parameters; estimation of the model error, subject to the distribution of extreme values.

Model error is an error that may be due to the lack of parameters that affect consumer choice. The procedure for calculating the error values of the model is given in the work of Rasta and Dont. The values of the parameters of the attractiveness of the centers for the residents of the district are found in the survey of consumers in each district. Also, based on the survey data, the values of consumer sensitivity coefficients to the values of attractiveness parameters are determined using linear regression equations. Practical use of models The above models are currently successfully used in practice to estimate the size of the retail area of retail stores. The following works can be cited as examples of the use of spatial interaction models. Huff’s model was used by Colome to determine the optimal location for a new retail store in Madrid, Spain. The probabilities of customers coming from each district of the city to the surveyed stores were used in the MAXCAP model to determine the area of the city in which a new store should be opened. The Nakanishi-Cooper model was used by Serra to estimate the probability of visiting the mall by residents of different parts of the city. A comparative study was conducted in two European cities: Barcelona (Spain) and Milton Kreis (England). The attractiveness of the shopping center was assessed by the following set of parameters: the convenience of access to the store by public transport, quality of service at the checkout, ease of finding goods in the store, ease of use of discount cards, breadth and quality of goods, discount policy and promotions, and convenience. Distance measures to the store and the average travel time to the store were introduced as measures of distance. Based on the identified consumer preferences and market share estimates, models were formulated to determine the optimal location for the construction of a new outlet within the city. Fotheringham’s model was used to study the food retail market in the Japanese city of Kusatsu. The authors examined the preferences of residents of ninety-seven districts of the city over twenty-one stores. The interviewed buyers were divided into six groups according to age and family composition. During the study, a survey was conducted in which city residents were asked to assess the attractiveness of stores on the following parameters: the convenience of opening and closing stores, size of retail space, size and convenience of parking, breadth, range, and quality of goods,

References

75

store atmosphere. Research has shown that young and elderly single shoppers are more sensitive to the distance to the store because they do not use personal cars. For married couples, an important parameter was the presence of alternative stores close to each other. After reviewing and analyzing all the popular models for calculating the most attractive location, we can say that consumer surveys are the main process that provides most of the data for planning and calculation. The Lewis model is the first to appeal to consumers, but it is not objective enough. All the models that appeared after the Nakanishi-Cooper model became more complex and detailed, unfortunately, to consider the location of the mall, they need too many factors that increase the rationality of creating a new store but are redundant for the mall. Huff’s model was based on the Lewis model and integrated to increase the specificity of the analysis, its input is more than enough to create large-scale shopping malls, malls, and even malls.

References 1. Nielsen Holdings «Marketing measurements in the consumer goods industry, media measurements and consumer research». https://www.nielsen.com/ua/en 2. Website «Finance.ua». http://news.finance.ua 3. Polishchuk S, Shevchenko O, How to create a public space. Practical recommendations for communities. https://decentralization.gov.ua/uploads/library/file/776/ULEAD_public.pdf 4. Kanayan K, Kanayan R. Development of the shopping center concept. Development of shopping malls in the regions. http://www.usconsult.ru/ 5. Website «State building codes of Ukraine» https://dbn.co.ua/load/normativy/dstu/dstu_b_a_2_ 4_41/5-1-0-1870 6. Website «ubtleties of tourism» https://tonkosti.ru/Gazometpy_v_Bene 7. European museums and centers of contemporary art. https://www.culturepartnership.eu 8. Huff DL (1963) A probabilistic analysis of shopping center trade areas. Land Econ 39:81–90 9. Pomortseva O, Kobzan S, Voronkov O, Evdokimov A (2021) Geospatial modeling of the optimal location of the infrastructure object. In: E3S web of conferences, vol 280, p 11013 10. Kobzan S, Pomortseva O (2021) Real estate market research using GIS. Trends and prospects for development. In: 3rd International scientific and practical conference «theoretical and empirical scientific research: concept and trends» vol 3, pp 151–156 11. Factors of the investment security of the Middleslide (2018) World investment forum. http:// www.itukraine.org.ua/events/svitovyy-investyciynyy-forum-2-4-kvitnya-2017-dubay-oae

Chapter 4

Determinations of the Optimal Location of the Real Estate Object

Abstract The purpose of this chapter was to consider the practical aspects of modeling the most attractive location of real estate objects. The search for the most attractive location for a new shopping center was carried out using the example of the city of Kharkiv. The authors created a geoinformation model using the ArcGIS software environment. The authors analyzed the current trends of the trade market and made conclusions regarding the three main factors of placing such a real estate object as a shopping center: • population density; • the level of income of the population; • transport accessibility to shopping centers. In this section, the task of processing topographic and geodetic data and related information was solved. The authors implemented the task using spatial analysis using existing ArcGIS software modules. The model of this process was created using spatial objects. Relationships between objects are modeled using spatial analysis tools. During the simulation, traditional database operations were combined with the advantages of full visualization and spatial analysis on a digital map. Thus, the possibilities of GIS for processing various formats of spatial information of the urban geosystem of a large city were used in the model developed in the development of various options for the further development of urban infrastructure. The authors have developed a geodatabase with a large amount of data. Thus, the possibilities of further spatial analysis of the created maps—schemes in the geoinformation system—were expanded. Thus, in this chapter, the authors proposed an algorithm for choosing the optimal place for the location of the real estate object, considering its specific properties. Keywords Geodatabase · Database · Digital city · Geographical information system · Geographical model · Location · Population density · Probabilistic model · Real estate market · Socio-economic factor · Transport accessibility · Vectorization · Visual model This chapter gives an example of finding the most attractive location for a new shopping center in Kharkiv. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_4

77

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4 Determinations of the Optimal Location of the Real Estate Object

4.1 Analysis of the Population Density of the City of Kharkiv Research current trends in the trade market, and it was concluded that there are three main factors in the location of the shopping center: • population density; • income level of the population; • transport accessibility to shopping centers. Shopping centers have different degrees of geospatial concentration in a certain area. And the connection of the shopping center to the trade facilities is closely connected with the places of permanent or temporary stay of people. Characteristic of a large city is a complex system of resettlement of residents, and this significantly affects the territorial formations of such institutions [1, 2]. The location of the shopping center is very important in the competition between similar institutions, so the urban-geosystemic analysis to optimize the territorial location must carefully consider some factors: • • • • •

number of inhabitants; location of competitive facilities, socio-cultural and administrative institutions; availability of retail trade enterprises; availability of public catering establishments; the purchasing power of the population.

As of January 1, 2020, the population of Kharkiv was 1443,207 people [3]. The most common indicator used to determine the characteristics of population distribution is its density. Density or population density is the main unit of population distribution, reflecting the average population per km2 . This indicator is calculated as the ratio of the population of the administrative unit to the area of this territory. That is, population density is the level of population of a certain territory. Kharkiv is a highly urbanized city. The distribution of the population in the Kharkiv region shows that the population density of the region is increasing toward the administrative center. Peripheral areas of the city have the lowest population density, which is due to the considerable distance from the center. In highly urbanized cities, such as Kharkiv, one must consider the fact that recently called “common” areas have recently begun to appear. Such areas of the city are characterized by the lack of businesses, and offices, and are often multi-story, rather than private homes. Because of this, the population density will not reflect the real picture. Therefore, it is necessary to consider a more specific indicator—the uniformity of population settlement—the index of population concentration. With the help of this index, it is possible to analyze the distribution of the population by administrative units of the city with the general uniformity of its territorial distribution. The index of population concentration in the territory is calculated by the following expression:

4.1 Analysis of the Population Density of the City of Kharkiv

Σ IKN =

|Ph − Sh | 2

79

(4.1)

where IKN population concentration index; Ph share of the population of the district; share of the district area. Sh The share of the area of the city is calculated in turn by the formula: Sh =

S p−H · 100% Sregion

(4.2)

where Sh the share of the area of the city; S p−H area of the city district; Sregion city square. The share of the population of the city is calculated by the following formula: Ph =

Pp−H · 100% Pregion

(4.3)

where the share of the population of the city district; Ph Pp−H population of the city district; Pregion the population of the city. According to the calculations carried out according to the above formulas, the index of population concentration in the city is 63.6%. This indicates that the distribution of the population in the administrative districts of the city is sharply uneven. This confirms the fact that the city’s population is concentrated mainly in the sleeping areas of Kharkiv. The next stage of modeling the most attractive location of the shopping center is to determine the area with a high concentration of population and the density of housing. Table 4.1 shows the data on the resettlement of the population in the administrative districts of the city. After analyzing these tables, a population density diagram of the districts of the city of Kharkiv was constructed (Fig. 4.1). From this diagram, in the Kholodnohirsky and Osnovyansky districts of the city the lowest population density, and the highest density are in the Moscow and Kyiv districts. Therefore, the analysis of the security of the shopping center according to this search criterion will be performed specifically for the Moscow and Kyiv districts of the city.

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4 Determinations of the Optimal Location of the Real Estate Object

Table 4.1 Population density of the city of Kharkiv by administrative districts District

Population, thousand people

Area, km2

Industrial

155.8

33.40

Kyivskiy

188.7

45.70

4.1

Moscowskiy

310.3

24.00

12.9

Nemyshlyansky

144.2

22.30

6.5

Novobavarsky

111.2

34.30

3.2

Osnov’yansky

96.5

45.30

2.1

Slobidskiy

Population, thousand people/ km2 4.7

149.8

24.30

6.2

Kholodnohirsky

93.8

32.10

2.9

Shevchenkovskiy

220.6

44.20

5.0

Fig. 4.1 Distribution of administrative population density districts of the city of Kharkiv

4.2 Analysis of the Location of Shopping Centers in the City Based on a preliminary study, it is assumed that when choosing the location of the shopping center comes to the fore the consumer with his desires and capabilities. The classical theory of central places describes the assumption of consumer behavior, but it could not be fully empirically confirmed, except in some cases. When the choice of the location of the shopping center is limited and the transport connection is unsatisfactory, which does not allow to visit the shopping centers located far enough from the place of residence. The most used models are “spatial monopoly” models based on Thyssen landfills. The essence of such models is to construct polygons around a network of point objects in such a way that for any position within the polygons the distance to the central point object is always less

4.2 Analysis of the Location of Shopping Centers in the City

81

than to any other object of the network. Because of this, the space is divided into sections where their boundaries become equidistant from the centers of the landfill. This model is very relevant for consumer services, where areas of influence do not “overlap”, and each consumer of the service is assigned geographically to its center (school, military enlistment office, hospital, etc.). When analyzing the location of objects, the model of “spatial monopoly” provided that all objects are equal for the consumer, and he chooses the one that is closest to him. This model can be applied to large networks when analyzing the location of equivalent objects and at low levels of competition. An important aspect of spatial models of consumer behavior is the gravitational model, which is developed by analogy with Newton’s theory of gravitation. The degree of gravity between two objects is determined by their size and the distance between them. This method was first proposed by Reilly, when estimating the location of the object, its market share was calculated by considering the distance and population. The Huff model has based on the hypothesis that the attractiveness of an individual shopping center is directly proportional to its size and inversely proportional to its distance from the consumer. The value of the usefulness of a commercial object for a resident, which is expressed by the probability of visiting a particular commercial object by a resident, is calculated as follows. Aαj

Pi j = Σ n

β

Di j

Aαj j=1 D β ij

(4.4)

where Pi j Aαj β Di j α β n

the probability of visiting the shopping center; measure of the attractiveness of the object j; distance to the shopping center, which must be overcome by the resident; is the empirically calculated coefficient of attractiveness; is the coefficient of influence of distance, which requires statistical evaluation; is the number of AC.

Thus, this model “allows” to cross the service areas of the shopping center, and the resident is not tied to the nearest competing facilities. The use of a road graph to determine the distances between objects is one of the main advantages of this model, resulting in a matrix of distances from commercial objects to potential consumers, it is also possible to analyze competitors of different sizes. This model uses the concept of “penetration rate”, which characterizes the market share of a commercial object in the selected area. That is, Huff’s model allows you to predict the change in the number of visitors to the mall in different scenarios (opening new malls of competitors, introducing new attractive offers), identify the geography of a potential target audience, and identify the risks of location [4].

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4 Determinations of the Optimal Location of the Real Estate Object

Because the model is flexible and can be adjusted according to the specifics of our task—to find the most attractive location of the shopping center, considering the characteristics of the local market and the study area.

4.3 Analysis of the Socio-economic Condition of the Administrative Districts of the City The next step will be to build a model of socio-economic security for the population of the administrative districts of the city. Analysis of household income also affects the choice of location of the shopping center. This type of analysis will provide an opportunity to identify areas with a different purchasing power of the population and determine the feasibility of placing entertainment venues. To obtain a model that reflects the level of welfare of the population, we will proceed from the administrative division of the city into districts and the establishment of functional anthropogenic use for these areas without the allocation of separate land use areas. The following attributive characteristics were adopted as socio-geographical characteristics, which assess the economic base of this area of the city. On this basis, the level of socio-economic security of the population in the administrative districts of the city was invented: K = {k1, k2, k3, k4}

(4.5)

where k1 k2 k3 k4

is the population of the administrative district; number of employed population; assessment of the level of income of the population; specific indicators of areas occupied by AC.

Estimates of the level of income, employment, and other indicators of socioeconomic security were determined using data on the population, its density, and statistical information of the Main Directorate of the Kharkiv Oblast (Fig. 4.2). The data obtained because of the population density analysis of the city of Kharkiv were also reflected in the GIS model (Fig. 4.3). As a result of comparing these two models, it can be concluded that in the two administrative districts of Kharkiv, namely Kyiv district and Moscow district, the highest level of socio-economic security of the population. And this coincides with the highest population density. Particular attention should be paid to those parts of the districts that are furthest from the central part of the city, but according to the analyzed indicators meet the conditions for the location of the shopping center.

4.3 Analysis of the Socio-economic Condition of the Administrative …

83

Fig. 4.2 Visualization of buffer zones built for display socio-economic provision of the population on the territory of Kharkiv

Fig. 4.3 Visualization of buffer zones constructed to reflect the density distribution of urban population

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4 Determinations of the Optimal Location of the Real Estate Object

4.4 Provision of Infrastructure to the Population When assessing the impact of infrastructure on the future shopping center, it is necessary to analyze how the visit of these objects correlates with the visit of shopping centers, and whether it is possible to attract streams of visitors at their expense. From the point of view of additional attraction of visitors, any object located on the territory can affect the shopping center both positively and negatively and can also have a neutral impact. For example, industrial enterprises will influence the shopping center from the point of view of ecology and general image, but they have many employees—potential visitors to the shopping center. Recreational places (parks, beaches) have a significant impact on visiting the shopping center, as the flow of visitors will directly depend on weather conditions and seasonality. Entertainment, sports, entertainment, or cultural centers are not always provided by shopping center visitors, as visitors to mass events often do not spend much time visiting the shopping center. However, parents who accompany their children to sports and cultural institutions appreciate the opportunity to resolve household issues while the child is in class. The presence of many children’s educational institutions has a positive impact on the development of shopping centers in the area. This predicts that the area will attract many buyers. We can say that it is children’s institutions that will determine the development trends of the shopping center soon. It is customary to divide the surrounding infrastructure into the following categories. Category 1—objects that have tourist attractions (water parks, zoos, etc.). Such facilities will be characterized by a small impact on the location of the AC. Category 2—objects of historical appeal (monuments, places of historical events). Characterized by high requirements for architecture. The shopping center should form a compositional whole with historical buildings, without standing out among them. Category 3—objects that have architectural appeal (architectural monuments, new buildings with outstanding architecture) the highest requirements for architecture, compositional integrity, style, size, and other parameters of the building. If in some areas there will be several similar buildings, it is said that there is an area that is attractive in one or several categories at the same time. For a more detailed assessment of infrastructure, it is necessary to build a map of the city—the so-called map of cultural, historical, architectural, and tourist attractions, to identify areas of attraction, for example, on the following principle: • group 1—areas that have the greatest attractiveness due to the high density of objects, or a high degree of attractiveness of one object located in the zone; • group 2—areas with high attractiveness; • group 3—areas with medium attractiveness; • group 4—areas with low attractiveness; • group 5—areas with minimal attractiveness (absence of facilities that have any attractiveness: sleeping areas, closed factory areas).

4.5 Analysis of Transport Accessibility in the City

85

Such zones in the structure of the city will be in spots or groups of spots. It is necessary to consider the affiliation of the building plot to one or another group. If in zone 1 of the group any type of shopping center will function successfully, then in zones 4 and 5 the most successful and visited will be shopping and entertainment centers. Choice of the district for the location of the shopping center: During the analysis of the population density by districts of the city, the Moscow and Kyiv districts were selected as the districts with the highest density. The Moscow, Shevchenkivskyi, and Kievsky districts of the city were selected during the analysis to provide the shopping center areas according to Huff’s model. Later, when building the model of transport accessibility, the type of shopping center was chosen—shopping and entertainment center (mall). That is a center that creates its streams of visitors through a combination of additional entertainment features. As a result of comparing the obtained models on the distribution of urban population density and socio-economic security of the population by districts, attention was focused on Kyiv and Moscow districts. Because the Moscow district is included in all types of analysis, we will search for a site for the AC on its territory. We will pay special attention to the area of attraction of the 5th group—the area where there are no cultural, historical, architectural, and tourist sites, the so-called sleeping areas. It is in such areas will be the most successful and visited large shopping malls such as shopping malls). Based on the data obtained during the preliminary research, the area in the Moscow district, bounded by Gvardiytsiv-Shironintsiv, Druzhby Narodiv, Traktorobudivnykiv, and Buchma streets—the so-called North-6 district, which is under construction (Fig. 4.4) was selected.

4.5 Analysis of Transport Accessibility in the City The next step in the analysis of the location of the shopping center is to study the public transport system. Given the specifics of our country, despite the increasing motorization, many visitors will use public transport. The transport scheme in Kharkiv is not homogeneous. Passenger traffic influences many planning decisions in terms of planning the future of the shopping center (location on the site, the orientation of the main entrances, considering flows, and the size of the area) [5]. Shopping centers for linking traffic flows should be divided into two main types. Local shopping center is characterized by a specific service area depending on the size. Most visitors to this type of shopping center are residents of the surrounding areas, and such a center is focused on pedestrian accessibility. Such shopping centers are mainly located on the border of districts or major highways. Such shopping centers depend on the presence of competitors in the area, population density, distribution of pedestrian flows, and their dependence on the time of day. Shopping center—“magnet”. Shopping centers of this type are designed to create their flows of visitors and therefore is one of the most difficult to predict the types of such objects. Such shopping centers can be designed for the long-term stay of

86

4 Determinations of the Optimal Location of the Real Estate Object

Fig. 4.4 View of the map with the image of the selected area to accommodate the mall

people, so the entertainment component is maximum. In Ukraine, given the low level of motorization of the population and the weak development of suburban shopping centers, such facilities are located mainly within reach of public transport. Thus, in comparison with the criterion of distance from the center, transport accessibility prevails. According to the availability of public transport to the city center, urban areas can be divided into 5 categories depending on the scale of the city: • • • • •

1 category—up to 15 min; 2nd category—up to 30 min; 3rd category—up to 55 min; 4th category—up to 100 min; 5th category—up to 150 min.

The more time is spent on reaching the center, the less impact on the area of shopping centers located in the city center, and the more important the development of its structure of similar facilities in this area. The location of public transport stops and minibuses in the immediate vicinity of the shopping center has a positive impact. Sometimes, the opening of a large mall entails a change in the schedule of transport or the organization of an additional minibus, which runs on the optimal route for visitors to the center. A network of roads in Kharkiv was built during the GIS analysis. With the help of point objects on the map, public transport stops were marked (Fig. 4.5).

4.6 Creation of Visual Models in the Design of Geodatabases

87

Fig. 4.5 View of the created layer in ArcMap with transport junction

4.6 Creation of Visual Models in the Design of Geodatabases Geoinformation systems are software and hardware that allow you to explore, analyze, and map those objects, processes, and phenomena of the world around you that have a certain spatial reference to their location. There are clear examples of systematic GIS modeling of anthropogenic infrastructure within a certain geographical extent of a large city. The use of the latest technologies and geographic information systems will allow for the creation of the necessary cartographic image, determine the optimal location of the necessary objects, and perform spatial analysis of these same objects, such as shopping centers. The model of this process will describe the interaction of spatial objects. We will model the relationships between objects with the help of spatial analysis tools. There are many different types of interactions for which an additional Spatial Analyst module has been developed in the software product from the American company Esri—Arc Gis. He provides a large set of tools for solving such problems. Process modeling is also called cartographic modeling. Process models are used to describe

88

4 Determinations of the Optimal Location of the Real Estate Object

processes, but they are also often used to predict the results of certain actions. That is, this technology combines traditional database operations, such as query and statistical analysis, with the benefits of full-fledged visualization and spatial analysis provided by the map. These capabilities distinguish geographic information systems (GIS) from other information systems and provide unique perspectives for their application in a wide range of tasks. That is, the GIS capabilities for processing various formats of spatial information of the urban system can be used in the model representation of the city and the development of various options for further development of urban infrastructure. A geodatabase (BGD) uses a data model based on spatial object class relationships. BGD displays a generalized data model for presenting spatial information. This model will be used in the work to create some problem-oriented data models aimed at solving the specific problem of finding the optimal location of the shopping center. In GIS, datum is one of the main factors, so in the planning process, at the stage of development of a geoinformation system, the requirements for the developed geodatabase will be considered. It is from these preconditions, and on their basis, the development of the database structure was started. To do this, an empty geodatabase was first created in ArcCatalog. After creating an empty geodatabase, sets of feature classes and the feature classes themselves were created. Based on the necessary data to solve this problem, the following classes of objects were determined: • point (shopping malls, large stores, bus stops); • linear (streams, roads); • polygonal (houses, neighborhoods). The created database schema is represented by a set of tables connected by oneto-many relationships. The developed database was normalized to the third normal form. That is, the data sets were organized in a geodatabase, in such a way that all the tables represented on the GIS map by spatial objects are interconnected according to the rules that ensure data protection. This makes the database flexible, eliminating inconsistent dependencies and data redundancy. Excessive data can lead to the loss of free space on the computer’s hard disk and complicate the maintenance of the database [6]. Figure 4.6 shows a diagram of the geodatabase of the created project.

4.7 Examples of Building Visual Models The map obtained after vectorization will be used in the future in the process of choosing the optimal location of the shopping center. In the selected part of the city of Kharkiv, we will conduct a more detailed analysis with the data on the transport system. To determine the possibility of using the transport network, a pedestrian access zone with a radius of 400 m was built, which is ~5 min of walking, for each stop on the Hromyadbyrotsivtsi Street.

4.7 Examples of Building Visual Models

89

Fig. 4.6 Scheme of the constructed geodatabase

To determine the best territory with the most convenient territorial interchange, trolleybus and bus transport connections were built on the territory of this district. Bus and tram stop on the side of Buchma and Traktorostroitelny streets were not considered because garage cooperatives predominate within walking distance to the planned shopping center. A comparison of each type of transport provided an indicator of transport accessibility to the planned facility (Fig. 4.7). The figure shows a cartographic GIS model, which allows based on visualization to determine the area in the neighborhood “North-6” with the most favorable conditions for the location of the planned shopping center, as well as reasonably indicate the location of the citizen. As there is a possibility of six options of travel by public transport from the station “Heroes of Labor” lasting from 15 to 20 min, you can walk in 25–30 min, and by car to cover this distance in 10 min. This model allows us to recommend the placement of a new shopping center, based on the principle of accessibility and minimization of time spent visiting. This allows, based on visual models for analysis, to determine the area in the Moscow region with favorable conditions for the location of the shopping center, as well as it is reasonable to indicate the location for the opening of a new shopping center type “magnet”. The built model allows for recommending the location of a new institution, based on the principle of accessibility and minimization of time spent to get to the shopping center.

90

4 Determinations of the Optimal Location of the Real Estate Object

Fig. 4.7 Buffer pedestrian zones built for stops

A new shopping center has been proposed in this area based on several factors: • high population density; • convenient transport interchange; • lack of other shopping centers nearby. As a result of the analysis, the type of shopping center—“magnet” was proposed. That is, such a shopping center, which will create its flows of visitors by combining not only cultural and entertainment functions, but also socially adaptive with children’s leisure. This is a transition to a new level—the creation of a shopping center with versatile functions. The conducted spatial analysis shows that with the help of modern geographic information systems, ArcGIS it is possible to determine the most attractive location of different socio-economic infrastructures of cities based on the construction of cartographic models Fig. 4.8. The proposed sequence of actions will allow you to choose the right place for the location of the future shopping center, which is one of the key factors in the future profitability of the planned infrastructure facility. One of the most important stages in choosing the optimal location of the shopping center, in addition to building visual models for analysis based on the open mapping service OpenStreetMap is the development of a database that would include a large amount of data influencing the location of the planned object. The creation of a geodatabase allows to significantly expand the possibilities of further spatial analysis

References

91

Fig. 4.8 Fragment of the map with the location of the proposed shopping center

of the created maps in the environment of GIS systems, in the case of using the appropriate modules for modeling.

References 1. Website «Main Department of Statistics in Kharkiv Region». http://kh.ukrstat.gov.ua/index.php/ chyselnist-naselennia-shchomisiachna-informatsiia 2. Pomortseva OE, Gerasimenko MD (2019) Development of a tourist route with the help of geographic information technologies. Inform Process Syst 1(156):37–43 3. Mokhonko V, Blinova N, Sheludko L, Kobzan S (2019) Environmental factors of ensuring the competitiveness of construction enterprises. In: Proceedings of the 7th international conference on modeling, development and strategic management of the economic system, Atlantis Press, (MDSMES 2019) 4. Rating of development of cities of Ukraine. http://www.ipa.net.ua 5. Map of civilian objects in Ukraine destroyed by Russia—Bellingcat (2022) https://armyinform. com.ua/2022/03/18/mapa-czyvilnyh-obyektiv-v-ukrayini-zrujnovanyh-rosiyeyu-bellingcat 6. Shalayev VM, Ivanova IB, Drapikovsky OI, et al (2012) Trends in the real estate market of Ukraine. In: Realities and forecasts, real estate market of Ukraine 2009–2013. Art Economy, Kyiv, p 240

Chapter 5

Factors of Influence on the Real Estate Market

Abstract The purpose of this chapter was to consider such an industry as construction, and the levers that affect the construction of residential real estate, the cost of construction, and the value of the real estate, constantly influencing the market value of the real estate in the market. The authors have thoroughly researched and identified the factors that affect the market value of the real estate. As a result of the conducted research, a conclusion was made regarding the value of the real estate and trends in the further development of the real estate market and the construction industry. Economic, political, and market factors were considered in more detail. The factors under the influence of which the development trends of the real estate market of Ukraine were formed in 2021 and at the beginning of 2022 are listed. The authors used geoinformation systems to identify trends and patterns of influence of the construction industry on the real estate market. Keywords Administrative district · Commercial real estate · Developer · Dynamics · Geographical information system · Influence factor · Modeling · Municipal economy · Real estate · Real estate market

5.1 Construction and Real Estate Market Today, construction in general and the construction of residential real estate are developing very rapidly [1]. The cost of construction and installation work is constantly growing, the cost of fuels and lubricants is growing, and the salaries of employees are constantly growing [2]. This significantly affects the cost of construction and the value of the real estate, constantly increasing the market value of the real estate market. Therefore, a very important and relevant issue for research is to determine the factors that affect the market value of a real estate and determine their impact. It is important and relevant to identify groups of factors influencing the value of a real estate and their interaction. Indicators of the indirect cost of housing construction in the regions of Ukraine are growing from year to year.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_5

93

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5 Factors of Influence on the Real Estate Market

Analysis of recent research and publications The rapid development of the construction industry and the entire infrastructure of the urban economy stimulates the development of the real estate market. The development of the modern real estate market is fundamental to the development of the urban economy. Today, we have a significant influence on construction companies on the development of both primary real estate and pricing in the secondary real estate market. The fact that construction companies want to make maximum profits seems reasonable. To determine the optimal market value of the real estate at the start of sales and different stages of construction, you need to consider many factors. Researchers such as Shalaev V., Mamonov K., Voronin V., and Shipulin V. are engaged in research on these problems [3]. The construction industry and the real estate market operate under the influence of some interrelated and interacting factors. When building real estate, all groups of factors must be considered when forming the exact (not underestimated or inflated) market value. This is important at the construction stage. That is why it is extremely important to conduct a study of these factors and identify all the dependencies in the current real estate market of the city. From the graph shown in Fig. 5.1, you can see the significant impact of different groups of factors on the formation of the market value of the real estate over time [4]. Currently, there is increased activity in the construction industry. There is also an increase in activity in the real estate market and rising prices for residential real estate in 2020. According to the results of the research on the residential real estate rental market in Kharkiv and the sale market as of the IV quarter of 2020, a map of the dependence of the real estate rental cost on the location by city districts was developed. Price analysis was conducted for different market segments: 1-, 2-, and 3-room apartments and location.

Fig. 5.1 Dynamics of changes in the market value of real estate ($/M2 ) in Kharkiv in the period from 2008 to 2020

5.1 Construction and Real Estate Market

95

For further analysis and research results, the classification of factors influencing the final value of a real estate in the market was conducted. As a result, two groups of factors were identified by the impact on the real estate market: 1. internal; 2. external (about the country or region). In the future, internal factors were divided into 7 groups of factors: 1. Market: • • • •

supply and demand; term of exposure; market elasticity; the relationship of primary and secondary real estate markets.

2. Political: • socio-economic orientation of the policy of the ruling party; • frequency of election campaigns; • government policy in the field of economics—regulations relating to segments of the real estate market (the housing market, commercial premises, land market, etc.); • a policy of local authorities on the real estate market and land market. 3. Economic: • • • • • • •

economic level of development of the country; growth rates of gross national product; monetary policy (especially in the field of mortgage lending); inflation rates; fluctuations in business activity; employment of the population; the purchasing power of the population.

4. Social—represented by various aspects of socio-economic structuring of the population (socio-professional, socio-consumer, income level, living conditions). 5. Demographic: • • • •

total population; population growth; birth and death rates; population density, migration, and the degree of urbanization.

6. Natural and geographical—climate, relief, natural resources, ecology. 7. Scientific and technical—factors that affect the technology and organization of construction (determine the cost parameters in the primary housing market). As for external factors, these are factors that affect regional markets and are related to trends in global real estate markets and global banking and financial systems.

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5 Factors of Influence on the Real Estate Market

To determine the factors influencing the value of a real estate in the real estate market, it is very important to correctly determine the impact of any of these factors. In this case, all factors affecting the real estate market are always in interaction. The duration of the impact, factors can be divided into three groups: 1. Long-term: • total construction in Kharkiv; • supply/demand for apartments in the segment (primary/secondary); • dynamics of average prices in the segment (business, economy); average in location (primary/secondary); • terms of installments of competitors, terms of loans; • indicators of the object, location; • the infrastructure of the object; • the quality of finishing, building materials, and technologies; • functionality, additional services; • legal status. 2. Medium-term: • • • • • • • • • • • •

inflation; dollar exchange rate; average salary; minimum wage; consumer basket; the discount rate of the NBU; weighted average rate on deposits of individuals; trans-share costs; the cost of commercial services; the cost of materials; the cost of energy; taxation of legal entities; average mortgage interest rate, lending volumes, availability of loans.

3. Short-term: • planned yield of 1 m2 . • number of locations in Kharkiv; • timeliness of delivery of facilities, lag construction schedules. As an example, the dependence of the cost of rent depends on the location and value of the real estate. Figure 5.2 shows the observed trend in real estate rental costs, which is increasing from remote areas to central ones. This figure shows a geographic information model of the average cost of renting real estate as of the IV quarter of 2020. The same trend can be seen in the value of real estate sales. Table 5.1 shows the dependence of the value of the real estate on the location. The above data show that the minimum cost is in remote areas and the maximum is in the central areas and areas close to the center. The study of the dependence of the value of the real estate on

5.1 Construction and Real Estate Market

97

Fig. 5.2 Rating of the value of real estate in the districts of Kharkiv

the secondary market of residential real estate in Kharkiv was conducted according to the IV quarter of 2020. Table 5.1 shows the cost of supply of 1 m2 of housing in the city of Kharkiv. According to Table 5.1, a chart of the rating of areas (Fig. 5.2), located from the most expensive to the cheapest [5], clearly shows the dependence of real estate value on location. After conducting a study of the impact of inflation on the value of the real estate, graphs of changes in the inflation index and the value of real estate were created (Fig. 5.3). The graph shows that the change in the inflation index repeats the change in the value of the average of 1 m2 of real estate in the city of Kharkiv. Conclusions 1. The analysis of the real estate market of the city of Kharkiv is carried out. In the example of the cost of rented housing, the rental rate was determined and a geoinformation model of the dependence of the cost of rent on the location was built. 2. An improved classification of factors influencing the value of real estate during construction is proposed. 3. A study of the impact of factors on the cost of rent by location. 4. A study of the impact of factors on the cost of selling housing by location. 5. The interaction of prices and inflation in the real estate market in the example of the city of Kharkiv is studied. As a result of the research, a conclusion was made on the value of a real estate and trends in the further development of the real estate market and the construction industry. Economic, political, and market factors have the strongest impact on the real estate market. The following external factors have a special influence: • the collapse of world stock markets and the beginning of the global economic crisis;

800

700

720

757

700

610

600

610

600

628

657

800

850

698

Saltivka

Mon. Saltovka

N. Houses

P. Field, Sos. Bitter

Gagarin

Sports, Zah. of Ukraine

Odesa

Center. Market, South Station

Novozhanovo, Moskalivka

HTZ, Rogan, village Oriental

H. Gora

Zhukovsky, Shyshkivka

Center, Nagorny, Gosprom

Average cost per 1 M2 850

1296

875

774

704

695

715

790

780

955

1008

785

800

915

1311

1742

950

890

780

790

820

980

950

1210

1258

850

900

1030

880

Max

835

880

590

710

580

595

480

600

650

680

780

590

600

560

790

853

1145

795

955

715

678

750

745

1045

885

990

790

745

805

895

Average

1205

1410

1000

1200

850

760

1020

890

1440

1090

1200

990

890

1050

1000

Max

Min

812

Average

Min

743

2-bedroom apartments

1-bedroom apartments

Oleksiyivka

Name of the district

Table 5.1 The cost of 1 m2 of housing in the city of Kharkiv

825

900

820

850

590

600

650

520

780

800

700

680

700

600

750

Min

874

1200

960

975

695

650

785

755

880

950

875

965

795

875

875

Average

1250

1500

1100

1100

800

700

920

990

980

1100

1050

1250

890

1150

1000

Max

3-bedroom apartments

859

1214

877

901

705

674

750

763

902

930

958

847

780

865

861

Average cost by 1 M2

98 5 Factors of Influence on the Real Estate Market

5.2 Research of Dynamics of Change of Cost in the Real Estate Market

99

Fig. 5.3 Dependence of changes in the inflation index and the value of real estate

• a pandemic of coronavirus and introduction of quarantine in Ukraine from 12.03.2020; • the second and third stages of the pandemic and the introduction of quarantine measures in Ukraine and the world; • growth of the hryvnia exchange rate against the US dollar from UAH 23.7 for $ at the beginning of January 2020 to UAH 26.9 for $ at the end of June and further to UAH 28.5 as of the end of 2020. Under the influence of these factors, trends in the real estate market in 2021 were formed.

5.2 Research of Dynamics of Change of Cost in the Real Estate Market Study of the dependence of real estate value on rental value and study of the rate of return for residential real estate The problem of investing is relevant and important for business development. The most pressing issues have always been the following—in which area to invest and how to get the maximum profit. Business owners and ordinary citizens need to know the amount of profit that can be obtained. Real estate investing is an important and profitable project to save and increase your resources. Today, there are several methods for assessing the effectiveness of investment. One of them is to determine the rate of return on each of the investment options. The rate of return is usually used to assess the feasibility of investments or projects. Making a profit is the more desirable, the higher its profitability. The rate of return is a relative indicator (percentage). Investments, or projects, are considered appropriate if their rate of return is greater than the established minimum accepted level of return.

100

5 Factors of Influence on the Real Estate Market

The problem is the search for locations to invest within the city of Kharkiv with the maximum profit. Data for calculations are taken from the geoinformation portal “Uvekon” for the 2nd quarter of 2021 at the rate of UAH 27.5 for $ 1 [6]. Today, the problem of researching the profitability of investing in various segments of real estate and real estate in the urban economy [1], which differ in location, is very relevant. Determining the rate of return or the rate of return is possible using the approaches used in valuation and using valuation techniques and procedures. Such researchers as Shalaev V, Voronin V, Guselnikov A, and Petrushina V. are engaged in the study of these problems in the real estate market [2, 7–10]. Research and calculation of the rate of return for residential real estate within the city of Kharkiv. To achieve this goal, the following tasks are set in the work: 1. Conduct a cost analysis for different segments of residential real estate by the district in the city of Kharkiv. 2. Analyze the cost of rent for different segments of residential real estate by region. 3. Investigate the dependence of real estate value on location. 4. Investigate the dependence of the cost of renting residential real estate on the location. 5. Calculate the rate of return on different segments of residential real estate. 6. Investigate the dynamics of changes in the rate of return depending on the development of the urban economy of the district (attractiveness of the district). Determining the average cost of selling apartments. Determining the average cost of one-bedroom apartments To calculate the average cost (V cep ) of one-room apartments, it is necessary to calculate the average cost of each district in the city of Kharkiv. Take for example the districts of Novozhanovo and Moskalivka. To find the average cost, the cost of all one-room apartments in neighborhoods must be divided by their number (5.1). The type of neighborhoods for the calculation is shown in Fig. 5.4. In the future, Figs. 5.4, 5.5, 5.6, 5.7, and 5.8 show information about the researched area and digital data, which object is being investigated, the number of objects, the average cost, and included subdistricts. Having obtained the necessary data, calculate the average cost: Vcep1 = 29255$

(5.1)

The average cost of one-room apartments in other districts was calculated according to a similar principle. The total average cost of one-bedroom apartments in the city of Kharkov will be calculated for all areas of the city. The results of the calculations are presented in Table 5.2.

5.2 Research of Dynamics of Change of Cost in the Real Estate Market

101

Average object price, $ 1 room Zalyutino 22446.48 Proposed 131

Moskalivka ‒ 32628.84 Novozhanovo ‒ Vlasenko 22333.33

Fig. 5.4 The cost of one-room apartments in the districts of the city—Novozhanovo and Moskalivka

Average object price, $ 2 rooms Northern Saltivka 5 34624.87 Proposed 8 Northern Saltivka 3: 40694.08 Northern Saltivka 4: 36853.85 Northern Saltivka 5 34624.87 Northern Saltivka 2: 40342.32 Northern Saltivka 1 50733.19

Fig. 5.5 The cost of one-bedroom apartments in North Saltivka

Conclusion As a result of research, we see that the minimum cost of one-room apartments in the areas of HTZ, Rogan, the village of East—24177 $, the maximum cost in the areas of Center, Nagorny, Derzhprom—$ 50625. Determining the average cost of two-bedroom apartments. To calculate the average cost (V cep ) of two-bedroom apartments, it is necessary to calculate the average cost in each of the districts of Kharkiv. Take, for example, the North Saltivka district.

102

5 Factors of Influence on the Real Estate Market

Average object price, $ 3 rooms Zhukovsky 1 50271.26 Proposed 7 Zhukovsky 2 43572.57 Shishkovka 79424.18 Zhukovsky 1 50271.26

Fig. 5.6 The cost of three-bedroom apartments in the areas of Zhukovsky, Shishkov determining the average cost of rent

Average price per m2, $ Oleksiivka 339th microdistrict 7.96 Proposed 94 339th microdistrict 7.96 338th microdistrict 7.16 Victory 10.73 336th microdistrict 7.57 337th microdistrict 7.49 Stara Oleksiivka 7.43 Studmistechko (Oleksiivka) 10.06 335th microdistrict 7.14

Fig. 5.7 The cost of apartments in the area of Oleksiyivka

To find the average cost, add the cost of all two-bedroom apartments in neighborhoods and divide by their number (5.2). The list of neighborhoods for the calculation is shown in Fig. 5.5. Having the necessary data, calculate the average cost: Vcep2 = 41991$

(5.2)

According to a similar principle, the average cost of two-bedroom apartments in other areas was calculated. The total average cost of two-bedroom apartments will be calculated throughout the city. The results of the calculations are presented in Table 5.3.

5.2 Research of Dynamics of Change of Cost in the Real Estate Market

103

Average price per m2, $ Zaikivka 869.79 Proposed 107 South Station 1,843.84 South Station 2,585.72 Central Market 902.7

Fig. 5.8 The cost of apartments by area South Station, Central Market

Table 5.2 The average cost of one-bedroom apartments No

Area

V cep , $

Total average cost, $

1

Gagarin

35164

32546

2

Zhukovsky, Shishkovka

26062

3

New Houses

27553

4

Novozhanovo, Moskalivka

29255

5

Odesa

31073

6

Oleksiyivka

38270

7

Pavlove Pole, Pine Hill

41102

8

Northern Saltivka

31592

9

Saltovka

27937

10

Sports

36457

11

HTZ, Rohan, Vostok Village

24177

12

Cold Mountain

29490

13

Central Market, South Station

27133

14

Center, Nagorny, Gosprom

50625

Conclusions As a result of research, we see that the minimum cost of two-bedroom apartments in the areas of HTZ, Rogan, the village of East—$ 32082, and the maximum cost in the areas of Center, Nagorny, Derzhprom—$ 82037.

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5 Factors of Influence on the Real Estate Market

Table 5.3 The average cost of two-bedroom apartments No

Area

Average cost (V cep ), $

Total average cost, $

1

Gagarin

64716

48305

2

Zhukovsky, Shishkovka

36476

3

New Houses

37014

4

Novozhanovo, Moskalivka

38341

5

Odesa

44495

6

Oleksiyivka

57171

7

Pavlove Pole, Pine Hill

61403

8

Northern Saltivka

41991

9

Saltovka

36792

10

Sports

55479

11

HTZ, Rohan, Vostok Village

32002

12

Cold Mountain

46276

13

Central Market, South Station

42202

14

Center, Nagorny, Gosprom

82067

Determining the average cost of three-bedroom apartments To calculate the average cost (V cep ) of three-room apartments, it is necessary to calculate their average cost in the city of Kharkiv. Take for example the districts of Zhukovsky, Shishkov. To find the average cost, the cost of all three-room apartments in neighborhoods must be divided by their number (5.3). The procedure for selecting neighborhoods for the calculation is shown in Fig. 5.3. Having the necessary data, the average cost was calculated: Vcep = $ 57756

(5.3)

According to a similar principle, the average cost of three-room apartments in the city was calculated. The results of the calculations are presented in Table 5.4. Conclusion: As a result of research, we see that the minimum cost of threeroom apartments in the areas of HTZ, Rogan, the village of East—37851 $, and the maximum cost in the areas of Center, Nagorny, Derzhprom—135460 $. The cost of three-room apartments in the areas of Zhukovsky, Shishkov, is presented in Fig. 5.6. The average cost of rent 8$ in the city of Kharkiv will be determined per 1 m2 for all types of residential real estate apartments [10, 11] within the city of Kharkiv (5.4). After determining the average cost of rent, determine the average cost of rent per 1 m2 (4.5). For example, let us determine the average cost of rent for the district of Oleksiyivka. The procedure for selecting neighborhoods for the calculation is shown in Fig. 5.7.

5.2 Research of Dynamics of Change of Cost in the Real Estate Market

105

Table 5.4 The average cost of three-bedroom apartments No

Area

1

Gagarin

Average cost (V cep ), $ 81950

2

Zhukovsky, Shishkovka

57756

3

New Houses

50506

4

Novozhanovo, Moskalivka

40435

5

Odesa

51636

6

Oleksiyivka

79436

7

Pavlove Pole, Pine Hill

71319

8

Northern Saltivka

44662

9

Saltovka

49661

10

Sports

82692

11

HTZ, Rohan, Vostok Village

37051

12

Cold Mountain

79696

13

Central Market, South Station

58025

14

Center, Nagorny, Gosprom

Total average cost, $ 65049

135460

◦ With the necessary data, the average cost of rent was calculated Ncep : ◦ Ncep =

7.96 + 7.16 + 7.49 + 7.14 + 7.43 + 10.06 + 7.57 + 10.73 = 8$ (5.4) 8

To find the average cost of rent per 1 m2 in UAH, you must multiply the value obtained by 27.5 UAH (according to the dollar exchange rate for the 2nd quarter of 2021): ◦ Ncep = 8 ∗ 27.5 = 220 uah

(5.5)

According to a similar principle, we calculate the average cost of rent per 1 m2 in other areas of Kharkiv. The results of the calculations are presented in Table 5.5. Conclusions As a result of research, we see that the minimum cost of rent per 1 m2 in the area of HTZ, Rogan, the village of East—$ 5, and the maximum cost in areas of the city—Center, Nagorny, Derzhprom—$ 10. Determining the average cost of selling apartments. The average cost of selling apartments in the city of Kharkiv will be determined per 1 m2 for all types of apartments [12] of residential real estate within the city of Kharkiv (5.6). After determining the average selling price, determine the average selling price per 1 m2 (5.7). For example, let us determine the average selling price for the areas of the Central Market, South Station. The procedure for selecting neighborhoods for the calculation is shown in Fig. 5.8.

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5 Factors of Influence on the Real Estate Market

Table 5.5 The average cost of rent per 1 m2 No

Area

The average cost of The average cost of rent per 1 m2 (N cep. ), $ rent per 1 sq. m2 , UAH

1

Gagarin

9

248

2

Zhukovsky, Shishkovka

7

193

3

New Houses

6

165

4

Novozhanovo, Moskalivka

7

193

5

Odesa

6

165

6

Oleksiyivka

8

220

7

Pavlove Pole, Pine Hill

9

248

8

Northern Saltivka

6

165

9

Saltovka

7

193

10

Sports

8

220

11

HTZ, Rohan, Vostok Village

5

138

12

Cold Mountain

7

193

13

Central Market, South Station

8

220

14

Center, Nagorny, Gosprom

10

275

The average cost, $

7

⊓ With the necessary data, the average selling price was calculated Vcep : ⊓ Vcep =

843.84 + 585.72 + 902.27 = 777$ 3

(5.6)

To find the average selling price per 1 m2 in UAH, you need to multiply the value obtained by 27.5 UAH (according to the dollar exchange rate for the 2nd quarter of 2021). ⊓ Vcep = 777 + 27.5 = 21368 uah

(5.7)

In the same way, the average selling price per 1 m2 in other areas of the city was calculated. The results of the calculations are presented in Table 5.6. Conclusion As a result of research, we see that the minimum selling price per 1 m2 in the regional center HTZ, Rogan, the village of East—$ 646, and the maximum cost in the regional center Center, Nagorny, Gosprom—$ 1254.

5.2 Research of Dynamics of Change of Cost in the Real Estate Market

107

Table 5.6 Average selling price per 1 m2 No

Area

The average cost of The average cost of rent per 1 m2 (V cep ), $ rent per 1 m2 , UAH

1

Gagarin

957

26318

2

Zhukovsky, Shishkovka

741

20378

3

New Houses

749

20598

4

Novozhanovo, Moskalivka

714

19635

5

Odesa

817

22468

6

Oleksiyivka

951

26153

7

Pavlove Pole, Pine Hill

1048

28820

8

Northern Saltivka

746

20515

9

Saltovka

752

20680

10

Sports

950

26125

11

HTZ, Rohan, Vostok Village

646

17765

12

Cold Mountain

789

21698

13

Central Market, South Station

777

21368

14

Center, Nagorny, Gosprom

1254

34485

The average cost, $ 849

Yield rate research The rate of return was obtained from the formula for calculating the value of property by the method of direct discounting (5.8): V =

N R

(5.8)

where V is the selling price of real estate per 1 m2 ; N— the cost of rent per 1 m2 for 12 months; R— rate of return. From the formula for calculating the value of property was derived how to calculate the rate of return (rate of return) (5.9): R=

N V

(5.9)

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5 Factors of Influence on the Real Estate Market

The rate of return must be calculated for each district of the city. For example, calculate the rate of return for the area of New Buildings. An area is considered favorable for investment if its rate of return exceeds 10%. Thus, the rate of return for the district of New Buildings will be (5.10): R=

6 ∗ 12 = 9.61% 749

(5.10)

From the calculations, we see that the rate of return for the district of New Buildings is 9.61%, which does not meet the conditions for further investment. According to a similar principle, the rate of return for other areas of the city was calculated. The results of the calculations are given in Table 5.7. Conclusion: As a result of calculations, we see that the lowest rate of return is in the city of Odesa—8.81% and the highest is in the Central Market, South Station—12.36%. The high rate of return [13] indicates that the area is close to the minimum value of real estate and the average cost of the rent. Conclusions As a result of research, it was established: • the average cost of one-bedroom apartments is $ 32,564; • the average cost of two-bedroom apartments is $ 48,385; • the average cost of three-room apartments is $ 65,849; Table 5.7 Rate of return for areas of the city No

Area

The rate of return, %

1

Gagarin

11.29

2

Zhukovsky, Shishkovka

11.34

3

New Houses

4

Novozhanovo, Moskalivka

5

Odesa

6

Oleksiyivka

10.09

7

Pavlove pole, Pine hill

10.31

8

Northern Saltivka

9

Saltovka

11.17

10

Sports

10.11

11

HTZ, Rohan, Vostok village

12

Cold mountain

10.65

13

Central market, South station

12.36

14

Center, Nagorny, Gosprom

9.61 11.76 8.81

9.65

9.29

9.57

References

109

• the average rent of 1 m2 is $ 7; • the average selling price of 1 m2 is $ 849; • the average rate of return is 10%. As a result of research, we see that the minimum cost of three-bedroom apartments in the areas of HTZ, Rogan, and the village of East—is $ 37,851, and the maximum cost in Kharkiv in the areas of Center, Nagorny, Derzhprom—is $ 135,460. The minimum cost of one-room apartments in the areas of HTZ, Rogan, and the village of East is $ 24,177, and the maximum cost in the areas of Center, Nagorny, Derzhprom is $ 50,625. The minimum cost of two-room apartments in the areas of HTZ, Rogan, and the village of Vostok is $ 32082, and the maximum cost in the areas of Center, Nagorny, Derzhprom is $ 82067. The minimum cost of rent per 1 m2 in the regional center HTZ, Rogan, and the village of East is $ 5, and the maximum cost in the areas of Center, Nagorny, Derzhprom is $ 10. Thus, we see that those areas of the city in which the rate of return exceeds the average for Kharkiv are the most favorable areas for investment. These are the areas of the beginning of Gagarin Avenue—11.29%; Central Market, South Station— 12.36%; Zhukovsky, Shishkovka—11.34%; Novozhanovo, Moskalivka—11.76%; and Saltivka—11.17%. As of the end of 2021 and the beginning of 2022, the real estate market is affected by the following factors: • • • • •

increase in the price of construction materials and increase the wages of builders; falling interest rates on loans and deposits; the behavior of the hryvnia exchange rate; increase in starting prices due to the transition to project financing; the price may increase due to higher wages of builders and the cost of building materials; • rising prices for natural gas and other energy sources, rising construction costs— these factors will somehow stimulate higher costs and higher housing prices.

References 1. Geoportal (2022). https://www.uvecon.ua/ua/geoportal.html 2. Kiev (2018) Institute of economic affairs of the council of political consultations: for the consolidation of the state agency for investment and management of national projects in Ukraine. Kiev. Rating of the privatization of the Ukraine, p 390 3. Peychev K, Lyashenko Y, Kobzan S, Levkov V (2013) Land operations, 3rd edn. Factor Publishing House, New York, p 1040 4. Kanayan K, Kanayan R (2020) Development of the shopping center concept. Development of shopping malls in the regions. http://www.usconsult.ru/ 5. Tregub M, Trehub Y (2015) Substantiation of land management methods of industrial cities. In: Pivnyak B, Kovalevs’ka K (eds) Theoretical and practical solutions of mineral resource mining. Taylor & Francis Group, London, pp 449–452

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5 Factors of Influence on the Real Estate Market

6. Caputo A (2013) Systemic stakeholders’ management for real estate development projects. Global Business and Management Research, London, pp 66–82 7. Pomortseva O, Kobzan S, Yevdokimov A, Kukhar M (2020) Use of geoinformation systems in environmental monitoring. In: International conference on sustainable futures: environmental, technological, social and economic matters, vol 166 8. Kobzan SM, Pomortseva OE (2021) Real estate market research using GIS. Trends and ´ prospects for development. Collect Sci Works ΛOGΣ 3:151–156 9. Kobzan SM, Pomortseva OE (2021) Construction and real estate market. Problems and trends. International scientific-practical conference «An integrated approach to science modernization: methods, models and multidisciplinarity», Vinnytsia, UKR—Vienna. AUT Grail Sci 1:497–504 10. Bugaychuk ES, Kobzan SM (2017) Hotels and mini dimensional apartments. Analysis of the market of similar property Modern aspects of real estate market formation: domestic and international experience. In: International scientific-practical conference. Ministry of Education and Science of Ukraine, Kharkiv national. University of Municipal Economy, pp 27–32 11. Meteshkin K, Shipulin V, Nesterenko S, Kobzan S (2020) Features of underground real estate use: infrastructural and regional aspects. Geodesy Cartogr 69(1):149 12. Factors influencing the choice of the location of the shopping center. Professional real estate development and construction. http://www.sozidateli.com/ 13. Voronin VO, Lantse EV, Mamchin MM (2014) Real estate market analysis: methodology and principles of modern valuation. Monograph. In: Lviv Magnolia, p 304

Chapter 6

Prospects for the Development of the Real Estate Market in Ukraine

Abstract The purpose of this chapter was to consider such an industry as construction, and the levers that affect the construction of residential real estate, the cost of construction, and the value of the real estate, constantly influencing the market value of the real estate in the market. The authors have thoroughly researched and identified the factors that affect the market value of the real estate. As a result of the conducted research, a conclusion was made regarding the value of the real estate and trends in the further development of the real estate market and the construction industry. Economic, political, and market factors were considered in more detail. The factors under the influence of which the development trends of the real estate market of Ukraine were formed in 2021 and at the beginning of 2022 are listed. The authors used geoinformation systems to identify trends and patterns of influence of the construction industry on the real estate market. Keywords Database · Geographical information system · Geographical model · Geoportal · Influence factor · Probabilistic model · Visual model

Conducting in-depth research on the real estate market is a very difficult task. It is necessary to study the value of land and real estate, analyze many factors that affect the real estate market, and monitor trends in real estate, to make objective and accurate forecasts. This is very important for an industry such as construction. In-depth research of the real estate market will have a significant impact on the case of the formation of proposals for real estate investment. Real estate transactions are not only one of the most profitable ways to invest, but one of the most reliable. The problem of real estate market analysis with the help of geographic information systems is very little studied but very promising. The subject of research of this work is the real estate market of Ukraine and, as an example, the real estate market in the city of Kharkiv. Research tasks were set as follows: • conduct a study of the real estate market of Kharkiv; • conduct a study of the real estate market of Ukraine; • to develop GIS maps based on the conducted research; © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_6

111

112

6 Prospects for the Development of the Real Estate Market in Ukraine

• identify trends and prospects for real estate market development. To conduct a full and in-depth study of the real estate market, it was necessary to determine the factors influencing the market that shape the value of a real estate and land today. Factors that affect the change in the value of real estate: • • • • • • • • • • • • • • •

insufficient construction volumes in Kharkiv and Ukraine; growth in demand; low level of supply for apartments in the segment (primary/secondary housing); development of new mortgage programs; increase in the cost of building materials; legal status of the land plot and possibility of official registration; high level of inflation/fluctuations of the dollar exchange rate; average wage/minimum wage; lack of labor; consumer basket; a discount rate of the NBU; weighted average rate on deposits of individuals; cheap mortgage programs 5–7–9%; increase in transaction costs; increase in real estate taxes. Thus, it was found that real estate prices for 2021 increased as follows:

• in the primary market—from 15 to 25%; • on the secondary—from 7 to 20%. As an example, we can cite trends in the cost of housing in the secondary market. Table 6.1 shows the trends in the cost of social housing in the secondary market of Kharkiv in the dynamics of August–September 2021. Figure 6.1 shows an example of using an information-digital map to reflect trends in real estate value by region in the dynamics of August–September 2021. Table 6.2 shows the trends in the cost of housing economy, comfort, and business in the secondary market of Kharkiv in the dynamics of August–September 2021. After conducting a study of individual districts of Kharkiv, it became possible to build an information-digital map with average prices for real estate in each district. Figure 6.2 shows the information-digital map of Kharkiv with a specially defined area—Nagorny district. 576 proposals were studied, and the average price of 1 m2 of housing is 1181 US dollars. One of the examples of real estate market research solutions using an informationdigital map is a map of Ukraine (Fig. 6.3) and Kharkiv region (Fig. 6.4) [1] with analytical data on the value of real estate by region as of June 2021. The problem of real estate market research in connection with the constant change of source data is quite complex, so using the ESRI platform and ArcGIS software is an important solution to this applied task [2]. The application of GIS technologies allows businesses to go beyond the usual framework of standard methods of working

6 Prospects for the Development of the Real Estate Market in Ukraine

113

Table 6.1 The cost of social housing built in the period 1950–1992, on the secondary market of the city of Kharkiv by the district Area

September V —the average cost of residential real estate, m2 /$

Rent August–September 2021, $

Rent August–September 2021, %

Shevchenko

741

5.4

1.37

Kyiv

662

4.32

1.53

Slobidsky

628

3.88

1.62

Kholodnohirsky

633

3.9

1.61

Moscow

694

4.75

1.46

Novobavarsky

607

3.6

1.68

Industrial

598

3.52

1.7

Nemyshlyansky

618

3.77

1.64

Osnovyansky

594

3.47

1.71

Fig. 6.1 Information-digital map of real estate value change by districts of Kharkiv

mainly with tabular data in process of viewing and analyzing data and to implement an integrated approach based on the geographic location of an object. The use of geomarketing, one of the new directions of marketing analysis, leads to the possibility of developing and justifying the concept of construction, determining the most profitable places for commercial real estate. For this purpose, market analysis data for the city and the vicinity of the planned facility are used, based on attribute data stored in the database (geodata). Geomarketing analysis allows for an investigation of the impact of spatial, geographically bound, and socio-economic characteristics

114

6 Prospects for the Development of the Real Estate Market in Ukraine

Table 6.2 The cost of housing economy class, comfort, and business in the secondary market of Kharkiv by district Area

September Rent August–September V —the average 2021, $ cost of residential real estate, m2 /$

Rent August–September 2021, %

Shevchenkovskiy

956

9.1

1.06

Kyivskiy

742

5.42

1.37

Slobidskiy

829

6.8

1.22

Kholodnohirsky

717

5.08

1.41

Moscowskiy

782

6.02

1.30

Novobavarsky

778

5.98

1.30

Industrial

695

4.76

1.46

Nemyshlyansky

731

5.26

1.39

Osnov’yansky

702

4.84

1.45

Average price per m2, $ Nagirnyi-Pushkinska 1181.28 Proposed 576

Fig. 6.2 An information-digital map with average prices for real estate by district of the city of Kharkiv

Kharkiv region/ Kharkiv city Social housing $212/m2 Kyiv region/ Kyiv city Social housing $401/m2 Zaporizhzhia region/ city of Zaporizhzhia Social housing $292/m2

Fig. 6.3 An information-digital map of Ukraine with real estate value data by region

6 Prospects for the Development of the Real Estate Market in Ukraine

115

Chuguyiv district/ Kharkiv city Social housing $292/m2 Zmiiv district/ Zmiiv city Social housing $219/m2 Dergachi district/ Dergachi city Social housing $271/m2 Vovchansky district/ city of Vovchansk Social housing $221/m2

Fig. 6.4 An information-digital map of Kharkiv region with real estate value data

of the target audience on the location of the future real estate object or shopping area [3, 4]. Geomarketing analysis can also be used to determine the optimal location for a new branch, shopping center, cafe, and other commercial and non-commercial real estates. Predict the possible profit and territorial coverage of the object and find the most advantageous application for a particular site. This paper analyzes the trends in the location and operation of shopping centers. The importance and complexity of the analysis of land for the location of the shopping center are difficult to overestimate because the decisions made at this stage determine not only the success of a particular object but also the entire area of its influence. As a result of the study, it was proposed to plan the location of the shopping center using geographic information technology, which will allow performing similar tasks with minimal time. The use of visualization with the help of geographic information systems will allow you to visually show on the map all the necessary spatial objects for analysis and display the spatial patterns of the shopping center. It was proposed to determine the land plot and adjacent territories for the location of the shopping center by the method of sequential screening, which reduces the number of unknown and inaccurate parameters. This approach will allow you to get a more competitive object. It is the proposed approach that allows you to get the best possible option and create a viable object. As a result of the study, it was proposed to give preference to the creation of shopping centers such as “magnet”. That is a type of facility that will create its flow of visitors by combining the functions of not only shopping but also entertainment, and wellness (such as the creation of a sports pool of small Olympic size). This is a transition to a new level—the creation of the so-called mall with versatile functions. It is through this synergy that the best results will be achieved. Figure 6.5 shows a schematic diagram of the sequence of modeling the most attractive location of shopping centers.

116

6 Prospects for the Development of the Real Estate Market in Ukraine

Fig. 6.5 Algorithm of the method of modeling the most attractive location of shopping centers

The proposed method for the use of geographic information technology for modeling such tasks will allow minimal time to perform the entire cycle of work to find the most attractive location of the shopping center. It is the GIS visualization that will allow you to visually show on the map all the spatial objects necessary for the analysis and to display the spatial regularities of the location of shopping centers. The study also conducted a study of the real estate market of Kharkiv, built an information-digital map and geodatabase with attribute information, and studied the dynamics of the region. The tendencies and prospects of development of the real estate market and the factors influencing the change of the market value of a real estate today are determined. It can be concluded that on average, house prices have risen by 15% since the beginning of 2020. Possible price drop in the coming year. But a recession is possible only if demand is reduced. Cheap mortgage programs heat the market. Thus, there is still high demand. The growth rate of apartment prices is gradually slowing down, the real estate market is overloaded. The above factors allow for maintaining demand at a high level. Rising prices are likely to continue until the new year. At the beginning of 2022, stagnation and a slight decline in prices are expected. Investing in real estate in 2021 remains a popular trend. Real estate helps not only to save money but also to increase it. All you must do is choose the right liquidity

References

117

and use the facility correctly. Homeowners continue to earn money traditionally—by renting out their property. The main thing I would like to emphasize is that the use of GIS technology allows you to conduct research on the real estate market, considering many, seemingly insignificant and indirect, factors, and obtain reliable results. With the help of the obtained data, it is possible to follow the trends and prospects of the real estate market and make forecasts for the future with a high degree of reliability.

References 1. Bugaychuk ES, Kobzan SM (2017) Hotels and mini dimensional apartments. Analysis of the market of similar property Modern aspects of real estate market formation: domestic and international experience. In: International scientific-practical conference. Ministry of Education and Science of Ukraine, Kharkiv national. University of Municipal Economy, pp 27–32 2. Anoprienko TV, Mamonov KA, Kobzan SM (2016) Analysis of the real estate market and real estate business technology. FLP Panov, Kharkiv, p 158 3. Website «UNIAN. News agency». https://www.unian.net/economics/other/ceny-na-zhile-poslevoyny-ekspert-ozvuchil-prognoz-poslednie-novosti-11766646.html 4. Website «Ministry of Finance». https://minfin.com.ua/2022/03/13/82136861

Chapter 7

The Situation on the Real Estate Market Because of Russia’s War Against Ukraine

Abstract The purpose of this chapter was to consider the situation in the real estate market because of the war between Russia and Ukraine. It is quite difficult to predict in detail the situation in the real estate market after the end of the war in Ukraine since the extent of the destruction is unclear. But it can be argued that after the end of hostilities, the demand for housing among Ukrainians will be significant. The authors assume that the lull in the real estate market of Ukraine is a temporary phenomenon, after the record growth in 2021. When the threat of war recedes into the background, the market will begin to revive. The authors present the analysis of changes in the value of various types of real estate during the 2022 military year. The studied trends were presented with the help of a geoinformation system on information-digital maps in a visual form. The authors formulated forecasts for the post-war period and emphasized that the recovery of the real estate market and the economy of Ukraine will happen. These trends will lead Ukraine to the leading country in Europe. And the real estate market of Ukraine will become very attractive for investors from all over the world. Keywords Secondary real estate market · Real estate market · Primary real estate market · Geographical information system · Geographical model · Dynamics

The situation in the real estate market because of the war between Russia and Ukraine has made changed the real estate market. Experts do not undertake to forecast in detail the situation in the real estate market after the war in Ukraine, as the scale of the destruction in the cities is unclear. After the end of hostilities, the demand for housing from Ukrainians will be significant, and foreign citizens will buy housing in Kyiv much less than before the war [1]. Due to the growing flow of refugees from the eastern regions of the country, in the western regions of Ukraine, there is a growing demand for housing on the secondary market. By the end of March, of the more than 0.5 million people who have been forced to flee their homes and temporarily settle in western Ukraine, about 3% may be interested in buying apartments or private homes. According to the growth of demand, prices for 1- to 2-bedroom apartments

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9_7

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7 The Situation on the Real Estate Market Because of Russia’s War …

may increase by an average of 3–7%. However, few people dare to invest in housing in the primary market [2]. At the same time, most likely, people will buy more housing for themselves than to further rent. It is impossible to speak about the real recovery of demand for housing yet. Real demand remains very low, especially in the primary market. For example, migrants in western Ukraine are not interested in new buildings, but ready-made apartments with renovation, in which you can live immediately. The same can be said that the housing market in Ukraine will no longer be the same. In the month since the beginning of the war, there have been dramatic shifts in the rental and sale of residential real estate. And after the war, this process will become even more prominent. Housing in Kyiv and the cities of millions in the east and north of the country may lose its prestige. And housing in the west, by contrast, will rise in price and will be in high demand [3]. During the war, rental rates in western Ukraine also rose to peak levels but will decrease as hostilities weaken. One thing is for sure, after the war the demand for building materials will grow significantly, which means that they will also grow in price. Therefore, rising house prices are inevitable. But if the war drags on and becomes more aggressive, we can expect a collapse in prices. Given the weakening of competition due to the withdrawal of a significant number of developers, after the war, developers can raise prices for apartments in residential complexes, which began to build until February 24, 2022, and which can be completed in six months [4]. On the other hand, the growth of prices in the primary market will be restrained by supply in the secondary market, which will increase due to the departure of Ukrainian refugees to European countries. The ratio of primary and secondary segments of the Ukrainian real estate market sooner or later, in our opinion, will return in 2010–2011. If last year the share of the primary market in the total number of transactions reached 60%, now and after the war, due to the increase in the secondary market and reduced supply from developers, this figure fell and will remain around 20% [5]. There may also be a situation where housing will become cheaper in the east and more expensive in the west due to the outflow of people. However, so far there is no evidence of a clear desire of compatriots to leave their native places forever. Real estate prices will fall in the post-war period, and many will not want to sell housing at such prices but will wait for growth. Owners who wanted to sell their apartments before the war will withdraw them from sale and put them on the rental market. This can increase the supply of rental housing and reduce the cost of rent in large cities. It is expected that soon may decrease the popularity of apartments in the suburbs of Kyiv. Also, when choosing a future apartment, many will pay attention to the presence of military infrastructure or airfields. After all, as a practice has shown, the enemy primarily conducts hostilities or fires on such targets. The popularity of the so-called view apartments, the windows which overlook the open spaces, may also decrease—the probability of a rocket’s arrival in this case increases. Most likely, when choosing apartments, Ukrainians will choose the lower floors—in this case, when the air alarm is announced, you can quickly get to the shelter.

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Most likely, the lull in the real estate market of Ukraine is a temporary phenomenon, which in no way indicates that the market went in the opposite direction after record growth in 2021. When Russia withdraws troops from our borders or the threat of war recedes into the background, the market will begin to revive.

7.1 The Situation on the Real Estate Market as of Spring 2022 Real Estate Market Analysis during the War, March 2022 In modern conditions, the issue of rebuilding the urban structure after the war is very important [6, 7]. Currently, there is a lot of destruction in the municipal economy and damage to state and municipal property, as well as private property of citizens and legal entities. Research on urban infrastructure using geographic information systems (GIS) is very relevant currently. Figure 7.1 shows a map of urban infrastructure destruction and shows the locations that suffered the most damage in Ukraine as of March 19, 2022 [5]. The map was built using GIS. From the above, the big cities suffered the most, namely Mykolayiv, Kharkiv, Mariupol, Sumy, Chernihiv, Kyiv, Dnipro, Vinnytsia, Zhytomyr, and others. Rebuilding the urban economy of these cities will be the main task soon. Now, analyzing the real estate market, we can conclude that it is in a state of a complete stop. This is understandable, state registers do not work, banking institutions do not work properly, there are no mortgage programs, businesses cannot work at full capacity in all regions of the country, and citizens are busy with more important issues. Conducting research on the real estate market in the region, there

Fig. 7.1 Map of the destruction of urban infrastructure in Ukraine as of March 19, 2022

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Fig. 7.2 The structure of demand for leased facilities in the Transcarpathian region as of March 18, 2022

is an activity in the rental market, but in some regions, addition, only a few large cities are regional centers. The cost of renting property has risen in Lviv, Zakarpattia, Ivano-Frankivsk, Khmelnytsky, and other regions. But we will consider that this is a short-term phenomenon. As soon as the demand for rent disappears, offers will roll back, and maybe even lower. Figure 7.2 shows a diagram that shows the structure of demand for leased facilities in the Transcarpathian region as of March 18, 2022 [8]. This is not typical for the whole country, but it is typical of the current situation. The price offer for rental facilities is not typical, and it is determined by the explosive demand in some areas and cannot stay at that level for a long time. Rental market analysis in the Zakarpattia region and Uzhhorod: • • • • • •

3.9% are looking for free housing. 4.2% are looking for housing more than UAH 1000 per month. 40.8% are looking for up to UAH 10,000/month. 27.6% are looking for within 10,000–25,000 UAH/month. 8.3% search daily. 90% of them are looking for Transcarpathia.

Statistics collected in the chat Galina Buchko, Real Estate Agency “Paradas”. As for the market for sale, as soon as a peace treaty is signed, the restoration of the entire real estate market will begin. We highlight the following stages of recovery of the real estate market: • comfort in the real estate market (immediately after the cessation of hostilities); • slow elimination of stagnant real estate market processes; • the beginning of the development of the banking system was the launch of mortgage programs;

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• restoration of construction companies and the beginning of construction processes; • resumption of operations in the real estate market; • restoration of the State Real Estate Registers; • restoration of full-fledged work of notaries; • restoration of full-fledged work of realtors and real estate agencies. Ukraine has banned the resale of real estate for a month. Thus, the government makes it impossible for raiders to seize real estate by fraudsters who can seize the moment to seize and dispose of someone else’s property. Today, access to the State Register of Real Estate Rights is already open. But not in all areas to prevent possible fraudulent housing appropriation schemes. Scammers can set up firms or resell one property several times in a row with the help of fictitious people. After a cycle of such operations, the so-called carousel can be big trouble for the property owner. A mechanism developed by the government will make the endless process of reselling the same apartment impossible. This will break the raider schemes. The opening of the State Register of Real Estate will allow to reset the housing market and fully conduct real estate transactions. Real estate transactions can be carried out only in areas where there are no active hostilities. The register was open only for the registration of new buildings. This was justified because if the new building is destroyed, the developer will be able to receive compensation for it only if he will be registered owner of this property. After the full restoration of the State Register and the State Land Cadaster, there may be a situation in which housing will become cheaper in the east and more expensive in the west due to the outflow of people. Commercial real estate In the pre-war period, the most expensive way to rent commercial premises was in Kyiv. Already in March, the average cost of rent was UAH 13,365/month, and in April, it even dropped to UAH 8640/month. In Lviv, the situation is the opposite: from UAH 8804/month in March, prices rose to UAH 9400 per month. in April. At the same time, the most advantageous offers for business are in Poltava. In March, the average monthly cost of renting commercial space in the city was 900 UAH/ month, in April—1500 UAH/month. During the two months of the war with Russia, the average cost of renting commercial real estate in the western regions increased by UAH 500–1000. The same trend is in Poltava, where the demand for working space has also increased recently. At the same time, rental prices for businesses fell in the capital and on the front lines. The sharpest reduction in price in Kyiv—the average monthly rent fell by almost UAH 5000. For UAH 2500, the rent in Odesa also decreased, by UAH 400—in Dnipro (Table 7.1).

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Table 7.1 The average cost of renting commercial real estate in different cities in Ukraine

City

The cost of rent in March, UAH

The cost of rent in April, UAH

Kyiv

13365

8640

Lviv

8804

9400

Odesa

7838

5206

Ivano-Frankivsk

7000

7500

Uzhhorod

6900

7000

Khmelnytskyi

6300

7000

Dnipro

4433

4012

Lutsk

1800

2500

900

1500

Poltava

Residential real estate We see that due to the evacuation of the population the rent of apartments in the west of the country and in Kyiv, which is used as a transshipment point, is becoming more expensive. They are now rented mainly daily, precisely because of uncertainty. Finding a vacant apartment is extremely difficult. After the end of hostilities, the demand for housing from Ukrainians will be significant, and foreign nationals will buy housing in Kyiv, but not immediately and with some caution. Currently, prices for building materials are rising, which will provoke a rise in prices for construction work and the impact on the supply of new housing and its cost. The crisis in the real estate market is quite possible in the current conditions, but with the stimulus programs of the Ukrainian government, it will be possible to solve the housing problem without serious losses. President Volodymyr Zelensky promised that the state would compensate for the loss of a house or apartment because of hostilities. This information also affects the balance of real estate values in the regional market, on the one hand, prevents a sharp collapse in real estate prices, and on the other will stimulate the rapid development of the real estate market in the post-war period. We can predict that in 3–6 months after the end of the war in Ukraine, and the real estate market will find a balance between supply and demand. After that, prices in the primary market will start to grow by about 1% per month, with an annual increase of about 12%. And on the secondary market 5–7%. The frozen primary housing market will come to its senses after the State Register of Real Estate Rights resumes. Subsequently, the average cost of primary housing in the western regions of Ukraine may increase by 10–15% of pre-war levels—this will contribute to the influx of migrants from other regions of the country, as well as supply shortages in the local market [8].

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During the first three months, the deals will be characterized by an imbalance between the offer price and the opportunities for potential buyers. Aftermarket, participants come to a balance between supply and demand, the price of housing will begin to increase by 1% per month, while at the pre-war level, the cost of housing will return only in 2–3 years. Now in Ukraine, the real estate market began to show signs of recovery in demand. Increasing demand for residential real estate in regions of Ukraine where there is no fighting, with an influx of migrants who have money to buy housing, but who do not want to spend on expensive rent and were able to find work in the new city. However, few people still dare to invest in housing in the primary market on a large scale. The price level in the primary real estate market will depend on the value of the real estate in the secondary market. Many questions arise as to how to reset the affected cities and rebuild or rebuild entire neighborhoods. The design of new buildings should take place with a reinforced underground parking lot, which can be used as a bomb shelter, as well as with the use of energy-saving technologies. Real Estate Market Analysis during the War, May 2022 Rental housing has become a very important issue for Ukrainians in martial law. Houses and apartments in the western regions of the country are in great demand [5] (Table 7.2). For example, the suburbs of Uzhhorod offer a two-story house of 175 square meters for UAH 3000 per day. According to the owners, it has 8 beds, autonomous gas heating, air conditioning, TV, and Wi-Fi. For UAH 13,297, you can rent a house in the center of Berehove. It can be rented for a minimum of 6 months, the amount for this time must be paid in advance. The house is designed for 4–5 people. A three-room house of 24 m2 can be rented for UAH 35,459. According to the owner, it has all the conditions. A two-story house in Uzhhorod for UAH 44,324, in Rakhiv for UAH 60,000 or another option—for UAH 75,000 House in Mukachevo—for 88,648 hryvnias [9]. The dynamics of changes in the cost of rent by region in Ukraine as of May 2022 are shown in Fig. 7.3. Table 7.2 Average cost of daily rent in different regions of Ukraine as of May 2022 City

1-room apartment, UAH 2-room apartment, UAH 3-room apartment, UAH

Kyiv

578

736

996

Kropyvnytskyi 600

750

863

Lviv

742

967

1438

Uzhhorod

850

1100

944

Cherkasy

600

700

900

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Fig. 7.3 Dynamics of changes in the cost of rent by region in Ukraine as of May 2022

Now, we cannot talk about constant and stable demand in the real estate market. The war severely shook the financial situation of Ukrainians. In April, more than half of the citizens stated that they were running out of savings and that there was no question of buying or finding housing at all. More than 4 million Ukrainians have become internally displaced, not all of them are spending the last money, and some are planning to move to a new place and are looking at real estate. Some want to invest even in these times. There are many investors in the market who are ready to buy real estate, but for nothing, offering 30–50%, even 10% of the pre-war price. At the same time, many panic and want to reset their property at any cost. It is currently difficult to analyze prices. The cost of almost identical apartments can vary significantly. For example, in the Dniprovskyi district of Kyiv, one-room Khrushchev houses with an area of 33 m2 are selling for $ 29,500, $ 35,000, and in a house commissioned in 2020, they are already asking $ 47,000 for an apartment of the same size. Another example: in Podilskyi district, two almost identical apartments (2-room, 46 and 48 m2 , renovated) sell for $ 55,000 and $ 89,000, respectively. At the same time, when calling the ad, the sellers emphasize that the auction is inappropriate, as they do not intend to lower the price. This situation was predicted by market participants: In the first months, it is unlikely to be able to find a balance between the offer price and the opportunities/ expectations of potential buyers.

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127

Judging by the ads that have already begun to be published in the western regions, there is an increase from 10 to 25% in renovated apartments with furniture. Investors will not be willing to buy real estate in Kyiv and Odesa. Real estate prices in Kyiv, Odesa, and Dnipro may fall by 30–40% from pre-war levels. At the same time, the value of real estate in Lviv, Ivano-Frankivsk, and Chernivtsi may increase by 30– 40%, and in the Transcarpathian region even up to 50%. In those regions where hostilities are currently taking place or are approaching, prices will fall first, and then everything will depend on the program of reconstruction and development of the regions and the return of the population, especially the working population. Conclusions Today, a very important task is to preserve the reserves of the National Bank and the earliest possible adjustment of the Ukrainian economy to the restoration of urban economy, the restoration of the construction industry. Faster launch of the legal system and notarial relations with individuals and legal entities is full. Getting investment in various sectors of Ukraine’s economy is a very important issue. We forecast a small decline in the real estate market to a maximum of 10–15%, then not a long period of stagnation. And only after that will begin the rapid growth of the construction industry, real estate prices and land, and the economy. Thus, the formation of the actual market value of the real estate will be possible after the end of hostilities.

7.2 The Situation on the Real Estate Market as of Summer-Autumn 2022 Primary property Because of the war, housing construction in Ukraine has partially stopped. Materials and work have become more expensive. There is no demand for primary housing. Currently, Ukrainians are not ready to invest money in primary real estate. The prices declared by buyers do not correspond to the real value. The number of purchase and sale agreements has significantly decreased since the beginning of the war. And for the past month, the number of transactions was 13% of the number of transactions for the same month last year. One buyer now has offers of dozens of apartments on the market. The prices that can be seen on the websites of real estate agencies and in specialized portals do not correspond to the real situation on the market. Currently, sellers are listing real estate prices at least 30% (and sometimes 55%) less than prices that could be listed in January 2022. Demand has decreased compared to the level before February 24, 2022, by at least 60–70% [10], but the cost of housing is gradually increasing, while the situation differs significantly in different regions (Figs. 7.4, 7.5, 7.6, 7.7).

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Fig. 7.4 The cost of 1 m2 in new buildings in Kyiv and the region

Fig. 7.5 The cost of 1 m2 in new buildings in Lviv and the region

Fig. 7.6 The cost of 1 m2 in new buildings in Kharkiv and the region

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129

Fig. 7.7 The cost of 1 m2 in new buildings in Ivano-Frankivsk and the region

The number of offers on the market has increased. But there are few adequate owners who understand that it is impossible to sell an apartment at the pre-war price. Now, they are selling only to people who have decided not to return to Ukraine [9]. The analysis shows that in various regions of Ukraine the situation regarding the cost of 1 m2 of housing in new buildings is gradually increasing in the long-term period, for example, from December 2021 to December 2022 (Fig. 7.8). Thus, the listed prices for the first floor from December 2021 to December 2022 from developers show that there will be no recession, there was a stop in sales, and now they are already setting prices higher than they were in December 2021. It is quite difficult to predict what to expect in the market until the end of 2023. If there are new missile strikes on the capital, the number of deals may collapse

Fig. 7.8 Average cost per 1 m2 in a one-room apartment in a new building

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again. It is impossible to activate the market while the war is going on. Prices may vary depending on the situation. To make a correct forecast, you need to be a military expert, not an expert on the real estate market. But some trends can already be traced— a decrease in new buildings, stoppage of investments, and decrease in purchasing power. In 2022, the real estate market in Ukraine experienced an unprecedented crisis because of military operations. In the first months of the full-scale invasion of Russia, it came to a complete halt. Access to the state register of real estate rights was closed until May. Prices for secondary housing fell sharply everywhere, except for the western regions and Zakarpattia. If the war continues throughout 2023, the situation in the primary housing market will remain difficult. Moreover, in connection with the deterioration of the general economic situation in Ukraine and the continuation of the blackout, many development companies will find themselves in the bankruptcy procedure since they will not be able to fulfill their obligations to creditors. Many investors who purchased a home with the help of installment plans or mortgages will not be able to pay off the payments owed. Today, the forecast of the real estate market in Ukraine depends on the events related to the war. Everything depends on the activity of hostilities, on the lull or armistice, and the long-awaited end of the war. For example, the demand for real estate in Kyiv is almost zero, because we have constant blackouts, loss of communication, and Internet. In such times, many people do not want to buy real estate. The real estate market for sale and purchase will begin to grow actively, only after the active phase of hostilities ends. Most likely, there will be a significant change in demand on the real estate market toward suburban real estate and the economy segment. This trend will continue in 2023 and the following years. In 2023, the demand for land plots will grow. Now there is a demand for buying real estate at deeply discounted prices. After the end of the war, real estate prices will rise. This will apply to real estate in new buildings that have already been put into operation and in which repairs can be made or repairs have already been made. In the secondary market, prices will also go up and return to pre-war levels. The main thing is that the hostilities end and there are no threats of destruction of this real estate. As always, one- and two-room apartments will be in demand. As soon as the population can return to a stable and peaceful life, the demand for real estate will increase and new investments will come. Then, the sales and rental prices will increase. Secondary housing market There was no critical collapse of the real estate market. Negative trends are followed, but in different regions the situation developed according to different plots. A situation has arisen when housing is becoming cheaper in the east of the country, and more expensive in the west due to the large displacement of people. But this trend will change as the Ukrainian territories are liberated and after the end of the war. Sellers do not want to sell homes at low prices, so they take properties off the market and wait.

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Fig. 7.9 General trends of the secondary real estate market during the year (07. 2021–07.2022)

Thus, the decline in the real estate market of Ukraine is a temporary phenomenon after growth during 2019–2021. When the war is over, the market will pick up and property values will rise. At the beginning of the war, there was a critical decrease in sales transactions, and after 2–3 weeks, a sharp increase in the value of rental rates in the western regions of Ukraine. Then, the demand began to decrease, the growth of rental rates on the market stopped and the secondary real estate sale market stabilized [11] (Fig. 7.9). The dynamics of price changes on the secondary market of residential real estate during the year is presented in Table 7.3. If we analyze the number of ads for the sale of apartments, houses, and rooms by regions of the country, we can come to the conclusion that the offers exceed the pre-war level (Fig. 7.10). Big cities suffered the most because of the war. Namely Kherson, Mykolaiv, Kharkiv, Donetsk, Luhansk, Zaporizhzhia, Chernihiv, Sumy, and others. Reconstruction of the urban economy of these cities will be the main task soon. In turn, the budget of a potential Ukrainian who can make a deal on the purchase of housing on the secondary market in the middle price segment ($30,000–$100,000) is decreasing (Fig. 7.11). Analysis and comparison of changes in the cost of housing by region of Ukraine for July and January 2022 are given in Table 7.4. The dynamics of demand for various types of real estate [12] is shown in Fig. 7.12. It can be concluded that the largest demand is residential buildings and the overall demand for residential real estate is increasing and approaching the level of January 2022.

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Table 7.3 Sales growth on the secondary real estate market during the year (July 2021–July 2022) Region

July 2021 p.

July 2022 p.

Increase

Zakarpattia

3687

3335

− 10%

Ternopilska

2882

2096

− 27%

Volynsk

3200

2327

− 27%

Rivne

6440

4558

− 29%

Chernivtsi

4094

2851

− 30%

Vinnytsia

6930

4801

− 31%

10634

7112

− 32%

Cherkassy

9503

6176

− 35%

Kirovohradska

5721

3669

− 36%

Zhytomyr

7474

4722

− 37%

14795

9334

− 37%

9009

5509

− 39%

32567

19035

− 42%

Poltava

Lviv Khmelnytska Dnipropetrovsk Sumy

5372

3046

− 43%

Odesa

67364

36072

− 46%

7263

3760

− 48%

Kyivska

92164

38876

− 58%

Ivano-Frankivsk

10432

5101

− 51%

Zaporizhzhia

13649

4535

− 67%

Mykolayivska

8991

2408

− 73%

Luhansk

7480

1301

− 83%

Donetsk

21082

3285

− 84%

Kharkivska

40309

5612

− 86%

Khersonska

7484

377

− 95%

Chernihivska

Housing rent If during the first blackouts, experts agreed that the lack of light would make renting on high floors irrelevant, now we can confidently say that this is not the case. In practice, housing is rented even in high-rise buildings, where there is no light for a long time and elevators do not work. The demand for high floors and panoramic windows fell slightly at the beginning of the war and remains at the same level. Tenants are warned: along with the light, the water goes out, the heating does not work, and these problems will be relevant if there are blackouts. However, people choose apartments with a good design—it covers all household shortcomings. People have equipped their homes with gas burners, and powerful batteries, neighbors have relied on generators to support Internet routers, and climbing to the 16th floor on foot is perceived as an additional physical burden.

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133

Fig. 7.10 Information and digital map of changes in value on the secondary market of residential real estate in July 2022

Fig. 7.11 Dynamics regarding the potential budget of Ukrainians for the purchase of housing on the secondary market

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Table 7.4 Dynamics of housing cost changes by region of Ukraine Region

Increase on m2

January 2022

July 2022

Uah/m2

Uah/m2

$/m2 (1$=37

$/m2 (1$=29

uah)

uah)

Uah

$

Zakarpattia

16,568

571

22,917

619

38%

8%

Volynsk

15,679

541

19,194

519

22%

− 4%

Lviv

22,788

786

27,463

742

21%

− 6%

Chernivtsi

20,660

712

24,605

335

19%

− 7%

Rivne

19,290

665

22,922

620

19%

− 7%

Ternopilska

16,787

579

19,852

537

18%

− 6%

Ivano-Frankivsk

13,900

479

17,665

477

27%

0%

Vinnytsia

21,354

736

24,753

669

16%

− 9%

Cherkassy

16,325

563

18,738

506

15%

− 10%

Poltava

16,293

562

18,537

501

14%

− 11%

Zhytomyr

16,629

573

18,874

510

14%

− 11%

Dnipropetrovsk

14,741

508

16,358

442

11%

− 13%

Khmelnytska

16,561

571

18,110

489

9%

− 14%

Sumy

12,993

448

13,002

351

0%

− 22%

Chernihivska

17,379

599

16,929

458

−3%

− 24%

Kyivska

35,741

1232

34,740

939

−3%

− 24%

Odesa

22,362

771

21,454

580

−4%

− 25%

Fig. 7.12 Dynamics of demand for various types of real estate during March–July 2022

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135

The cost of renting housing in Kyiv during the blackout fell again by 10–15%. Average prices were distributed as follows: • 1-room apartment—UAH 8500; • 2-room apartment—UAH 12,000; • 3-room apartment—UAH 20,000. At the same time, demand grew slightly and increased by 3% compared to December. If earlier the end of December—the beginning of January was traditionally a “quiet season”, then at the end of 2022, lease reviews and contracts were also held on December 31 and January 1. As for long-term leases, a decline was observed at the beginning of the war, due to a sharp outflow of the population because of moving abroad or to other, safer regions of Ukraine. Then, the demand began to grow rapidly, and in the summer months, there was a decline again, but not as much as at the beginning of the war (Fig. 7.13). The dynamics of long-term housing rent during the year is uneven in the regions of the country—in the western regions, in connection with a calmer situation, there is even a trend toward growth (Table 7.5). How will the real estate market recover? Security is the main factor that will influence the recovery of the real estate market in the first stages. New categories of buyers are appearing in the western regions of Ukraine, these are: • internally displaced persons who lived for a certain period in new cities and adapted, realized that they are comfortable, and they are ready to continue their lives here and have the appropriate resources for this;

Fig. 7.13 General trends of long-term housing rent during the year (July 2021–July 2022)

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Table 7.5 Growth of long-term housing rent during the year (July 2021–July 2022) Region

July 2021

July 2022

Increase

Sumy

624

1384

122%

Chernihivska Lviv Kyivska

633

1242

96%

2694

5049

87%

14,142

31,297

83%

Kharkivska

4547

8099

78%

Odesa

7197

12,335

71%

Ternopilska

377

627

66%

Ivano-Frankivsk

867

1422

64%

Chernihivska

511

707

38%

Zakarpattia

539

666

24% 13%

Volynsk

565

640

Mykolayivska

1098

1216

11%

Vinnytsia

1250

1208

− 3%

Rivne

1545

1372

− 11%

Dnipropetrovsk

4380

3784

− 14%

980

796

− 19%

Chernihivska

915

596

− 35%

Zaporizhzhia

1229

738

− 40%

453

258

− 43%

Zhytomyr

Kipovogpadcbka

2213

1244

− 44%

Khersonska

833

468

− 44%

Cherkassy

729

323

− 56%

Donetsk

1676

661

− 61%

Luhansk

362

142

− 61%

Poltava

• employees of companies that relocated to the west of Ukraine; • investors who want to own housing in the west of Ukraine, due to the security factor; • investors who changed their investment focus to the western regions, due to the safety factor and to obtain a liquid asset and profit. Assumptions that in the first months of the war in the western regions they would buy up all real estate turned out to be unjustified. A situational increase in demand for buying and renting housing was felt during the first two to three months, and then the decline began again. In this regard, in the western regions of the country, the real estate market will recover quickly enough, in Kyiv—also, after the security issue is resolved. In other regions, especially those that suffer from shelling, the issue of restoring the real estate market will depend on the confidence of the people who live there and support from the state (Fig. 7.14).

7.2 The Situation on the Real Estate Market as of Summer-Autumn 2022

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Fig. 7.14 Regions with the most damaged housing stock

The war hit the residential real estate market in Ukraine painfully, and further changes can only be expected to deepen. If the state wants to help Ukrainians solve the housing problem, it must consider the new reality and take care of effective means of influencing the construction industry. One of the most affected was the country’s housing stock, which the Russians are destroying with brutality, especially in those regions that are in the war zone or proximity to the front line. According to the Kyiv School of Economics, as of the end of September, 135,800 private and multi-apartment buildings were already damaged and destroyed in Ukraine. Of these, 120,000 are private houses, 15.6 thousand are multiapartment buildings, and 200 are dormitories. The total area of damaged or destroyed objects is 74.1 million square meters or 7.3% of the total area of the country’s housing stock. The damage caused by the invaders to the country’s housing stock is already estimated at $50.5 billion, and these indicators, unfortunately, continue to grow every day [13]. Considering more than 6 million refugees who left Ukraine, as well as 3.5 million internally displaced persons who fled the war to safer regions, the issue of restoring the housing stock will become one of the key issues for the state after the end of hostilities.

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For the country’s leadership, solving this problem is indeed an important priority for the future. The post-war recovery plan for Ukraine (which the Ukrainian government presented in the summer in Lugano, Switzerland) includes an important point “Modernization of regions and housing construction”. Of the total amount needed for the implementation of the plan, it is $750 billion, and it is proposed to allocate $150–$250 billion in this direction. The Ukrainian authorities plan to increase the energy efficiency of residential buildings, build new ones, and repair damaged ones. In addition, the water supply, drainage, and heating systems will be modernized, and the production of glass, windows, and thermal insulation materials will be localized. In addition, the state budget for 2023, which was approved by the Verkhovna Rada, provides for the creation in Ukraine of a Fund for the liquidation of the consequences of Russia’s armed aggression with a total volume of UAH 35 billion. The funds of this fund will be directed, among other things, to the reconstruction and capital repair of buildings, and to provide housing for internally displaced persons and persons who have lost their homes because of hostilities caused by the war. In October, the state program of affordable mortgage loans “eOselya” was launched. Now, it can be used by military personnel, law enforcement officers, doctors, educators, and scientists, who are allowed to take out a home loan at 3% per annum for a period of up to 20 years. From 2023, all willing Ukrainians will be able to take a soft loan for the same period, but at 7%. We should not forget about the drop in real incomes of many fellow citizens. According to the World Bank, the number of people in Ukraine living below the poverty line has increased tenfold since the start of the full-scale war. By the end of 2022, from the pre-war 2%, this indicator may increase to 25%, and under the current dynamics, by the end of 2023, the number of Ukrainians living below the poverty line may increase to 55%. In such conditions, one can hardly expect mass demand from Ukrainians to participate in the mortgage lending program. But the state has not yet created the proper conditions for launching a full-scale mortgage in difficult wartime. The question of what to do if the mortgaged property is destroyed, but the loan remains, is not resolved, the insurance does not cover such a case. It turns out that a person does not have a home, and the debt remains. The Verkhovna Rada has not yet adopted a relevant legislative decision. The situation with providing housing can be improved by the adoption of the bill promised by the authorities “On compensation for damage and destruction of certain categories of real estate objects as a result of hostilities, acts of terrorism, sabotage caused by the military aggression of the Russian Federation” [13]. So far, the parliament has adopted it only in the first reading, so the country does not have a prescribed procedure for compensation for damaged or destroyed housing. As a result, people cannot afford long-term planning under conditions of force majeure. A law on compensation for lost or damaged housing should be adopted. First, it will have a positive effect on the market because the state should implement steps that will support builders and developers by buying square meters at market prices and handing them over to the victims.

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Attraction of investments. Internal Investor At the conference in Lugano, Ukraine presented a post-war recovery plan. According to him, the number of investments that will be needed for the reconstruction of the country after the war reaches 750 billion dollars. Previously, funds were provided for the implementation of 850 projects. We are talking about rebuilding all the damage caused by Russia: cities and infrastructure, architectural monuments, expansion, and integration of logistics with the EU, etc. We can count on foreign investments only after the end of the war. Therefore, today, we can only count on ourselves. However, it makes no sense to rely on the savings of Ukrainians who suffered economically significantly in the war. It is worth looking for an internal investor who will live and work in Ukraine— big business investment, capital investment of successful enterprises, etc. We have a similar experience of successful European countries that went through such a stage of development in the second half of the twentieth century. Significant changes are expected in the market of both primary and secondary housing. The state must be aware of the importance of these trends and respond to them in advance, creating the proper conditions for the development of one of the key sectors of the national economy. To return a larger number of refugees after the war and create conditions for Ukrainians to stay in their homeland, it is necessary to find effective incentives for the construction industry, and first, that part of it that will deal with housing construction. The “affordable mortgage” program alone or sending a small part of budget funds as compensation for the purchase of housing cannot solve this problem. A systematic approach is needed in the development of our cities and territories because many Ukrainians have seen negative examples of construction, when new high-rise buildings stand empty for years, as there is no well-paid work or developed infrastructure nearby. With the right approach, housing construction can become one of the drivers of the recovery of the Ukrainian economy, because it will give impetus to the development of many related industries, such as the production of building materials, energy, metallurgy, the housing and economic complex, and others. Perhaps in ten years the state and our citizens will be able to return to a more traditional model of development of the residential real estate market. Changing consumer priorities At the beginning of summer, 14 million square meters of destroyed housing were recorded in Ukraine. Another 35 million square meters were damaged. The government and local authorities began to look for quick solutions to resettle those who lost everything. A discussion began on how to reimburse funds for destroyed and damaged property. At the same time, Ukrainians were urged to submit applications for compensation for housing destroyed during the war in the Diya application. As of June 14, there were more than 200,000 such appeals. There were no global changes in the recovery of the real estate market. The excitement was also absent in the secondary market, where sellers reduced prices in some places by 5–7 thousand dollars (this is 10– 20% of the total cost of housing). To somehow change the course of events, the

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possibility of selling housing by proxy is being restored in Ukraine. And developers have simplified the procedure for coordinating projects with state bodies and are allowed to put completed objects into operation without decorating the facade and improving the surrounding area. Already in mid-July, 39 new buildings in Ukraine received certificates of commissioning of their lines, a total of 385 thousand square meters of housing [14]. In many settlements, the mass reconstruction of dormitories and health and medical facilities for temporary housing for internally displaced persons has begun. New modular settlements are appearing. These buffer zones were necessary for most of the immigrants to settle down, get used to the new city, and find a job if it was lost. Having put themselves on their feet, they were able to start looking for housing for the long term. Therefore, the first increase in interest in secondary housing in 2022 was recorded in large cities of Ukraine Kyiv. The real estate market, which was considered dead just a few months ago, has revived 67% of sales departments of new buildings resumed work. This is 17% more than in the spring period. The beginning of the business season would have put everything in its place, if not for the energy terror of Russia. In anticipation of the autumn season, the index of business activity in the construction industry increased from 43.6 to 44.1. According to the National Bank, many developers said that they plan to increase the volume of orders, and builders—the volume of work. Forecasts regarding the volume of purchases of raw materials and materials became more optimistic. At the same time, return migration began in the country—people who left their homes after February 24, 2022, returned to large cities in Kyiv. Fewer and fewer Ukrainians asked for asylum in Europe. It is during this period that housing prices in the central regions, Odesa and Dnipro, begin to show growth. Today, it can be said that the solvent demand in the western regions of the country has exhausted itself. The cheapest per “square meter” in new buildings was offered in Khmelnytskyi, Ternopil, Ivano-Frankivsk, and Lutsk [14]. As of the beginning of October, 67% of housing estates resumed their work, and the cost of new buildings increased throughout Ukraine. 76% of companies opened sales departments. 86 completed residential complexes were recorded on the market for this period. Another 124 projects were started from scratch. To stimulate buyers, “eOselya”—an affordable mortgage program—started working in a test mode. In the same month, the first loans were to be taken at 3% per annum. Developers breathed a sigh of relief, and experts changed their catastrophic rhetoric. But the minimal positive changes were again destroyed by Russia, releasing 83 missiles on October 10, 2022. The real estate market of Ukraine reacted relatively calmly to the massive rocket attack. Although the number of requests for renting apartments in Kyiv fell by 25%, within a few days the situation began to level off. In addition, it was this attack that gave impetus to the search for housing in country houses. The population began to prepare for a long blackout. But even in the most critical conditions, there was a real estate sector for which demand revived. Due to emergency power outages, the share of requests for coworking, where generators work, has increased by 2 times. This accelerated the

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recovery of business in the field of flexible offices, which showed a record decline in the summer. Demand for hotels, especially smart apartments, where you can live for several months to a year, has also remained. Many experts point out that in the coming years, we should expect a radical change in the attitude of Ukrainians to the very fact of owning a home that can be destroyed by a Russian missile. It is not yet known when the war will end, but its impact on the psychological state and basic attitudes of Ukrainians will be felt for decades to come. This tendency toward a full-scale invasion of Russian invaders on our land was already observed among the residents of the occupied Donbas, who moved to the territories controlled by Ukraine and did not buy their housing but rented it. With time and bitter experiences gained, this attitude will become more widespread, which can significantly affect the demand in the housing market. In the next two to three years, buyers’ priorities will change. They will be interested in apartments in built-up facilities, and not in investing in the initial stages of construction. Most likely, the main trend of the coming years will be a gradual transition from the model of real estate ownership to the model of use. Most likely, we should expect a significant drop in the purchasing power of the population against the background of the fear of losing property due to war. Therefore, we should expect an increase in the demand for rented housing, which has additional levels of security and allows citizens to quickly leave for a safer place. By the way, in many countries of Europe and the democratic world, people live mainly in rented housing. For example, in Austria, this figure is approximately 80%. So, Ukrainians can become more like Europeans in this, even due to tragic circumstances.

7.3 Results of 2022 Construction delays in Ukraine will be 6 months at best, but it is more realistic that the handover of most residential buildings may take up to 1.5 years. At the same time, not all construction companies will be able to survive 2023. The situation in the secondary housing market is better—demand is weak, but still, deals are being concluded, and apartments are gradually being sold. Most likely, a serious correction of the dollar price is not expected until the end of the year. The projected demand recovery of 10–15% in the first half of 2023 may prove to be short-lived if missiles arrive from a neighboring state. As for prices, they will primarily be influenced by the population’s ability to pay. Although the developers have significantly increased the cost against the background of zero demand, a real buyer, provided that the cost of the apartments is paid in full, will be able to count on discounts of 10–20%. In general, after the end of the war, it will take at least 3 years for the primary housing market to fully recover. Therefore, the coming year 2023 can only become the basis for future positive changes.

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The demand and requirements of buyers for housing in 2023 will change significantly compared to pre-war times—the security factor has come to the fore. The location of the object and its autonomy became no less important. In addition, the apartment must retain heat well. People often ask about underground parking, which can be used as a bomb shelter, and about walking distance to the subway. Distance from strategically important facilities, factories, airports, and military units will be no less important. Now, the distance from critical infrastructure facilities is a positive factor that affects the increase in the cost of housing. The psychological factor affects the choice of the technology used to build the house. After a wave of publications, in which it was said that monolithic-frame new buildings demonstrated the greatest stability during enemy attacks, clients precisely prefer such residential complexes. Buyers will pay special attention to these characteristics throughout 2023. If hostilities cease in 2023, we should expect the number of buyers to increase. This will be due to the delayed demand for residential real estate. Among the 250,000 immigrants in Lviv and 100,000 in Kyiv, some decided to buy apartments in new buildings in the future. If we talk about the small towns in the Kyiv region, which were badly affected by the Russian army, they are not yet willingly considered as a place to live, because the infrastructure was badly damaged. Despite the price reduction of 20–30%, a price reduced by 50% or more can be called a profitable investment in these cities. Currently, the cheapest prices for apartments are in the eastern and southern regions of Ukraine. One of the biggest price reductions is observed in Kharkiv—minus 50–60% of the pre-war prices. Post-war forecasts Today, most developers are determined to complete already started facilities. Today, companies do not start new projects, that is, in the future, we will face a significant shortage of apartments. In the long term, there will be no new high-quality objects and there will be a price jump in ready-made houses. It is difficult to predict when the market will operate at even half capacity. Just as it is not entirely clear what he will be like after the end of the war. Everything depends on the duration of the war, on the destruction that Ukraine may still experience. Trends in demand for real estate do not change. The client’s request will be the same as before the war: compact quarters or mixed buildings of different stories, where, in addition to housing, all the necessary service infrastructure is provided (grocery retail, coffee shops, pharmacies, children’s educational institutions and spaces for development and entertainment, offices, recreation areas, promenades, children’s and sports grounds, safe courtyards without cars, etc.). The war and its consequences will affect the buyer’s request. In addition to the above-mentioned amenities, the client will pay attention to the safety of the complex and the presence of underground parking lots, which must be adapted to the functions of a bomb shelter. In my opinion, this is not a trend, but our reality. There will also be a lot of attention to the inclusiveness of housing and infrastructure: a comfortable neighborhood, comfortable access to apartments, etc. This has been talked about for a long time, but after the war, inclusiveness and barrier-freeness will be even

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more relevant. By the way, 90% of people who can buy an apartment today want ready-made housing or something that will be put into operation in 2022. Of course, much fewer buyers are willing to wait until the end of 2023. After all, in times of war, every client wants to have confidence in the reliability of investing their funds. The price of apartments has already increased in hryvnia equivalent. The price per square meter is higher on average than it was in February 2022. In the postwar period, the upward trend is likely to continue. After all, the price is directly affected by the purchasing mood of customers, the weakening of the hryvnia against the dollar, the pace of construction recovery, and the remoteness of the region from hostilities. And if you add to all that the increase in the price of building materials and complicated logistics, the price per square meter for new construction projects will increase significantly. The issue of housing, after the end of hostilities, will be particularly acute. A significant slowdown in the pace of construction, and the lack of new facilities, albeit weak demand, will lead to a certain shortage of quality housing and a shortage of comfortable and liquid residential real estate on the market. Most likely, there will be an increase in demand, due to many postponed planned deals, and forced deals to improve housing conditions. Developers will not be able to quickly satisfy all the needs of buyers, since the cycle of preparing and bringing the object to the market lasts 12–24 months. Together with the increase in the price of materials, all this will lead to a significant increase in prices [15]. Perhaps a situation will arise in which the state and local territorial communities will have to take part. We are talking about communal housing, which will belong to the community of the city, and which can be leased on a long-term basis specifically to vulnerable sections of the population—“internally displaced persons” and those groups of people who need it but cannot afford to buy it. In this way, cities will receive a market tool to influence the rental market by regulating rental prices and, to some extent, the cost of primary housing. City administrations will be able to purchase such communal square meters on the already existing market, attracting financing from state guarantees, international grants, etc., and this will give a certain opportunity to revive the market itself. The second block, which requires the participation of the state, is mortgage programs. Currently, there are isolated similar programs in the youth credit fund, which work successfully, although they have a lack of funding from cities and the government. If the program to rebuild the real estate market of Ukraine is properly implemented, it will be able to give a strong boost to the economy—create jobs, bring investments, the latest technologies, etc. We believe that the recovery of the real estate market and the economy of Ukraine will happen. These trends will lead Ukraine not only to the leading countries in Europe but to the whole world. R.S. This book was written by one of the authors to the sounds of round-theclock shelling of thousands of housings Saltivka in the city of Kharkiv, and the second – while serving in the Armed Forces of Ukraine.

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References 1. Website «ToDayUA». https://biz.today.ua/ru/rynok-zhylya-v-ukrayne-sylno-yzmenytsyaposle-vojny-gde-zhdat-obvala-tsen 2. Website «UNIAN. News agency». https://www.unian.net/economics/other/eksperty-rasska zali-chto-zhdet-rynok-nedvizhimosti-posle-voyny-poslednie-novosti-11795310.html 3. Website «Gov.ua. State sites of Ukraine». https://minre.gov.ua/page/yak-otrymaty-kompensac iyu-za-zruynovane-zhytlo 4. Website «Association of Realtors (Realtors) of Ukraine». https://www.asnu.net/news 5. Website «Olx». https://www.olx.ua/uk/nedvizhimost 6. Kobzan SM (2019) Real estate market formation: practical aspects and features of evaluation. Jurinkom Inter, Kyiv, p 212 7. Kiev (2018) Institute of Economic Affairs of the Council of Political Consultations: for the consolidation of the state agency for investment and management of national projects in Ukraine. Rating of the privatization of the Ukraine, p 390 8. Website «Today». https://economics.segodnya.ua/ua/economics/realty/podorozhanie-na-225gde-v-ukraine-samye-vysokie-ceny-na-arendu-kvartir-1622343.html 9. Website «TSN». https://tsn.ua/ukrayina/cini-na-zhitlo-vpali-na-30-50-yaka-situaciya-narinku-neruhomosti-v-ukrayini-2136262.htmlhttps://misto.lun.ua/price 10. Website «Lun Cit ». https://misto.lun.ua/price 11. Website «OLX». https://www.olx.ua/d/uk/nedvizhimost/ 12. Website «Association of real estate specialists (realtors) of Ukraine». https://www.asnu.net/ 13. Website «UNIAN Information Agency». https://www.unian.ua/economics/other/nova-paradi gma-yak-viyna-zminila-rinok-zhitlovoji-neruhomosti-v-ukrajini-12038670.html 14. Website «Real estate 24». https://realestate.24tv.ua/yak-zminyuvavsya-rinok-neruhomosti-ukr ayini-2022-rotsi_n2216783 15. Website «Economic truth». https://www.epravda.com.ua/columns/2022/08/25/690797/

Index

A Analysis, 1, 3, 14, 23, 24, 30, 43, 45, 46, 49, 50, 56, 63, 68–71, 73, 75, 77–80, 82, 85–90, 94, 95, 97, 100, 111, 113, 115, 116, 119, 121, 122, 125, 129, 131

B Buffer zone, 83, 140

F Forecasts, 111, 117, 119, 127, 130, 140, 142

G Geographical model, 65, 68 Geomarketing, 113, 115 Geoportal, 16 GIS visualization, 116

H Huff’s model, 64, 70, 71, 74, 75, 81, 85 C Cost, 5, 7, 11, 13–18, 20–31, 33–36, 44, 46, 51, 52, 54, 70, 93–109, 111–114, 120, 122–129, 131, 134, 135, 139–143

D Database, 16, 77, 88, 90, 113 Demand, 2, 7, 8, 12–17, 22, 24, 26, 27, 29, 31, 35, 36, 40–42, 44, 45, 47, 52, 54, 55, 64, 69, 95, 96, 112, 116, 119, 120, 122–127, 130–132, 134–136, 138, 140–143 District, 10, 14–17, 20, 22, 25, 27, 29, 33, 35, 55, 58, 60, 65, 67, 69–74, 79, 80, 82, 85, 89, 94, 97, 98, 100, 101, 104, 108, 112–114, 126 Dynamics of change, 17–21, 27, 28, 31, 36–38, 40, 41, 94, 99, 100, 125, 126

I Impact factor, 45, 96, 97 Improvements, 1, 2, 4–6, 45, 46, 64 Information and digital map, 133 Infrastructure, 1, 2, 7, 12–14, 19, 21, 24, 29, 33, 47, 55, 62, 77, 84, 87, 88, 90, 94, 96, 120, 121, 139, 142 Investment, 10, 22, 24, 30, 38, 42, 44, 57, 63, 64, 99, 108, 109, 111, 127, 130, 136, 139, 142, 143

L Land, 1–9, 11, 12, 30, 31, 42–47, 51, 82, 95, 111, 112, 115, 123, 127, 130, 141 Location, 2, 5, 7, 10, 13–17, 19, 21–24, 29, 35, 42–44, 47, 49, 50, 55, 56, 58, 63–65, 69, 72–75, 77–82, 84–91, 94, 96, 97, 100, 113, 115, 116, 121, 142

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 S. Kobzan and O. Pomortseva, Real Estate Market of Ukraine, SpringerBriefs in Geography, https://doi.org/10.1007/978-3-031-31248-9

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146 P Population, 4, 7, 24, 31, 44, 51, 52, 54, 64, 68, 77–86, 90, 95, 124, 127, 130, 135, 140, 141, 143 Primary real estate market, 7, 10, 13, 30–32, 34–36, 38, 41, 42, 125 Probability, 42, 65, 69–74, 81, 120 Property, 1–6, 8, 9, 21, 43–45, 50, 64, 69, 77, 107, 117, 121–123, 126, 127, 130, 131, 138, 139, 141 R Raider, 123 Rate of return, 30, 99, 100, 107–109 Real estate, 1–19, 22–24, 30, 35, 38–40, 42, 43, 49, 50, 53, 63, 77, 93–97, 99, 100, 104, 105, 107, 108, 111–116, 119, 120, 122–127, 130, 131, 133, 134, 136, 138, 140–143 Real estate market, 1–3, 7–11, 13, 14, 16, 22, 23, 30, 31, 38, 40, 41, 43, 44, 49, 57, 93–97, 99, 100, 109, 111, 112, 116, 117, 119–127, 130, 131, 135–137, 139, 140, 143

Index Rent, 13, 16, 17, 20–22, 26, 27, 29, 46, 96, 97, 100, 102, 104–109, 113, 114, 120, 122–126, 132, 135, 136

S Search model, 65, 69 Secondary real estate market, 7, 9, 31, 42, 94, 95, 131, 132 Shopping mall, 50, 52, 56–60, 73, 75, 85, 88 Subjects of the real estate market, 111 Supply, 2, 8, 11, 24, 39, 40, 42, 44–47, 95–97, 112, 120, 124, 125, 138

V Visual model, 49, 87–90

W War, 119–121, 123–127, 129–132, 135–139, 141–143