Developers set exchange rate of UAH 45-47 for U.S. dollar in cost of new construction – expert’s opinion

The cost of residential objects, whose construction is starting in the second quarter, is based on the exchange rate of UAH 45-47 for the U.S. dollar.

The relevant statement was made by Sales Director at GAZDA Construction Company Marianna Bihunets in a commentary to Ukrinform.

At the same time, the weighted average rate throughout the entire construction cycle of new objects, which is an average of two years, is expected to be around UAH 43-44 for the U.S. dollar, in her opinion. Thus, developers mostly choose to play safe.

“Undoubtedly, developers are carefully analyzing the country’s economic conditions and adjusting prices, primarily based on the main objective factors. First of all, the foreign exchange market conditions. On the primary housing market, the price per square meter is tied to the dollar exchange rate. Between January 1, 2024 and July 1, 2024, the exchange rate of the U.S. dollar increased from UAH 38 to UAH 40.45, i.e. the Ukrainian hryvnia lost at least 7% of its value,” Bihunets told.

The second factor affecting the developers’ calculations is the inflation rate. According to the expert, following the increase in electricity tariff rates and excise duties on fuel, the prices may rise significantly, by an average of 10-15% based on the group of goods and services. Meanwhile, the official forecast expects that inflation will accelerate to 5-6% in the second half of 2024 and reach 8.2% at the end of the year.

“Growing prices are the realities. At the same time, manufacturers and suppliers of construction products usually revise prices with a small margin, which is 5% in average,” Bihunets explained.

Another factor, in her words, is the decline in the number of new buildings. With the start of the Russian full-scale invasion, the number of new construction objects across Ukraine decreased more than twofold. Next year this market is expected to shrink by 30% compared to 2021.

“The fourth factor is the concentration of demand in safe areas. It is an important fact, which in the past two years has equalized the price of objects in the Western region (Zakarpattia, Ivano-Frankivsk, Lviv, Chernivtsi) and the Central region (Zhytomyr, Poltava, Vinnytsia), and the largest cities, where prices usually were higher (Kyiv, Odesa, Dnipro, Kharkiv). In some places, the price gap at the start of construction in different regions, if you compare similar objects, does not exceed 5-10%,” Bihunets noted.

The expert mentioned that the price situation was also influenced by the qualitative characteristics of housing complexes, townhouses and cottage towns. This refers to the quality of building materials, construction and installation works, the pace of construction (compliance with the declared deadline), the number of floors, recreational opportunities, etc.

The expert believes that, taking into account the objective economic factors and based on the quality and class of housing, the cost of real estate in the new buildings may increase by another 10-15% before late 2024. Hence, in the hryvnia equivalent, the cost of new buildings may rise by a total of 25-30% in 2024.