10% interest mortgages – Ukrgazbank (not the answer)

February 14, 2017

Ukrgazbank and Ukrbud, a large construction company have teamed up with the bank offering 10% interest mortgages for those buying Ukrbud property.

10% interest is incredibly low for any form of (legitimate) lending Ukraine.  Historically interest rates on any form of loan has been double and even treble that figure.  Needless to say it seems likely that Ukrbud will fairly swiftly shed any unsold units rather swiftly, and quite possibly will sell much of what they plan to build before it is built.

Good for Ukrgazbank, good for Ukrbud and good for the home purchaser.  A little stimulus for the property market too.  Perhaps more banks and builders will follow suit with similar agreements.  It’s all welcome of course, but it’s not really the answer (although it could be part of it).

So why is it not the answer?

Obviously there are limitations upon just how much and how swiftly Ukrbud can build, and regardless of the extremely attractive (for Ukraine) 10% interest rates on borrowed money, the problem is that construction costs and property prices in Ukraine are simply too high.

The answer for Ukraine is to find a way to reduce the construction costs of housing (by a significant amount) and produce something close to affordable housing.

Thus perhaps Ukraine should arrive at a definition of what it deems to be affordable housing and then task the Oblasts with providing the social and income data to create an index?


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