While the war continues in Ukraine, it is difficult to talk about the investment attractiveness of the country. However, experts believe that investing even now in the western regions will be able to provide investors with a stable profit in the future. Investing in real estate is a particularly popular practice in Dubai, the largest city in the United Arab Emirates in terms of area and population. In the first quarter of 2022, about 2.2 million tourists visited it.
The management company Ribas Hotels Group is preparing to enter the UAE market with the service of managing hotel real estate and private apartments. Arthur Lupashko, founder of Ribas Hotels Group, and Kristina Zvereva, co-founder of DOMSTAR, who opened her company's office in Dubai in 2022, commented on the topic of investing in Ukraine and the UAE.
Variety of formats
The Ukrainian real estate market is changing a lot. Back in 2014, with the outbreak of the war between Russia and Ukraine, architecture began to transform, especially in Kyiv and Odessa. The design of residential buildings and commercial real estate has become much more interesting and modern. Circumstances in Ukraine have changed the approach to development products and the changes continue.
In Ukraine, the format of apartment management by a management company is just beginning to be popularized. For example, apart-hotels can be attributed to a new format for the market. In fact Ukrainians are used to controlling everything on their own. However, in the near future it seems that people have less and less free time and they begin to realize the value of what the management company can bring.
Hotel products such as apart-hotels and tenement houses will grow in price in the future in Ukraine as well. So, according to Artur Lupashko, in the near future apartments of 30-50 m2 or hotels and hotel complexes with infrastructure designed for 100-300 rooms will be popular.
On visualization: apart-hotel WOL.33 by Ribas (Lviv)
As for Dubai, the product line there is wider than in our country. For example, high-rise real estate is popular in the city. In one complex there can be flats and an apart-hotel - studios or one-room apartments with a kitchen and a separate hotel. “Apart-hotel format is popular, where you buy an apartment or a unit and with the money invested (minimum $124,000) you get 7% per annum for 10 years,” said Kristina Zvereva.
In addition, there are residential buildings in the city, which are monitored by a management company. When this service is provided in a house, it is easier to buy an apartment, live in it, rent it out. Also in Dubai there are complexes in which you cannot rent housing through services for renting housing. And there are times when renting apartments is allowed only for a year or more. In general, the Dubai real estate market offers a wide variety of formats.
It is worth noting that many people in Dubai consider real estate not only as a purchase for themselves, for rent or resale, as in Ukraine, but also as the preservation of capital and its inheritance.
Features of taxation
The real estate investment world is focused on Dubai. Accordingly, the prices for it are higher there, but there are no taxes. “The city is officially allowed to buy residential real estate, and at the same time do not pay tax. However, you must pay a fee to the Dubai Land Department. It is 4% of the amount,” said Kristina Zvereva.
So, for example, if an apartment costs $500,000, then you need to pay a $20,000 fee to have it registered. Even if the first installment, for example, is $50,000, then you still need to immediately pay $20,000 to the state for registration.
In Dubai, taxes are calculated when buying a hotel. VAT is 5% of the amount. “If you buy a hotel room, then in addition to everything you have to pay an additional 4% VAT for registering real estate. That is, the total tax will be 9%,” shared Christina Zvereva.
When buying an apartment in Ukraine, it is necessary to pay 1% of the property value to the Pension Fund of Ukraine and 1% - the state duty.
In our country, the sale of commercial real estate (office premises, parking spaces or even apartments) is taxed at a rate of 5%. Additionally, a military tax of 1.5% is levied on income subject to personal income tax at a rate higher than zero.
On visualization: hotel complex AMA FAMILY RESORT (Bukovel, Ivano-Frankivsk region)
According to Kristina Zvereva, from the outside it may seem that it is more profitable to buy real estate in Ukraine. In Dubai, the increase in prices is the same as in our popular resort cities, but you can earn 10-70% per annum here. Also in Ukraine there are times when you deposited a small part of the money, started building a house and quickly resold it. But in Dubai, the style of real estate is a little different - the standards are higher, the quality of life is different, and accordingly, the requirements are different.
According to experts, where we can compete with Dubai it is in service. “For example, if in WOL.121 in Odessa the reception works around the clock and is always ready to help the guest, then in Dubai there is no such thing, the staff does not solve problems 24 hours a day there. Our service is at a high level,” emphasized Kristina Zvereva.
Arthur Lupashko suggests that this may be due both to the peculiarities of the mentality, and to the fact that there is already a high demand in Dubai, so providing this service is an extra effort that no one wants to make. “In Ukraine, there is a struggle for each guest, also for hotel occupancy - we want to extend it, we try to stretch the season longer,” Artur Lupashko said.
However, according to Kristina Zvereva, the dissonance is that with such a level of service in Ukraine, the price remains low. “Now people who have visited Europe and other countries of the world understand that our real estate is undervalued,” she commented.
Demand and investment climate
Now, due to the situation in the world, the demand for real estate in Dubai exceeds the supply. This can be compared with the current state of affairs in western Ukraine. People stand in line to buy an apartment. Now demand, of course, is difficult to compare with pre-war figures, since even in the western region it fell by half, however, market experts give positive development forecasts for the latter.
So, investors believe that real estate in the west of Ukraine will cost twice as much in 5 years, because this region is safer. In addition, it is important that Ukraine has received the status of a candidate for EU membership and the price of real estate in the country will certainly grow.
But there are still some risks investing in Ukraine, due to the war, and this will continue for some time. Therefore, Artur Lupashko advises diversifying your portfolio, investing both in Ukraine and in the markets of Spain, Portugal, Montenegro, Croatia and, of course, the UAE.
On visualization: apart-hotel WOL.33 by Ribas (Lviv)
For example, in Dubai, according to the portal Zoom Property Insights, in the first quarter of 2022, the real estate market recorded the best performance since 2010, with a total of 20,539 sales transactions worth about $15.1 million.
Citing official data, Zoom Property Insights claims that the secondary market dominated the real estate sector as it accounted for about 58% of total sales transactions, while the remaining 42% of sales were recorded in the primary market.
Rising demand, real estate prices and return on investment can be attributed to the influx of foreign investors in Dubai. Specifically, the Expo 2020 exhibition contributed to the visit of the country by many investors who first came to this market.
In addition, it is important that the Cabinet of Ministers of the United Arab Emirates recently announced new visas to enter the country. Experts predict that this will provide more opportunities for foreign investors and lead to an increase in investment performance in the coming quarters. So, at the moment, by investing in the UAE, you can get a green (issued for 5 years) or a golden visa (given for 10 years), which give the right to reside in the country.
Experts believe that 2022 will end for Dubai with even greater performance due to rising demand.
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