Regarding the profitability of renting out an apartment in Kyiv, 24 Kanal discusses insights from Minfin. This information is reported by Kontrakty.UA.
How the rental market has changed
Before the full-scale invasion, investing in property for subsequent rental was highly profitable, especially in Kyiv. Rental rates increased annually, alongside the value of properties. This allowed owners to not only earn immediate income but also to capitalize on their assets.
However, everything changed after February 2022. The number of tenants significantly decreased, and rates began to decline. Many apartments remained vacant for months, requiring continuous investment from owners.
Over time, the rental market in Kyiv has somewhat stabilized. Yet, rates still remain relatively low, and there is a wide selection of available rental properties. Rates occasionally rise, but only for a short period before reverting back.
As a result, property owners may be considering what to do with their apartments – whether it’s still profitable to continue renting them out.
Is it profitable to rent out property in Kyiv now?
Capital realtor Iryna Lukhanyna commented to the publication on the current profitability of renting properties in Kyiv. She used an average two-room apartment in Troieshchyna, valued at approximately $40,000, as an example. This apartment can be rented out for about $250 on average. Therefore, the owner would earn $3,000 annually. Based on current rental rates, the payback period for such an apartment is roughly 13 years, with an annual yield of less than 10%. This is lower than before the war and is not very profitable.
If we analyze properties in the price range of $100,000 to $200,000, such an apartment can now be rented out for $700 to $800, translating to up to $9,600 annually. The payback period for such properties is 10 years, with a yield of 10% per year.
Premium apartments, costing $400,000 to $500,000 or more, are currently rented out for $2,000 to $3,000 per month. This means the owner can expect to earn $24,000 to $36,000 per year, with a payback period of 15 years.
Why some property owners decide not to rent
As noted by independent financial expert and co-owner of KIF "Capital Plaza" Pavlo Krapivin, actual prices for apartments in Kyiv have dropped by 7% to 12% this year. Regarding rental rates, they have increased by an average of 15% compared to last year, but they remain quite low. Moreover, potential tenants are continuously raising their demands.
It is not advisable to expect an increase in rental property profitability or capital appreciation in the near future.
According to Krapivin, the average effective yield for many apartments in Kyiv, considering vacancy periods and maintenance costs, without tying to the dollar, is only 4.8% to 5.2% annually.
Therefore, many owners, after analyzing the situation, prefer to leave their properties unoccupied, simply closing them off until better times, understanding that rent will not cover the depreciation of the property and investment in repairs,
– says the expert.
Additionally, specialists anticipate that the utility costs for potential renters will continue to rise. If people’s real incomes do not increase, fewer and fewer tenants will be able to afford to rent properties even at current prices.