Two years ago the “orange revolution” was billed as the overthrow of Ukraine's corrupt elite, but in the capital's real estate sector at least, the population is still struggling in the shadow of a well-connected clique.

A closely knit group of developers with links to local politicians has helped fuel a boom that has seen apartment prices in Kiev quadruple in five years, freezing out anyone making anywhere near the average wage, analysts said.

Meanwhile, a wealthy elite has been snapping up properties to expand their wealth while making ownership an impossible dream for the city's aspiring middle class.

“There are two Ukraines,” said Olena Pnyovska, 28, a manager at a Western hotel who still lives with her parents because she can not afford anything else. “In one, everyone owns five apartments. In the other, you can't even dream of buying one.”

Five years ago $70,000 (54,000 euros) would have bought you a new two-room apartment in the handsome historical centre. The same apartment today would cost upwards of $280,000 (216,000 euros), realtors said.
Now $70,000 will only buy you a small one-room flat in a Soviet-era tower block at the edge of town.

“Prices have risen fantastically, prices are very, very high,” said Philip Hudson, principal partner of the Jones East 8 real estate agency.

The wealthy local elite, who have little time for banks or stocks, are the main force pushing prices skywards, he said.
“You have a keen local demand, due to the lack of alternative investment vehicles, but a choke on supply due to bureaucracy and corruption delaying the permission process” for new buildings, he said.

Thus to afford one of the cheapest apartments in Kiev without struggling, a family would need to earn roughly $1,400 (1,080 euros) per month, said Yevhenia Akhtyrko, an economist at the International Center for Policy Studies in Kiev.
Both partners would need to make double the average wage of $340 to afford that she said, meaning few can realistically think of buying.

“On the one hand [the boom in prices] represents the creation of a middle class... but it stops them becoming middle class because they have to spend all of their money on accommodation,” she said.

One factor in the price hike has been the dependence of developers on the support of individual politicians, said Alexei Kondenko, a realtor charged with analyzing the market for the Association of Realtors of Ukraine.
He said the market saw stagnation in 2005 and early 2006 as political uncertainty reigned ahead of parliamentary elections in spring 2006, reducing supply and putting pressure on prices.

“Without a clear favorite and rules of the game for the near future it was difficult to start new projects,” he said.
The cozy relationship between a small band of developers in Kiev means prices are not coming down any time soon, said Ruslan Oleksenko, managing partner of DEOL Partners real estate firm.

“Leading residential developers keep this area of the market tightly controlled, therefore the market will remain sustainable. Any so-called collapse of the market and fall in prices would be unfavorable for them,” he said.

The source: TurkishDailyNews