Housing prices in Ukraine may increase in the first half of 2025 due to an increase in the cost of construction and a small tax burden. Economy and middle-class real estate will be most affected.
This was reported by developers interviewed by Interfax-Ukraine. Starting from December 1, 2024, the military tax rate for real estate transactions has increased from 1.5% to 5%.
This means that almost all real estate transactions, especially those involving objects less than three years old or new buildings, are now subject to higher taxes. “The increase in the military tax will lead to an increase in the costs of processing transactions, which, in turn, will affect the prices per square meter. It may also lead to a reduction in the number of transactions on the market due to a decrease in purchasing power,” explains Iryna Mykhalyova, a representative of one of the construction companies.
According to developers, the increase in the tax burden will negatively affect not only the final cost of housing, but also sales volumes, especially in the economy and middle class segments, where demand is most sensitive to price changes. Additional pressure on the cost of housing is created by increased construction costs. According to developers, during 2024, the cost of construction work increased significantly due to inflation, currency fluctuations, rising prices for building materials, logistical difficulties and labor shortages.
Experts predict that this pressure will only intensify in 2025. In particular, the cost of purchasing building materials and logistics services will increase.
“The first to rise will be prices for building materials and contracting services. The increase will be gradual, but noticeable during the first six months of 2025,” notes Oleksiy Koval, head of one of the construction projects.
Additional costs are also caused by the shortage of qualified workers, such as crane operators, electricians and plumbers. In order to retain specialists, companies are forced to increase their salaries.
Another factor affecting the market situation is demand. On the one hand, low demand restrains a sharp increase in prices, on the other hand, tax innovations may further reduce the activity of buyers.
The companies also note that the increase in military duty will negatively affect professional investors in real estate. This creates a risk of a decrease in the number of transactions, which may cause some stagnation in the market.
“The increase in taxes will hit those who are engaged in professional investment in housing, and this is one of the important segments of the market. As a result, demand may decrease even more,” emphasizes a representative of one of the development companies.
Some experts believe that the increase in taxes may lead to the growth of the shadow sector in the real estate market. Some developers may try to avoid formalizing transactions or minimize their tax obligations. However, this practice has its risks for both buyers and developers themselves.
Given all the above factors, experts predict that housing prices will grow gradually but steadily in 2025. The main reasons for this will be the increase in construction costs, the increase in the tax burden and the shortage of qualified labor.
At the same time, if demand remains low, the pace of price increases may be moderate, and the market will remain in a state of uncertainty. The changes will primarily affect the economy and middle segments, where price sensitivity is the greatest.
