Serhii Kucher: “Economic shock resulting from the quarantine may be stronger than consequences of the pandemic” 

Serhii Kucher: “Economic shock resulting from the quarantine may be stronger than consequences of the pandemic” 

KievVlast, political  digest

April 2020

KV has found out from Serhii Kucher, CEO of Ukrainian-German Construction Company “Edelburg Development”, who will survive, who will continue to purchase and, most importantly, to what extent the quarantine will affect the country's economy and the housing market. 


 
KV:  What is currently happening at your construction sites, sales centers – not just here in Ukraine, but also in Europe where you are also implementing several projects? 
 
Serhii Kucher: We have not put construction works in Ukraine on hold, we are keeping the pace. Yes, this is not easy due to a number of technical challenges. For example, a shift team was supposed to arrive to the facility, but they were not able to do this due to the implemented quarantine measures. We had to look for an alternative. But so far we have been able to solve these issues without deviating from the schedule.  
Our office is attended only by those staff members whose work cannot be done in a remote mode, but there are just a few. Everybody else, like other Ukrainians, works remotely. 
 
Certainly, sales have dropped significantly, especially in the segment we specialize in, that is business class. There is no previous dynamic behavior. But there remain targeted calls, previews, people come to see the facilities. 
Overall, the market of the capital has seen 3-5 times decrease in sales. But no large Ukrainian developers has put construction works on hold. 
 
But in Austria, where we are also implementing some projects, all the construction works have been stopped cold. This was regulated by the municipality and the construction police: it is expressly prohibited to perform any works at construction sites. Thus, sales were also prohibited.  
 
KV: Strict measures! What are Europeans predicting – what will happen to the market after the quarantine? 
 
Serhii Kucher: The most interesting fact is that European analysts consider that after the quarantine, the price for real estate in the EU countries will shoot up. Now, I cannot be sure about their logic, but as a rule, they do not make mistakes.  
 
KV: Many developers slow down the pace of their construction works, some may not survive – now, basically, the market players are rather pessimistic.  
 
Serhii Kucher: The slowdown in construction in Ukraine is mainly due to the fear of developers resulting from the drop in sales. Moreover, in our country, the construction works carried out by the majority of developers were covered by the receipts from sales, without any financial leverage. But as soon as the quarantine period finishes and the pandemic peak in Ukraine downtrends, sales will resume and the construction works will get back on track very quickly.
  
And the most important fact is that all major developers have made the decision to continue construction in order to maintain the industry. It is quite essential for the market: if at least one large company puts an end to everything, the market will be seized with panic and will face a total collapse. 
 
KV: What are prospects for the business class apartments in this period of crisis? 
 
Serhii Kucher: I will probably sound cynical, but frankly speaking, purchasers of business class apartments have always had money, and they will have it even after the quarantine, after the period of economic ups and downs. Our purchaser will remain on the market. Moreover, we have different sales dynamics. In order to ensure the successful fulfillment of a project, the economy class needs to sell 5 apartments daily. But it is absolutely sufficient for the business class to sell 5 apartments a month. I am confident that we will manage to sell our 10 apartments in two projects as we previously did. 
  
KV: Who will leave the housing market?
 
Serhii Kuher: Fingers of one hand will be enough to count the developers of our market with the effective business strategy who have taken care of a financial leverage. All the others are “vacuum cleaners” who live off sales to investors. They are the ones who will have serious problems. 
If the economic downturn continues, small companies with several projects will simply “fail”. 
 
KV: Everyone is talking about the negative effects of the quarantine for the housing market. Judging from your experience, who will benefit from the crisis? 
 
Serhii Kucher: If the market is left by unstable players with inconsistent business strategies, the scope of offer shrinks, then it is an advantage for the market as a whole, for system companies with an adjusted business strategy. Why? Because then purchasers will see who really sells only for money and does not care about the quality of projects and reliability of a company, and who creates worthy projects and guarantees their legality and reliability to investors. The market will clear up.
  
KV: According to the market players, after the quarantine our housing market may be “restocked” with new uncompleted construction projects. 
 
Serhii Kucher:
First of all, in order to solve the problem of uncompleted construction projects the state should intervene, ensure legal response to the issue. Guarantees of project completion by the developer should be provided. Currently, the community of developers is resisting this approach. But, for example, I personally do not understand why many companies resist it. Yes, in terms of the number of facilities, the market will decrease, but it will have a positive impact on the price of a “square meter” – it will increase, which is only an advantage for businesses.   
 

01.04.2020