MBS Blog

The last week here in Ukraine has been interesting. Just when you think you have seen or heard it all, you get surprised. Well…the surprise for us here “on the ground” are the depths people will go to convince themselves that things are OK when they know they are not.

I am referring-indirectly-to the real estate market here in Ukraine. While there are new market realities, it seems that the average Ukrainian, and landlords in particular, have not gotten the message. Many still believe that the global economic crisis is happening somewhere else to someone else. Of course, the standard line in Russia and Ukraine is that it is America’s fault.

Even as their friends are fired from jobs, or their own pay is cut or their salary unpaid for the last 3 months, there is a stubborn streak within the Ukrainian soul that does not allow it to acknowledge the obvious. Of course, there is a global economic crisis out there and everyone, everywhere is affected. Wealth, businesses and jobs are disappearing.

As we have noted on this site for the last month, the value of the Ukrainian currency is evaporating quicker than a drop of water in the desert. You would think that would change the perspective of people here.  

When I went to look at a new apartment for myself over the last week, few of the landlords I met with considered negotiating the rents down a bit from pre-crisis bubble prices…even when foreign currency is offered as the form of payment. You would think they would look at the value of the hryvnia shrinking every day and be happy to take a bit less, knowing that they are being paid in a currency that still has some value (for how long Mr. Obama and Mr. Bernanke?).

Of course, the Ukrainian Government is playing the “if you can’t beat them, confuse them” strategy with the currency. A late week intervention by the Government pushed the value of the hryvnia  up quite a bit. Naturally, people took that as a sign that things weren’t that bad after all (those Americans are just spreading gloom and doom!!) so they stopped talking real estate price adjustments, and went shopping. Reports from friends in four Ukrainian cities suggest that the crowded stores I was seeing here in Odessa were no aberration.

Well…the news this morning was that the Prime Minister (the super wealthy blonde with the braid) had accused the President (the formerly handsome one of Orange Revolution fame) of playing currency games so that his cronies could make some money on some contrarian bets. Of course, as soon as the games end the hyrvnia will go back to its original trajectory (it has dropped over 50% since May 2008). Is the IMF watching?

Meanwhile, I am out of the market until after the holidays. I figure once the holidays end, the “hangover” is going to be just the time to talk with people about real estate. In fact, many of businessmen we know are headed here from Europe and the USA, but with investment real estate plans on their minds.

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