The recession caused by industrial output decline has continued in 2013. In Q2, the GDP has contracted by 1.1% year on year. Taking to the account the seasonal factor, in Q2, the GDP shrank by 0.4% quarter on quarter. In Q1, GDP declined by 1.1% year on year. Ukraine's GDP growth in 2012 slowed to 0.2% from 5.2% in 2011. In Q1, the largest fall was seen in construction-down by 14.85% year on year. The experts forecast GDP to range from 0.5% contraction to 1% growth in 2013.

After declining by 1.8% year on year in 2012, the industrial output continued to show negative trend throughout H1. In July, the industrial production in Ukraine declined by 4.9% year on year compared to June and May, when the decline in industrial production was 5.7% and 9.3% respectively.

Because of worldwide economic slowdown and a slowdown of Ukrainian economy in particular, purchasing capacity of the population is still low. This, alongside with absence of the mortgaging and growing rates of the taxation of operations with the real estate, led to stagnation of the market. The volume of construction works in Ukraine declined by 17.7% year on year to UAH 28.2bn (USD 3.5bn) in January to July, after reduction of 12.1% year on year to UAH 62.3bn was seen in 2012. In particular, the volume of construction of buildings and structures was UAH 13.44bn (including residential buildings worth UAH 5.08bn and nonresidential buildings worth UAH 8.36bn).

In addition, the volume of construction of engineering structures and construction of utility networks was UAH 14.73bn. These types of construction work accounted for 47.7% (18% and 29.7%) and 52.3% of the total volume of construction work in the country, respectively. New construction, reconstruction, and technical upgrade work accounted for 82.3% of the total volume of the work performed in January to July, while major repairs and routine repairs accounted for 10.2% and 7.5%, respectively.

We forecast negative outlook for Ukraine’s real estate sector in general, however, the industry may begin to show some signs of recovery in H2 due to a number of factors, such as an improving regional outlook, and possible deal with Russia or the IMF as well as signing the FTA Agreement with EU.