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The economy of residential construction: state, problems and prospects of development

Author(s) Andriushchenko A. M.,, Candidate of Ekonomik Sciences, ,
Dovhan O. V. , , ,
Category Economics
year 2019 issue Випуск 94 Частина 2
pages 32-45 index UDK 332.8(477)
DOI 10.31395/2415-8240-2019-94-2-32-45 (Link)
Abstract The problem of insufficient rates of construction is relevant for the Ukrainian economy. For example, in 2017 10.2 million m2 of residential space or 0.24 m2 per person were constructed in Ukraine, which is tenfold less than in the USA. Insufficient rates of residential construction hinder economic growth and don’t allow alleviating one of the acutest social problems – housing affordability. The shortage in the housing market causes extremely high purchase and rent prices. This slows down workforce migration on the territory of the country, hinders full employment and reduces the effectiveness of the operation of the national labor market. From the end of the transformation crisis in the 90s of the XX century up to the present moment the economy of residential construction experienced two stages of development. The first stage lasted since early 2000 to the middle of 2008. This period can be called the period of rapid and uncontrolled growth. This period had a contradictory nature. On the one hand, there were favorable macroeconomic conditions for residential construction. However, beginning from the third quarter of 2008 the latent crisis factors, enhanced by the world’s financial crisis, revealed themselves to the full extent and resulted in the collapse of the economy of residential construction. The analysis of the reasons and consequences of the financial crisis of 2008 – 2009 enables us to understand that the factors of growth in the branch in 2000 – 2008 had a short-term nature and they cannot be considered as a positive experience for the future. Conclusions: 1) Insufficient rates of residential construction slow down economic growth and don’t allow to alleviate one of the acutest social problems, which is low housing affordability; 2) Increase in the volumes of residential construction in 2000 – 2008 was based on the factors that had a short-term nature and was interrupted by the financial crisis; 3) Renewal of the volumes of residential construction in 2009 – 2017 is hindered by the structural problems: monopolies domination at the housing market, high inflation rate, reduction of investments in the branch, etc.; 4) There is a considerable interregional differentiation of the volumes and rates of residential production; 5) Two of the most essential factors influencing interregional differentiation of the volumes and rates of residential construction are available income of population and the number of marriages. 6) Family policy has a great potential in influencing the volumes and rates of residential construction
Key words residential construction, recession, inflation, "building pyramids", interest rate, monopolies, investments, available income, number of marriages, family policy
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