Investment analysis by Ruslan Averin — originally published at averin.com.
Two parts, two defensible answers. Part 1 showed a Kyiv one-bedroom netting 4.35% against 5.51% for investment grade corporate credit. Part 2 showed a credit market paying 0.81% for corporate risk, a subsidised mortgage at 3–7%, and a tax-free exit after three years.
Both are true. They are answers to different questions, and the whole dispute is caused by asking the wrong one — which asset is better instead of what is this capital for.
The numbers on one page
| Kyiv one-bedroom, $68,500 | Investment grade USD credit | Hryvnia OVDP | |
|---|---|---|---|
| Gross yield | 7.36% | 5.51% | 15.18–16.47% |
| Net of tax and costs | 4.35% | ~5.5% before residence tax | 15.18–16.47%, no tax |
| Currency of income | Dollar-linked | Dollar | Hryvnia |
| Liquidity | Months | One day | One day |
| Leverage available | 3–7% via єОселя | None | None |
| Can the issuer rewrite terms? | No | Only in default | Yes — 2024 precedent |
| Work required | Continuous | None | None |
| Exit tax | 0% after 3 years, first sale | Taxed | Taxed on gain |
The break-even that settles it
The apartment nets 4.35%. Investment grade pays 5.51%. The gap is 1.16% a year, and that is precisely the appreciation the apartment must deliver, every year, simply to draw level.
Over the last twelve months it delivered about 5% — it beat the bond, and comfortably. But the rent that funds the coupon side of the comparison fell 12% in dollars over the same period. An asset whose price rises while its income falls is being bought for capital gain, not for yield, and it should be assessed as a capital gain bet, honestly and out loud.
So the real question is not 4.35% against 5.51%. It is: does the buyer believe Kyiv residential prices rise more than 1.16% a year, on average, over the holding period? Anyone who does should buy the apartment. Anyone who does not is buying a bond with a plumbing obligation attached.
Three questions that decide it, in order
1. Horizon. Entry costs on a Kyiv apartment run to roughly 4% and exit costs to another 3–5% between the agent and the negotiation. Under five years, that 7–9% round trip eats the entire yield advantage before the argument begins. Under five years the answer is fixed income; the property comparison does not even need to be run.
2. Leverage. Whether the buyer qualifies for єОselya at 3% or 7% changes the answer more than any yield in this series. With subsidised financing, the tenant amortises someone else's principal and inflation erodes the debt — that is a materially different asset from the same apartment bought for cash. Without it, the apartment is an unlevered 4.35%, and the bond wins on the arithmetic.
3. Currency of liabilities. Someone who spends hryvnia and buys a dollar coupon is running a currency mismatch and calling it prudence. Someone who spends dollars and holds hryvnia OVDP at 16.47% is being paid handsomely to run the same risk in reverse. Match income to spending first, then optimise the yield.
Where the government bond and the corporate bond diverge
The series has treated bonds as one asset. They are two.
Government paper — Ukrainian OVDP at 15.18–16.47% tax-free, or US Treasuries at 4.34–5.25% — is a position on the state's willingness and ability to pay. In Ukraine that comes with 122% debt-to-GDP and a 2024 restructuring in living memory; in the US it comes with duration and an FOMC meeting on 15–16 September where the market prices roughly a 58% chance of a hike.
Corporate paper — investment grade at 5.51%, high yield at 7.15%, Ukrainian hryvnia issuers up to 18% — pays a spread of 0.81% and 2.65% respectively for taking default risk on top of that. Those spreads are historically thin. Investment grade at 81 basis points is compensation for credit risk that barely exists in the price, which is a reason to own the government bond and skip the corporate one, not a reason to reach for high yield.
The single cleanest instrument in this entire comparison, for a Ukrainian resident, remains hryvnia OVDP: the highest nominal yield on the page, no income tax, no military levy, daily liquidity — carrying, in exchange, exactly one risk that the apartment does not have, and it is the issuer.
The allocation this argument actually supports
The framing that survives all three parts is not a choice between two assets, it is an ordering:
- Liquidity and short horizons — under five years, any currency: bonds, and preferably government ones. There is no version of this comparison where an apartment wins over three years.
- Hryvnia income and hryvnia spending — OVDP first, before deposits and before corporate issuers. Tax-free 15–16.5% is the best risk-adjusted line available domestically, and the risk is the sovereign, which the buyer already carries by living there.
- Dollar income, long horizon, no leverage available — investment grade credit or Treasuries; take the government yield and decline to be paid 0.81% for corporate risk.
- Access to єОselya at 3–7%, a horizon over seven years, and a tolerance for the work — the apartment, bought below the district median, renovated, and held past the three-year mark for the 0% exit.
- Cash purchase at the median price, held passively, no renovation, no leverage — the worst version of both ideas. It carries property risk, property illiquidity and property work in exchange for a yield lower than a Treasury bill's.
The verdict
The landlord and the bondholder rarely disagree about facts. They disagree because the landlord quotes 7.36% and the bondholder quotes 5.51%, and only one of those numbers is net.
The honest comparison is 4.35% against 5.51%, and it says: without leverage, without a renovation plan and without a seven-year horizon, the coupon wins. With any two of the three, the apartment wins, and it wins on the parts of the return that a bond structurally cannot offer — a resetting income, an asset that cannot be restructured, and an exit that goes untaxed.
What no version of the arithmetic supports is the default behaviour: buying at the median for cash because property feels safer than paper. In September 2026 it yields less, moves slower, and demands more.
More market analysis by Ruslan Averin at averin.com.
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