What Impact Will the Russia-ukraine Crisis Have on the Real Estate Market?

Apart from the Physical and Structural destruction, The Russia- Ukraine crisis may affect the Global Real estate Field. The experts argue that at this rate, and if the world powers were to impose sanctions on Russia. It would significantly impact the Global Economy and that includes the Real estate sector too.

If this leaves you wondering what went down, or why it escalated to war so quickly, you’re not alone. Many people had no idea what was going on until it hit their news feeds and social media.

How Did the Russia Ukraine Crisis Start in the First Place?

The crisis in Crimea began on February 27, 2014, when pro-Russian citizens took over key facilities and buildings in Crimea. They refused to recognize Ukrainian authority and instead acknowledged Russia’s leadership. Russian troops occupied military bases across Crimea, including airports and government buildings.

On March 6, a referendum was held by pro-Russian citizens of Crimea asking whether they wanted to rejoin Russia or become an independent state. The final tally showed 96 percent of voters supported rejoining Russia. In response, the U.S., European Union (EU), and other countries all announced sanctions against members of Vladimir Putin’s administration as well as limited their foreign aid to Russia with sanctions on Russian oil companies that have close ties with leaders in Moscow.

Russia argued that it had every right to protect ethnic Russians living within its borders. Moreover, Russia said it had no desire to threaten or destabilize Ukraine. In September 2014, Russia annexed Crimea, a peninsula on Ukraine’s southern coast. In March, pro-Russian separatists in Eastern Ukraine seized several towns from Ukrainian control.

The Ukrainian war continued until late 2015 when peace talks between Putin and Poroshenko finally began to make progress toward solving these long standing issues. Ukraine has been an independent country since the end of the Cold War, but it doesn’t have full control over its territory.

Russian separatists hold parts of the East and South, while Crimea was annexed by the Russian Federation in 2014. There’s no doubt that Putin supports these groups—and he probably encouraged them to start their protests in Kyiv—but whether he gave direct orders to intervene is unclear.

Many speculate that the Ukraine crisis would have never happened if not for US meddling.

Current Situation of the Ukraine Crisis

On the 24th of February, Russia had its military troops invade Ukraine. The Russian government decided to annex Crimea, but the Ukrainian forces resisted the Russian military troops.

Where Does the Ukrainian War Leave the Global Economy?

In just a matter of days, The Global economy has not been looking good and there is an unexpected, powerful financial sanction breaking down the Russian economy, which on top of that is threatening to fuel worldwide inflation.

There was a trading loss of up to 4% in all the sectoral indices, even in metal stocks trading and telecom, IT, realty, and auto.

Banks are trying to figure out how much they are going to lose if the Russian economy collapses.

The prices of Oil, natural gas, and other staples have spiked up. And this could just be the beginning because if strict measures are taken against Russia, it could mean an inexorable increase in these resources.
Russia and Ukraine, being the biggest wheat and corn producer respectively, there would be food inflation.

How Will the Russia Ukraine Crisis Impact the Real Estate Sector?

The Ukrainian crisis has also impacted the real estate market in Ukraine. The war has caused many people to leave their homes and move elsewhere, which means that there are more properties available for sale than there were before. This is some news for those who are looking to buy property in Ukraine as it means that they will be able to get a better deal on their purchase.

The Luxury housing sector will be the most disrupted segment as the wealthier home buyers use financial resources such as stocks and cryptocurrency to make their purchases. And these financial resources have been hit badly since the crisis began.
There is a high construction cost which is painful for buyers, renters, and home builders. Because there is a potential of a full-blown war in Europe, the matters could even get worse. Home heating costs will be affected, more global supply-chain disruptions will be caused, which will be felt to a large degree in the home building industry. This in turn can lead to even higher construction costs.
Mark Zandi, the chief economist at Moody’s Analytics, said in an interview with realtor.com; “It’s all bad for the economy and housing. It’s just a matter of how bad,” “There’s many different ways in which Russia’s actions will hurt housing.”
Benson Udenta, a realtor told this reporter at the weekend; “For the Nigerian real estate sector, this is a grim reality given that the sector imports over 70 percent of its building materials, especially finishing materials, from outside,”. He also says that in case of a full-blown conflict, the transportation cost will spike up, indirectly pushing up the prices of raw materials and increasing the cost of construction. The Nigerian developers are already complaining under the weight of increasing construction costs because of high import duties and the devaluation of the Naira which could lead to a high exchange rate of the naira to a dollar. “The Ukraine crisis can only worsen their lot,” Udenta noted.
India is yet another country whose real estate sector is struggling with the Russia Ukraine crisis. Harshvardhan Patodia, president of the Confederation of Real Estate Developers’ Associations of India (CREDAI) says that the Indian cement makers are likely to feel the impact considering the pressures of an upsurge in the prices of raw material and energy.
Harshvardhan said “Eventually, the impact will trickle down into the real estate industry as well. While the industry has been resilient, the rise in prices of raw materials by 20-30 percent has forced developers to marginally increase the prices of projects,”
Agreeing with his statement, The economists said “If the Ukraine crisis deepens, then there may be a negative impact on the overall economy and the real estate sector, which is currently witnessing a growth trajectory,” They explained further, “With oil prices crossing the $100 a barrel mark, there may be an impact on the overall economy in terms of cost of manufacturing and supply chain. The price of factor inputs for real estate is likely to go up as a result and real estate developers, who are already operating on thin margins, may not have any option but to push up prices (supply-side). On the demand side, due to inflationary pressure on the Indian economy, the RBI may have to change its stance, which may in the future lead to an increase in the policy rate (repo rate) as well. If this happens, there is a likelihood of mortgage rates inching up,”

Considering The situation at present, if things keep going on this way, it will not augur well for the Real sector, let alone any sector.

In Summary

After the Pandemic, when we were just about to breathe a sigh of relief, Russia decides to invade Ukraine, causing chaos in the world again. We are on the verge of a war, which could bring destruction to every sector including Real Estate.

What are we to expect next? A zombie attack, an Alien invasion perhaps? Anyhow, This Russia Ukraine has got the Realtors pacing up and down as the impact would be felt on both sides of the demand and supply of Real estate.