Sat, 21 May 2022

The US housing market is not the only one that has been booming. Housing in Canada is more expensive than ever, as is the case in the UK, Australia, and many other developed countries. This has been driven by a number of factors, including pandemic-related supply issues and low-interest rates. The question asked in every one of these markets has been whether this is a bubble that will pop.

In the midst of this, the Russian invasion into Ukraine has thrown everything into doubt. Sanctions have led prices to rise, especially in countries where Russian energy imports have been halted. Furthermore, instability brought on by war anywhere in the world can cool a property market, as people hold off on making big financial decisions.

As of yet, the global property market has not shown any signs of decline due to the invasion of Ukraine. People are still buying homes at high prices in most countries. Interest rates are still fairly low, making big mortgages affordable. With the ability to purchase a homeowners insurance policy online, the admin surrounding homeownership is also easier than ever. It helps that the cost of insurance is still reasonable, even with high housing values.

But will the invasion of Ukraine begin to hit property markets around the world? Here are some of the pertinent factors.

A Prolonged War

The fact that the war is still going on is, in many ways, a good thing. Putin expected Ukraine to fall without much resistance and hoped to complete the invasion in a couple of weeks. That has not come about, and there is still intense fighting with Russia finding it difficult to gain ground.

However, a prolonged war also means that its impact lasts longer. Sanctions on Russia around the world will keep the cost of living high, making it more difficult for people to afford homes. A drop in demand will cause housing values to come down.

The instability also sticks around. Many people are terrified that a third world war will break out, and that means they are feeling insecure in their own countries. Instability is not good for the housing market, as investing in such a big asset is a long-term decision. People will wait and see what happens before purchasing their homes.

International Friction

But what about people who buy property abroad? Will they go ahead with their purchases? If not, why not?

This all depends. As mentioned, people are wary of this war involving more countries. Countries that people fear will get involved will see less investment from home buyers. No one wants to buy a home abroad that they are subsequently unable to reach or that gets destroyed in a future war.

There is also the matter of politics. Most developed countries have reacted to Russia's invasion of Ukraine in the same way - outright condemnation and sanctions. But this is not the case everywhere. Some governments support Russia's actions. Other governments just are not ready to condemn Russia because of what it will mean for trade deals or out of fear of reprisals.

This may be understandable to some, but others will not want to invest in countries they see as holding the 'wrong' values. They may be concerned about these countries becoming more like Russia, with totalitarian leaders. Alternatively, they may have a moral issue with bringing money into a country that sides with Russia.

This could lead to housing values dropping in certain countries. Of course, this goes both ways. There are many people who support Russia in this war who will not want to invest in countries which are currently sanctioning Russia. A cooldown in property markets everywhere is therefore possible.

As of yet, Russia's invasion of Ukraine has not impacted property markets in developed nations. However, the longer the war continues, the more likely we are to see the aftershocks. With the potential for housing markets around the world to pop for a range of other reasons, the war between Russia and Ukraine certainly cannot help.

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