Russia-Ukraine crisis: Impact on UK Real Estate

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Russia-Ukraine crisis: Impact on UK Real Estate

This week, Russia launched its long-feared full-scale invasion of Ukraine after President Vladimir Putin announced a special military operation in a televised address to his citizens in the early hours of Thursday morning.

Explosions were reported soon afterwards on the outskirts of the cities of Kharkiv, Kramatorsk, Mariupol, as well as the capital Kyiv, prompting many Ukrainians to form queues at supermarkets, ATMs and petrol stations in preparation for weathering the siege or attempting to flee.

Ukraine’s airports have been shut down temporarily and secured against potential Russian aircraft landings while Russia has closed its own airspace around the border to civilian access for the next four months.

The situation is bleak for the Ukrainian population and wider global security, but looking closer to home, what impact does the crisis have on UK Real Estate?

The crisis is beginning to result in economic sanctions – Germany’s Chancellor Olaf Scholz has already halted the controversial Nord Stream 2 pipeline. Meanwhile, the UK has implemented its own economic sanctions – 5 banks have had their assets frozen, along with 3 Russian billionaires (who will also be hit with UK travel bans), and the controversial ‘golden visa’ programme has been scrapped. There is no doubt there will be further economic sanctions which will almost certainly slow economic growth.

Industry leaders are concerned the crisis could heap further pressure on the domestic residential market, which is already battling rapidly rising inflation, successive interest rate rises and the cost-of-living crisis.

The crisis and its wide-ranging economic fall-out would have a severe impact on gas prices, which in turn would keep inflation higher for longer, potentially bringing forward interest rates. Quicker interest rate rises would hasten the housing market slowdown that analysts are forecasting this year as mortgage costs would increase.

In the shorter term the biggest impact of the conflict will be a diminishing demand from Russian buyers in the UK. In 2014, with the backdrop of the Crimea crisis, the Washington Post labelled London ‘Moscow-on-Thames’ – and it is in the Capital’s wealthiest boroughs where they impact will be most noticeable.

Since 2014, Russian buyers have cooled their interest in the UK market and so the crisis is unlikely to have a significant impact on residential property values. However, the impact of economic sanctions and the slowing of growth could have drastic effects on the UK’s already fragile residential market. Of course, these effects are nothing compared with the reality Ukraine is facing – our thoughts are with the whole population as they begin to come to terms with the events of the last week.

 

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