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UncategorizedHow the Ukraine conflict could affect UK property prices?

How the Ukraine conflict could affect UK property prices?

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So far, apart from the First World War and the Second World War, there has been no major war or event that has impacted the UK economy. However, the war between Russia and Ukraine could certainly have an impact on the UK economy, as well as the UK property market. In 2021, the prices of property in the UK were rising steadfast, with the average price of property reaching a record high eight different times in the year itself. In fact, the average price of the property during the Covid-19 era, from November 2020 to November 2021, had led to a 10 per cent increase, with the average price of property reaching £271,000. So, if you’ve been wondering about the price of your property, you can always find out what your home is worth on Leaders.

Photo by Tierra Mallorca on Unsplash

According to most property experts, the war between Russia and Ukraine could have a devastating impact on the UK property market. Let’s keep in mind, the increasing rate of inflation, the rising property prices coupled with the imbalance between buyer demand and housing supply has already taken their toll on the UK economy as well as the property market. How could the war on Ukraine further affect property prices in the UK?

The impact of rising gas prices

The rate of inflation in the UK has gone up to 5.5 per cent, which is considered pretty high. As the rate of inflation continues to rise, with some experts predicting that inflation could rise as high as 8 per cent, the cost of living will continue to rise. Right now, the prices of fuel and gas are high. With Russia being a global supplier of gas and energy, the prices of fuel, gas and energy have gone up even further, in the UK and in most of Europe. As the prices of gas and energy continue to rise, the cost of living will thus rise, due to higher utility bills and hefty energy bills. This will squeeze household income which in turn will lead to a reduction in buyer demand, as people will not be able to save as much of their income as they did before.

The impact of expensive imports

Russia is a big exporter of metals, including aluminium and copper. Aluminium is used in creating our basic day to day items, such as soda cans. Even a small rise in the price of aluminium could lead to a massive increase in the price of such day to day items. Also, copper is a very important metal that is used in electrical wiring – a necessity for commercial and residential properties. As the cost of copper goes up, the cost of construction will increase. Thus the price of new-builds and new residential properties will be even higher than before. Essentially, the cost of basic things such as petrol, diesel, oil, nickel, copper, aluminium and even wood will start to rise. This means an increase in the cost of transportation of materials, an increase in the cost of construction materials and a definite increase in the cost of construction. At the end of the day, the hefty selling price on new builds and new homes will show the long-lasting impact of the war.

The impact of the rising rate of inflation

In order to combat the rising rate of inflation, the Bank of England has increased the rates of interest. In accordance, banks and lenders have also increased their interest rates which have thus made mortgages more expensive. As the interest rate continues to rise to catch up with the base rate, mortgage payments can become very expensive in the future. Many lenders and banks will probably remove their lucrative deals and offer in the short term, thus reducing the number of potential buyers who will even be able to afford such a hefty mortgage. Again, as the rate of interest rises, the demand will eventually slow down. Since the property market is very sentiment-driven, there might be a slight decrease in the market activity, however, most experts believe this will be short-lived. In essence, it depends on the length of the war between Russia and Ukraine that will determine the long-term impact on the UK property market. In short, most property experts and economic experts believe that the UK property market will continue to see an upward trend for the term ahead.

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