How the War on Ukraine Could Have a Major Impact on UK’s Property Price

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There are very few conflicts that have happened in the past, excluding the First World War and the Second World War, that have had a direct impact on the UK economy. However, the war between Russia and Ukraine has certainly impacted the UK economy as a whole. Gas prices have gone up, fuel prices have increased, energy prices are on the rise and this is just the beginning.

According to the experts, the rate of inflation has risen to 5.5 percent in the UK, which is the first time the inflation rate has reached this peak since the early 90s. However, financial experts believe that the inflation rate could reach a whopping 8.2 percent in April, as an impact of various factors, including the Ukraine and Russia war.

Without a doubt, the war on Ukraine will have a major impact on UK property prices; both directly and indirectly. So, if you’ve been thinking about buying a house or selling a property anytime soon, you might want to put it off for a little while. Let’s discuss the potential impact of the Russia and Ukraine war on the UK and how this war can impact property prices in the UK.

 

How the War on Ukraine Could Have a Major Impact on UK's Property Price

 

Increase in gas prices

Residents of the UK already pay hefty utility bills due to the high price of energy and fuel. However, with the Russia and Ukraine war, and Russia being an important supplier of gas to the UK, it is expected that the prices of gas, energy, and fuel will start to rise. As of now, the UK only imports 7 percent of its total gas requirements from Russia.

The main import of gas comes from Norway; the UK important almost one-third of its total gas requirements from Norway. However, if Russia decides to ban gas imports, then the UK will become even more dependent on Norway which will certainly drive up gas prices. Now, this is a very important issue as most properties in the UK are highly dependent on gas.

As per the data from English Housing Survey, around 68 percent of all the properties in the UK have central gas heating. As the prices of gas go up, the utility bills will go up. As the energy bills continue to rise, the cost of living will continue to rise. Couple a higher cost of living with the rising rate of inflation, and the outcome will be higher property prices.

 

How the War on Ukraine Could Have a Major Impact on UK's Property Price

 

Increase in interest rates and mortgage payments

The inflation in the UK has risen by 5.5 percent in January, and it is expected to rise further in April. Some economists believe that the rate of inflation can actually rise by a whopping 10 percent in major European countries as well as in the UK.

Essentially, this sudden spike in the rate of inflation is directly linked to the rising cost of energy and the increasing cost of food. If the prices continue to rise while the rate of inflation continues to rise, then the Bank of England will be forced to increase the rate of interest. As a result, banks and lenders will further increase their rate of interest which will then impact mortgages and loans.

While most homeowners and property investors believe that the increase in the rate of interest will be minimal, there will still be a number of households that will be impacted by this increase. For instance, in the UK itself, at least 2.2 million homeowners have taken out a mortgage that is linked to the base interest rate of the Bank of England.

That means, at least 2.2 million mortgages will see a change in interest rates and the repayment amount will increase. This will put additional pressure on households as they are already dealing with higher energy bills and a rising rate of inflation. As the mortgage rate will increase, so will the cost of buying a home, thus increasing the average price of a property in the UK, once again.

 

How the War on Ukraine Could Have a Major Impact on UK's Property Price

Increase in the value of metals

Russia is considered to be one of the largest suppliers of metals in the world. A leading exporter of metals, Russia exports everything, from copper wires to aluminum cans, from lithium-ion batteries to palladium, and even nickel. So, how does this impact property prices? Well, the price of even the most basic metal will rise if Russia decides to ban their exports to the UK.

Alternatively, Russia could also choose to increase the price of exports or levy heavy taxes which will eventually lead to a higher price of metals. Say, you’re looking to construct a home in the UK. Even something as simple as copper wires for electrical wiring will cost a whole lot more, which in turn will add to the overall cost of construction.

If you are thinking of renovating your home, you might require basic metals such as copper or aluminum, which will be much for expensive. If Russia does decide to completely stop the supply of metals, then finding alternate sources will be a major issue for the UK. Meanwhile, there will be a major supply problem that will make the existing metals very precious – thus leading to a rise in prices. From basic soda cans to electronics, from cars to residential properties, the price of everything will start to rise due to inflationary pressure.

Essentially, the Russia and Ukraine war is a part of a complex number of factors that will not only impact the UK property market but the UK economy as a whole. With the rising prices of gas, fuel, energy, and food, it is just a matter of time before the UK economy undergoes a major rise in the rate of inflation, which in turn will directly impact the cost of living. In order to combat this, the Bank of England will continue to increase interest rates which will then impact mortgages and loans. 

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