Investing in real estate in war time: surviving in war-torn Ukraine and other parts of the world
Geopolitical tensions have recently increased in the world. Military conflicts have a negative impact on the global economy and investment markets. Nevertheless, some experts see the crisis as an opportunity for development and wealth creation. In this article, we will take a closer look at the peculiarities of investing in real estate during wars
The highest fortunes are earned precisely in the period of crises. Is it so?
In recent years, geopolitical tension and the number of military conflicts have been increasing in the world - Russia's invasion of Ukraine, Israel's war with Hamas, prospects for a confrontation between China and the United States. These events have a negative impact on the global economy and investment markets.
At the same time, many experts consider the crisis to be the best period for development and wealth growth. Is it so? We will talk about the peculiarities of investing in real estate during the war.
Investing in real estate is one of the most common ways to save money, receive passive income, and increase capital. Buying objects, renting out premises for living or commercial activities has been a profitable and stable form of doing business for many years.
Historical experience: how did World War II affect the global real estate market?
Not much research has been done on the effects of the war on real estate.
It is known that during the Second World War, the stock market in February 1942 fell to a historic low. Given that real estate prices are largely dependent on stock market activity, the sector was experiencing a significant crisis during this period. At that time, it was impossible to sell a New York hotel even for a price equal to the size of its annual profit, and the rent in Wall Street office buildings was only a dollar per square meter.
In World War II, approximately 70-85 million people died and 70% of Europe's infrastructure was destroyed. Despite the devastating effects, demand for real estate, especially residential real estate, increased sharply after the end of the conflict as soldiers returning from war sought to set up homes and raise families.
The value of objects gradually increased along with the demand for them. Many families lived in temporary housing for years. This issue was solved by building affordable residential areas in the suburbs, which was initiated by the famous American developer William Levitt. In the late 1940s, Levitt was building one house in the suburbs every 16 minutes.
The impact of the war in Syria on the country's real estate market
Despite the difficult security situation and economic instability, in recent years Syrian expatriates have begun to actively buy real estate in regime-controlled areas.
The real estate market in the country is booming. Lands are especially popular. People are buying land near the city center of Aleppo for the possible future construction of "villas" in the region.
After all, given the experience of the Second World War, compared to real estate, land is a much better investment. Buildings can be expropriated, converted, devalued or destroyed, and getting them back or compensated after hostilities end can be problematic at best. On the other hand, the underlying land has always been there and will continue to be there, even in spite of past hostilities.
Peculiarities of the Ukrainian real estate market during the war
In the cities of Ukraine, the rapid construction of high-rise buildings, rows of townhouses and single-family houses has resumed in recent months. The main reason is the increase in demand for real estate, because the population in the regions located in the rear is increasing due to the relocation of Ukrainians from the destroyed cities and suburbs of Kharkiv, Mariupol, Kherson, etc.
In addition, experts predict that after the war, Kyiv and other large Ukrainian cities will be crowded with foreign companies and their employees, who will also need housing and office space.
At the same time, current real estate prices are the lowest they have ever been, and Ukraine will definitely win this war in the near future. Therefore, from a business point of view, right now is an ideal time to invest in Ukrainian real estate. Given the lack of bank financing, cash investors get additional benefits.
Useful expert advice
Anton Taranenko is the founder and CEO of Visit Ukraine and Visit World online platforms and the owner of the international development company AntaGroup:
Investing in real estate during a war is extremely difficult and risky. Military conflict has a serious impact on the economy and the investment climate. Of course, for investors, this means unpredictability and high risks.
War usually leads to a decline in economic growth, business interruption, and deterioration of financial conditions. This affects the real estate market, reducing demand and investment returns.
Military conflict in any country is accompanied by political instability and uncertainty. Changes in the political situation and the legal environment may affect property rights, legislation, and the security of investments. Hostilities may cause destruction and damage to infrastructure, including real estate.
Investments may be destroyed or damaged, resulting in significant capital losses. But, if you look at the situation from the other side, it is during the crisis that countries have the opportunity to purchase real estate at reasonable prices and in promising locations. After the dark times are over, you will have the opportunity to receive good dividends, because your real estate will grow in value dramatically.
Unfortunately, Ukraine is currently at war, but the real estate market has already begun to recover. According to a study by the URE Club (Ukrainian Real Estate Club), about 65% of development companies plan to start working on new projects in Ukraine in the near future, and more than 21% are going to do so partially.
So, the industry is gradually recovering, despite everything. Demand for real estate is partially returning due to the factor of internal migration: people who left the frontline cities are trying to live a full life in the capital and other safe regions of the country. They choose apartments with the highest degree of readiness for real estate investments.
At present, investors in Ukraine are in high demand for real estate that is far from military installations or critical infrastructure. Given the realities, a strong and safe building construction, availability of a shelter and parking are mandatory criteria when choosing a property.
Should you buy real estate during a war?
Taking into account the experience of countries experiencing military conflicts, it can be concluded that preserving one's assets during a crisis is a difficult task: currency devaluation quickly eats up savings, banks are unreliable during a period of deep economic crisis and martial law, buying shares of companies of the country that being in the stage of conflict is risky, and opening your own business in the current conditions requires considerable courage. Therefore, investing in real estate during the war is the best option for those who do not dare to risk their own funds and are looking for an opportunity to save financial assets from inflation.
Also, during the war, housing prices drop significantly, because people are ready to sell their premises for any price they can get if they plan to go abroad. The second factor that contributes to the decrease in the value of real estate is the decrease in demand.
Considering the future prospects, the acquisition of real estate during the war can bring a good profit. However, such an investment also has significant risks, in particular, there are no guarantees regarding a possible increase in the value of the object. The second factor is the possible destruction of real estate. Usually, insurance does not cover military action, so if a house is rendered uninhabitable after a bombing, it can be difficult to get any compensation.
Rules for buying real estate in a country in a state of war or military conflict
Buying property abroad can be a complicated process, especially in a country at war. Therefore, here are some important tips for future investors:
1. Carefully choose the location of housing
Location is critical when buying real estate in a country experiencing military conflict. Do your research and choose a safe and stable location. The war may have affected some regions of the country more than others, so it is imperative to understand the situation on the ground before making any investment decisions.
2. Hire a local real estate agent
It is recommended that you hire a local real estate agent who is familiar with the local market and can help you navigate the legal and bureaucratic procedures. An expert can also provide valuable information about current market conditions and the best areas to invest.
3. Will study local legislation
Foreigners wishing to purchase real estate abroad should be aware of the legal requirements and procedures. It is important to work with a lawyer who knows the local laws and can help you navigate the legal process.
4. Be prepared for bureaucracy
Buying and selling real estate can be a complicated bureaucratic process, so it's important to be prepared for delays.
5. Consider the risks
Investing in real estate in a wartime country carries significant risks, and it's important to be aware of them. War significantly affects the economy, so the value of real estate can fluctuate significantly. Before investing, it is important to conduct a thorough risk assessment.
It is also necessary to study the real estate and the history of its ownership. This can help you avoid fraud or ownership disputes.
Despite the difficulties, buying and selling real estate in a wartime state can create unique opportunities for foreign investors. With the right research, preparation and guidance, investors can navigate a complex market and make successful investments.
How to preserve your assets during war?
To deal with the instability caused by regional conflicts, it is imperative for real estate professionals to adopt strategic approaches. Diversifying investments across different industry sectors can help reduce risks associated with political unrest or economic downturns.
Look for more stable markets to preserve your wealth. Currently, for example, Indonesia, particularly the island of Bali, is a promising destination. According to experts, the amount of net profit from the sale of apartments purchased in Bali during the construction phase will be 44% in three years. When renting real estate, you can return the investment in 5-6 years. However, the investor should carefully choose a developer, it is better if he has international work experience. It is also important to pay attention to the type of real estate and the location. A profitable investment option in Bali is the purchase of premium apartments ANTA Residence Canggu from the reliable international developer ANTA Group.
Turkey also has an attractive real estate market where you can get a high return on investment. Most investors prefer to buy business-class apartments in Turkey, because such an investment is a good option, both for living and for investments. Read more about the advantages of investing in real estate in Turkey here.
In addition to diversification strategies, it is necessary to be aware of geopolitical events. Keeping track of the news and understanding its potential implications allows professionals working in the real estate sector to make informed decisions.
Although it is difficult to predict how long-lasting the effects of crises and military confrontations will be, one thing remains clear: the ability to adapt is key to doing business in difficult times.
Also, given the growing crisis in the world and the possible start of World War III, it's worth having a safe place to wait until it's all over.
Daria Rogova, Head of Insurance at Visit World
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More articles on the topic:
Hotel business in Bali: one of the best hospitality industries.
Reasons for choosing global investment: the power of international investment.
Global Investment Opportunities: Where to Look for the Best Deals?
Investing abroad: how to invest in foreign markets.
Comparison of investment instruments: pros and cons of investing in real estate.
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