4 min
Editorial Invest in Slovakia
What impact will the conflict have on housing prices? Can I lose my investment? How will the geopolitical crisis affect the real estate business in Slovakia?
We are intensely aware of the events caused by the conflict in Ukraine. The current situation brings with it aspects that may affect the real estate business and investments in it. We understand the need to stay informed and therefore present:
This situation makes us pause and reflect on the implications it may have for investment. These are 5 predictions that may occur.
The impact of the conflict will manifest itself in the form of an increase in the cost of building materials. The cost of transporting the raw materials will rise appreciably due to oil prices and the secondary effect will ripple through the supply chain, increasing the cost of building development projects.
Developers will be forced to increase the price of the properties they sell, which should lead to a natural decline in demand for new housing as interest rates on mortgages rise.
In Slovakia, however, there is a specific situation in the real estate business, as in recent years the supply of new apartments and real estate has not been able to sufficiently cover the demand. The shortage of new flats in Slovakia is counted in tens of thousands. Therefore, the real estate sector, together with the banks in Slovakia, is currently not worried about a significant reduction in demand for new housing, even with a further increase in input costs for their construction.
The situation of large industrial producers such as U.S. Steel Košice and Slovalco, whose pricing depends existentially on the price of input energy, is becoming a much more critical sector. The interruption or cessation of production and subsequent redundancies may result in the migration of the population from these regions to more 'balanced' regions of Slovakia, which are less dependent on industry.
The demand for housing by this group of the population may manifest itself in a positive sense as an increased interest in housing in larger Slovak cities that have better diversified employers.
How will this affect my investments through the Invest in Slovakia project: Our platform supports projects that are geographically "diverse" enough and in strong economic regions of Slovakia with low unemployment. The surroundings of the Tatra Mountains, Banská Bystrica or Bratislava are not tied to mono-production and employment in factories or large manufacturers.
Slovakia is not the primary destination for immigrant Ukrainians. Even so, after Poland and Moldova, we will experience a significant number of refugees, especially from the western parts of Ukraine.
How will this affect my investments through the Invest in Slovakia project: There are several opportunities here for the real estate development sector. In the medium term, the influx of new labour could reduce the cost of labour, which will correct the increased price of building materials.
Immigration will attract Ukrainians to the strong economic regions of Slovakia, where they will be able to find employment and support their families. Immigrants will need housing to live. And it is to these regions investinslovakia.eu intermediates its investments.
Increases in the price of raw materials and energy will make production in all sectors, whether in agriculture or industry, considerably more expensive. This will translate into an immediate increase in product prices and hence a rise in inflation, which may exceed the 10% threshold. To tame the accelerating inflation, the NBS is likely to increase interest rates on housing loans. Fewer mortgages, should equate to less demand for housing.
According to this equation, housing should become cheaper, but as we mentioned above, we are generally observing an acute shortage of housing in Slovakia. Therefore, an increase in interest rates should not lead to a fall in demand. The market will be given the opportunity to purge itself of 'speculative' purchases and purchases of investment flats that are rented out or remain empty.
How will this affect my investments through the Invest in Slovakia project: The math is simple. Liquid funds will be "eaten up" by currency depreciation. This means that loose money in bank accounts and cash is and will be losing value significantly.
In this case, it is essential not to keep funds unused, but to invest. For the more adventurous, an investment in cryptocurrencies seems appropriate. For more conservative investors, the real estate market is still an efficient and relatively safe option.
We must not forget that the real estate market has historically continued to grow despite various crises in the 20th and 21st centuries. It is unlikely to be any different now.
The economic sanctions imposed on Russia should not have an extreme impact on the euro. Trade relations with Russia are not the driving force of the common European economy. We must turn our attention in a different direction - towards the US.
The value of the euro changes relative to its parity with the US dollar. And, albeit in an unfortunate way, the war in Ukraine may help the US dollar. US equity indices will go up, helped considerably by the announced end of the Nordstream 2 project and therefore increased sales and exports of US liquid gas to replace the 'current' gas supplier, Russia.
It may seem cynical in this situation, but from the market's point of view, war conflicts are an opportunity to make money. Markets can adapt very quickly, crash, or weather the initial period of 'shock' of conflict and then grow very quickly and appreciate in value for investors.
In reality, however, no one can say for sure how the conflict with Ukraine will escalate and to what consequences it will lead. We are only basing ourselves on history and the facts that are known from previous similar events.
Although it is difficult to predict anything in the current situation, let us outline the most likely scenario.
Russia's primary objective is the neutralisation of Ukraine and the withdrawal of the eastern territories. Russia also does not have inexhaustible resources and will need to end the military operation as soon as possible. It is also not in Russia's interest to provoke a world conflict and thus initiate self-destruction.
Therefore, the conflict will bring both sides to the negotiating table, as the latest news from Kiev already suggests.
Eventually, without NATO military assistance, Ukraine will be forced to agree to this proposal and a stabilisation of the situation will be achieved. Therefore, it is most important not to panic and to approach your money with a cool head.
The recommendation reads - don't keep money in cash and accounts, as you lose a significant amount of its value due to inflation. And it is at this time that it will really be felt. Invest wisely. Whatever you decide to invest in property through investinslovakia.euor somewhere else.
We are extremely sorry that we have to deal with this issue and the potential consequences of military conflict. But this is not unusual in the history of modern economics. Paradoxically, the current conflict in Ukraine may present an opportunity for the real estate market in Slovakia. With an estimated 100,000 immigrants (which, in the words of manager profesia.sk the labour market can cope), these people will need housing and some of them will be employed in the construction sector.
It is therefore likely, also based on current demand, that the property market will continue to grow. It may experience stagnation or slowdown for some time, but not its destruction. Losing the money you invest in real estate is not an option.
Peace discussions between Russia and Ukraine may drag on for a long period. The mood between the world and Putin may be tense for years, or even until a new Russian government is elected. It is therefore important not to be pessimistic, but to continue to live an active life and to value your assets for yourself and your family.
