Nicholas Wallwork
Editor-in-Chief
Staff member
Premium Member
Will problems in the Ukraine hit emerging real estate markets?
While the European Union has had more than its fair share of worries over the last few years, the disintegration of the Ukraine could have a profound effect upon emerging real estate markets. Ukraine, like many other emerging economies, joined the European Union as a means of escaping the clutches of the former Soviet Union and moving towards democracy with a financial safeguard should the road to riches be a little bumpy.
There are growing concerns this evening that problems in the Ukraine, with Poland concerned about a potential knock-on effect, could spread across other countries in the region and have a massive negative impact upon emerging real estate market.
EU membership was supposed to bring riches
Only a few years ago, proposed membership of the European Union brought a raft of real estate speculators to countries such as the Ukraine, Romania, etc. These are countries which had been set adrift from Europe and were under the control of the former Soviet Union which had a very different view on democracy, asset ownership and international investment. Joining the European Union was for many supposed to be a new chapter in their history but with the ongoing problems in the Ukraine there are grave concerns about the impact this may have on real estate investment.
Quote from PropertyForum.com : “As we have mentioned on numerous occasions, Spanish banks have been left with an array of troubled property loans after many mortgage holders defaulted on their payments and effectively gave up their properties.”
There is no doubt that the European Union will be forced to bail out the Ukraine, there could yet be some political conflict with Russia and the battle for democracy across the Ukraine could go on for many years to come. Against this backdrop it is difficult to see why any level headed real estate investor would look to invest their cold hard cash and indeed the knock-on effect to other emerging markets may not be too far away.
Political stability and real estate markets
Political stability is the key to the development of real estate markets around the world, economic prosperity and long-term plans can only be put in place in a calm and sensible political environment. We have seen this in countries in Latin America, we have seen this in the Far East and when the likes of the Ukraine joined the European Union this was supposed to be the end of political uncertainty and conflict. However, the country seems to have taken a lurch back in time and this weakness and confusion within the Ukraine seems to have alerted the Russian authorities to the potential to reclaim their former partner.
The European Union will bail out the country with billions of euros of development funding, we may yet see troops flown in to bring calm but there are grave concerns that the issue of political instability could take years to resolve. While nowhere near the same type of situation as Iraq and other similar countries, there are elements of developments in the Ukraine which bear some resemblance to political instability in other areas of the world.
Conclusion
Entry to the European Union was seen by many developing countries such as the Ukraine as a road to riches, as a means of installing political stability and bringing to an end connections with the former Soviet Union. In this environment we saw an array of real estate investors, both long-term and speculative, descend upon the country looking to plunder its rich real estate market. There is no doubt that those looking towards emerging real estate markets within the European Union will now be gravely concerned at developments in the Ukraine and the knock-on effect could be catastrophic for many countries and many investors.
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