Houses for rent, the effects of the war in Ukraine on prices

Houses for rent. If anything has been clarified since the very first hours of the war between Russia and Ukraine, it is the fear of a strong economic impact on our country. As we know, Italy is in fact heavily dependent on Russia for gas distribution, but not only that: the war is already leading to strong increases in raw materials, first of all wheat, and consumer goods. But what is also frightening is the impact of the war in Ukraine on mortgages and rents, given rising interest rates.

War in Ukraine and the real estate market: what is happening
The real estate market is suffering severely from the dynamics of the war, as evidenced by the figures giving 360 homes for rent, and from the first days of the conflict the increases in mortgage and rent-cutting prices were clearly visible.
The fixed interest rate has reached levels not observed since 2019, exceeding the historical 1%, leading to greater uncertainties and mistrust throughout the buying and selling process.
For example, a fixed mortgage loan of 126 thousand euros at 70%, which can be repaid in a period of twenty-five years, can now use, at best, an APR (Annual Effective Global Interest Rate) of 1.44%.
In practice, this means that the annual increases for buyers’ pockets will be more than noticeable.
Low mortgage loan, less than 100 thousand euros, if until recently it could be extinguished in absolute calm, today it is estimated that it could lead to significant increases, which easily reach 7,000 € per year based on the fixed interest rate adopted.
But not only mortgages, but also the rental sector is suffering a lot: even there, prices are rising along with consumer goods, with increases of up to 10%.
This prevents not only the tenants, but also the landlords, who are faced with increasing taxes to pay, with the result that the whole system seems to be faltering.
Even the most reasonable solution in these cases, namely the use of loans, is no longer so immediate: interest rates are also higher here, not to mention the fact that loans are more difficult to obtain.

Mortgages and rents are skyrocketing: what awaits us?
At the moment the real estate market seems to be stagnant: increases have been observed but no significant increases are expected in the near future.
But if the level becomes structured, then resorting to the intervention of the ECB (European Central Bank) would be the only solution to curb rising interest rates.
The focus of the problem is certainly represented by market expectations that are closely linked to the conflict and its duration. Forecasts are not rosy: if the war in Ukraine continues for a long time, interest rates could rise to 55 basis points between the end of 2022 and the first months of 2023, increasing the cost of money and leading to even stronger effects.
In this context, floating rate mortgages are very risky, as they could see the installments skyrocket over the months. Not to mention substitution mortgages: if the current interest rate was much higher than the previous one, mortgage substitution could be very difficult.
We are encouraged to know, however, that floating rate mortgages are not very popular and that even substitution is now a practice in pure disuse.
The European Central Bank seems to be aiming to stabilize interest rates at 2% right now, and that is precisely why many real estate experts are encouraging Italians to buy a home in this transitional period, as they almost certainly will. much higher percentages await us.
Another option could be to buy a house and then sell it later, taking advantage of lucrative fixed interest rates, but these are practices that can not be solved immediately: you have to have the money to invest and then find good buyers, as well as some familiarity with the buying and selling processes.
With inflation expected to reach 5% or even 7% soon, rents, especially to cover higher and higher bills, could rise as high as 12%, representing a very dangerous market solution.
So the investment logic of the industry must change: inflation, high interest rates, uncertainty, these elements seem to characterize the future of our homes.
In general, a strong period of precariousness awaits us in the real estate market, as the increased risk raises the cost of money, leading to strong consequences.

All data provided by Caseinaffitto360.

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