Expressed opinions Entrepreneur Contributors are their own.
If you don’t live under a rock, you see that Russia has invaded Ukraine. More than two million Ukrainians have been forced to flee partially since the beginning of the conflict, and we are seeing dramatic changes in European real estate. Let’s dive deeper into how this market is being used as an engine for social good as well as help and loss in the scene of the first major international war of the decade.
The population in the neighboring countries is skyrocketing
Prior to the invasion, Ukraine had a population of only 40 million in the north. As of March 31, only more than four million people had fled the country (about 10% of the population within a month), and that number was sure to rise before the conflict ended. This represents the most dramatic change in population in Europe since World War II. The three countries receiving the largest number of refugees are:
1. Slovakia, with a population of 2.1 million, has adopted 140,000 Ukrainians (representing an increase of about 7% of the population).
2. Poland has a population of 37 million, which has accepted 1.2 million refugees (an increase of 3%).
3. The current population of Hungary is 9.7 million, which is 193,000 (an increase of 2%).
This puts a huge strain on the housing market between these countries, both long and short term. Thousands of buildings have already been demolished and no end in sight is yet to be seen, with many of these families unable to return to Ukraine.
Sadly, increased demand and limited supply mean rapid housing costs. In the Slovak capital Bratislava, the average price of a house has already risen by more than 10% by 2021 alone. While profitable for homeowners, we see a 17% price increase there by the end of this year, and that’s already bad news for cash-strapped refugees. Fortunately, though, financial aid is coming from the West and the EU has gone to grant Ukrainian citizenship to Ukrainian citizens for the next three years so that they can safely stabilize their families.
Related: What you can do to help Ukraine: A list of top-rated relief agencies and additional resources
Tech companies as a vehicle for social good
A fancy form of digital-age support emerged in March when thousands of people booked Airbnbs in Ukraine, but had no desire to be among them. More than 60,000 nights were booked on March 2nd and 3rd alone, and the grant amounts to a few million dollars in financial aid that goes directly to Ukrainian families and is sure to increase. These bookings come from everyone from the average citizen to corporate CEOs like Mary Jane’s Yoni Hagos.
It beautifully demonstrates that capitalist innovations can play an important role when people think outside the box and use technological tools with empathy. Airbnb, for its part, waived all these booking fees for the duration of the conflict. While this may be a press play for the company as much as it is the right thing to do, it still means enough support for people on the verge of receiving it.
This unique financial aid scenario helps emphasize two additional things: the many and varied ways that homeownership can be used to generate income in both security and volatility, and landlords should allow tenants to sub-lease. Over the past decade, Airbnb, Vrbo and other platforms have dramatically shifted the rental market, and landlords have pushed back by creating leases that prevent tenants from engaging in short-term sub-leases. In my opinion, Ukrainian landlords who forbid tenants to list an extra room or full accommodation in this way have committed crimes against their people.
Related: What does the invasion of Ukraine really mean for business?
Both the global supply chain problem and inflation will slow down the reconstruction and make it more expensive.
Housing costs in Europe have already risen by almost 10% by 2020 (according to Statistar), replacing buildings destroyed by a continuous epidemic-related supply chain bottleneck will take significantly longer and cost much more – already in a congested world economy. That said, there will be a decade-long construction boom for any European nation around Ukraine, and perhaps even longer in Ukraine.
It will probably be an engine for post-war job growth in Ukraine, and even for war-torn countries with high refugee numbers. There will be an increase in multi-family housing as well as small house construction (since the square footage to be built in Europe is limited compared to the American market). Hopefully, both during and after these turbulent times, the result will be a lot of jobs, a ray of sunshine for the European economy.
Related: The Ukraine crisis is hitting home for Silicon Valley, and Tech Exx is not wasting time: ‘they are thinking like a startup, allowing them to move faster’
The bottom line is that any event that affects people will affect the real estate market. Everyone needs a roof over their head, and it doesn’t change just because of a collision. Supply and demand can change dramatically at any time, and government and non-government organizations are similarly forced to adapt to new situations. Hopefully, the common good of humanity will prevail and the public and private sectors will work together to create innovative and affordable solutions to the most significant and complex changes in the European real estate market within seventy years.