Effect Of The War In Ukraine On Property In SA

 Russia launched its invasion of Ukraine on 24 February 2022. One motive for the conflict, whether true or not, has been Russia’s unhappiness with the possibility of Ukraine joining NATO (North Atlantic Treaty Organization.

At this stage, it is far too early and the future too uncertain to know the economic and property market impact in South Africa. But, either way, there will not be favourable outcomes on a global scale.

In South Africa, there are a few undeniable points to consider, such as:

  • The conflict will undoubtedly add to global inflationary pressures and energy prices across the board. There is no escaping this. 
  • Due to potential sanctions and boycotts against Russia, an essential oil and gas producer, there will be massive energy supply disruptions. We have already seen energy prices rising significantly. Brent Crude price levels are already approximately 124% above the 2020 level. In South Africa, petrol prices have already been skyrocketing, and it has not stopped.
  •  Ukraine is a crucial agriculture producer (maize, wheat, soybean and sunflower oil), with prices significantly up from a year ago. These prices will continue to escalate, and the knock-on effects will continue.

  • The increase in inflation will directly impact the South African interest rates. We are already poised for more interest rates hikes as we come out of the COVID doldrums, but we are not ready for too much at once.
  • South Africa’s economic situation is fragile at best. The Rand weakness and higher global inflation will directly impact consumer goods prices. It will cost a lot more to fill a trolley of food at the supermarket. 
  • The Ukraine war impact remains highly uncertain, depending on how long it continues, its final outcome result, and what happens in terms of global sanctions, boycotts and reaction to them. 
  • The direct impact to SA is definitely the inflationary impact, which heightens the risk of increased interest rates. So stand by and get ready. There could be quite a ride ahead of us. 

by Marsha Haupt