In a world where change is the only unchangeable fact, real estate is just one of the many industries highly influenced by political unrest. Whether wars, uprisings or geopolitical decisions, property prices, much like finance in general, reflect those changes. In this feature, we review how political events have influenced property prices in three recently volatile cities: the UK’s London, Ukraine’s Kiev and Egypt’s Cairo.

London, UK

The effect of Brexit is still underway- unsplash.

The effect of Brexit is still underway.

Along with Germany, the United Kingdom real estate market slowed down in the first quarter of this year, which reflected on the whole European market and led to a 19% decline in real estate investments. However, the effect of Brexit, a referendum were Britain voted out of the European Union, is still underway.

“With the main political fallout and market responses behind us, the first wave of volatility and uncertainty is coming to an end,” residential researcher at real estate consultancy Jones Lang LaSalle (JLL) Adam Challis says. “It is time to look more closely at rebuilding lost momentum through the Referendum process and return to the job at hand; to grow rates of housing supply and to create a more stable and resilient industry to protect supply over the long-term.”

The supply of properties will not face changes on the short and medium term, JLL Building Consultancy professional Simon Latson says, highlighting that the cost of overseas building materials will reflect the value of the British pound against foreign currencies.  Last month, the value of the British pound against the U.S. dollar depreciated to a 31-year low, registering $1.28.

“Those with the hardest challenge could be medium size developers,” Latson continues. “Margin pressure could ratchet up as either supply of work falls away or they are forced to absorb costs to keep up in a more competitive environment.”

“While focusing on issues abroad, our political leadership must be cognizant that some of the biggest opportunities for change in the next couple of years will start at home,” Challis adds.

Despite an immediate shakeup in the consumer confidence after the Brexit vote, the retail and office market remains largely unaffected; existing building plans march on with the same pace.

Kiev, Ukraine

Kiev's real estate shows signs of revival- Wikipedia

Kiev’s real estate shows signs of revival.

Perhaps unsurprisingly, the Russian-Ukrainian conflict, which started in 2014, took a heavy toll on the latter’s property prices, registering a notable drop in prices.

“The deterioration in the economic situation has created significant uncertainty in the commercial real estate market with almost all the primary economic indicators sliding in 2014-H1 2015,” JLL analyst Mariana Supchan tells progrss via email.

“The commercial real estate market has responded to the macroeconomic decline with falling rental rates, growing vacancy rates and an almost complete absence of investment deals. Meanwhile, a slight economic recovery in H2 2015-H1 2016, less exchange rate volatility combined with an increase in activity among local companies made a positive impact on commercial real estate market in Ukraine,” she adds.

By mid-2016, the price of residential units ranged from US $24,000 for a 387.5-square-foot unfurnished apartment in outskirts of the city to a US $180,000 for a 1,292-square-foot in one of the city’s lively districts.

The retail turnover in Ukrainian capital Kiev went from having a 10% year-on-year growth to -5% between 2013 and 2014, according to JLL. In 2015, the decline continued with the retail turnover reached -17%. Between January and May 2016, the market went back to its precedent success with retail turnover growing by 11% year-on-year.

In the second quarter of this year, the prime base rent in the Kiev is the third lowest among 13 other cities in Europe, standing at US $720 per square meter per year. The list is topped by London, with over US $3,000 per square meter per year, followed by Moscow, Paris, Warsaw, Berlin and Frankfurt.

The market recently started showing signs of revival. Despite many shops being vacant and offered for rent in some old upscale neighborhoods, new shops have been opening and medium-income neighborhoods have been showing signs of encouragement.

On how things have changed, Supchan says: “The opening of a number of large shopping centers, announced for completion in 2014-2015, was postponed given the low demand for retail premises.”

“In 2015 the record low supply entered the market over the last 10 years. Meanwhile, with economic and market condition stabilization the pipeline for 2016 is expected to be the record high and total 167,000 sq m, including the biggest shopping centers: Lavina Mall SEC (127,500 sq m GLA), which represents 20% of the Kiev market stock,” she continues, stating that “considering the enormous amount of announced new supply, further market dynamics will depend upon its actual completions and the amount of pre-leased premises.”

Cairo, Egypt

Cairo's urban sprawl encroaches into the desert in the west, circulating the Great Pyramids in Giza.

Hit by two uprisings, Cairo’s real estate market remains buoyant.

Although it was not hit by war, the Middle Eastern country witnessed political fluctuations in 2011 after demonstrations called for the ousting of its former president Hosni Mubarak. Following the first uprising, several announced projects were cancelled while others faced delays.  Office rentals notably dropped to USD $26 per square foot per month. The main dilemma, however, arose when the state started demoing “evaded taxes” from local and foreign real estate companies, lowering the investor’s appetite for real estate investment.

In 2013, Egyptians took to the streets to call for the ousting of former president Mohamed Morsi. The new administration sought to amicably resolve issues with investors and re-encourage them to pump money in the market.

However, the city still fails to cater to its medium-income families, mainly offering high-end houses and villas, and low-income subsidized apartment buildings. Real estate company Colliers International said that 500,000 additional residential units need to be supplied in Greater Cairo by 2020 in order to close the gap between the supply and demand gap.

Egyptian and foreign companies still poured their investments in the country. Local real estate company seeks to deliver 1,800 units by the year’s end while Emirati Company Emaar has successfully sold some 2,150 residential units in Q1 2016, Oxford Business Group states.

Upperscale neighbors performance for Q2 of 2016 in Cairo, JLL photo

Upper-scale neighborhoods performance for Q2 of 2016 in Cairo (JLL).

So where does the market stand now? The real estate ordeal did not end with the two uprisings but rather continued with the repetitive militant bombings and struggling economy but the market continued to show unprecedented resilience.

For the timing being, the public’s view on property remain that it is the safest investment to save up money so the residential and retail prices have not declined. The currency instability, which faced several devaluations against the US dollar during the year, has proven to be a good thing for local investors.

“Local investors are now encouraged to transfer their savings from banks to investing in the residential market,” JLL says in its latest Cairo report. “At present, there is demand for off-plan sales driven by the perception that residential real estate is a safe haven.”

“The retail sector is yet to adjust to a heavy blow as retailers are facing increasing costs due to the depreciation of the EGP and their main reliance on imported goods,” the report adds. Unlike last year, the rental growth for residential and retails units has slowed down.