Impacts of Warfare: Exploring the Impact on Real Estate Markets
Our Thoughts on the War and Real Estate
As headlines worldwide fill with news of a potential attack between Iran & Israel, concerns about the next global conflict grow. What impact might a war in 2024 have on real estate?
For sure it won’t be as financially forgiving as the pandemic.
Wars do not provide rent relief, stimulus checks or halt mortgage payments. Even the Homeowners serving in the Battlefield will likely have to face their monthly payments.
Thankfully, in order to motivate people to serve, we have systems setup through government interventions like tax increases or war bonds that could assist the honorable men and women, at least temporarily. These benefits are thanks to the Servicemembers Civil Relief Act which provides certain protections against default and foreclosures.
So what changes can we expect if a war breaks out?
For the most accurate answer it is best we look at how Battles before us affected both hyper and national markets in order to precisely point out the fears [and some benefits] that can be realized during and post war.
The Historical Impact of War on Real Estate
https://en.wikipedia.org/wiki/World_War_I
Warfare Tactics and Their Economic Consequences
Historically, warfare tactics have evolved from ground infantry engagements, like those seen in World War I and the Civil War, to more complex strategies involving propaganda and proxy wars during the Cold War and Vietnam War. These changes have influenced the economic outcomes, including real estate markets.
Immediate and Long-Term Effects
The immediate aftermath of major attacks, such as the 9/11 terrorist events, disrupted local economies—evident through increased office vacancy rates and insurance premiums in Manhattan. Over time, these factors contributed to reduced property values and hindered sales in high-profile areas.
Rising Energy Costs and Construction
War often leads to higher energy prices, significantly impacting the construction industry. Historical data from World Wars I and II shows a notable decrease in housing starts during these periods.
Economic Shifts and Resource Allocation
Wars necessitate a shift from civilian to military production, diverting resources and affecting the broader economy. For instance, the stock market plummeted in 1942 following military defeats, reflecting investor uncertainty. Post-World War II, the U.S. faced a housing shortage as returning veterans sought to start families, highlighting the demand sometimes seen as a long-term impact from war on the real estate market.
What Gains Value During Wars?
During wars, essential items like food and warm clothing often become more valuable than luxury goods. Historical anecdotes reveal that everyday necessities became critical barter items during prolonged conflicts, emphasizing the importance of practical resources over traditional investments.
Our Final Thoughts
Estimating the impact of war on real estate is challenging due to the investment’s illiquidity. While direct effects might be minimal, the broader economic instability can influence investor confidence + market dynamics, potentially reducing competition for real estate assets that could become in high demand [assuming a brighter future]. In the event we become part of a government restructuring like Venezuela then we all lose our homes since “Land is for People not for Profit”
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