How is Real Estate Affected by High-Inflation Markets this 2022.docx
Any real estate investment can succeed or fail during periods of high-inflation markets.
The future of our country’s economy has recently been the subject of much discussion and
speculative reporting in the press. Some experts claim that we are witnessing tremendous
inflation, while others claim that we are facing deflation or stagflation.
Although no one can predict the future with certainty, informed real estate investors can. It’s a
good idea to know how real estate inflation operates, how a high-inflation market may affect
your assets or debt, and the most effective ways to protect against inflation. Regardless of the
state of the economy at the time, the COVID-19 epidemic has impacted every economy. Real
estate investors can take steps to protect themselves against inflation, so their real estate portfolio
does well in these circumstances.
HIGH-INFLATION MARKETS AND
REAL ESTATE: HOW THEY IMPACT
In essence, it is Naira’s declining purchasing power over time. According to an average inflation
rate of 10%, the washing machine you purchased last year for 100,000 will likely cost you an
additional 110,000 today.
When you sum up the expenditures of all your purchases, such as food, gas, phone bills, and
other expenses, that might not seem like much. You will have a much higher number and higher
cost for goods over a year.
It might have an even greater effect if a nation experiences higher than normal inflation. For
instance, inflation in Nigeria recently hovered about 35%, making the identical washing machine
worth $100,000 worth $135,000 more.
It’s crucial to understand that inflation is different from appreciation.
An increase in a property’s worth over time is an appreciation rate for real estate. Value does not
rise relative to the currency with appreciation. It rises following demand. Both situations—where
a home appreciates more than the rate of inflation—are possible. In an economy with inflation, it
How is Real Estate Affected by Inflation?
1. Rising rental property rates are possibly favorable during periods of high inflation. It may be
challenging to obtain a loan in an economy with significant inflation. Because buyers have
less purchasing power when interest rates are high, many people continue to rent.
2. Rents rise due to increased demand, which is fantastic for landlords.
3. Housing prices typically increase in an inflationary economy, even if appreciation is a unique
and separate market analysis.
4. People need to have roofs over their heads regardless of the value of their currency. Hence real
estate has intrinsic value. You’ll probably have a line out the door if you can provide
advantageous terms for a private buy.
5. The increasing cost of borrowing debt is one of the potential drawbacks for a real estate
investor in an inflationary environment.
6. To prevent shorting the bank or a developer. They will offer fewer loans or shorter payment
schedules and demand higher interest rates.
7. Another drawback is rising building material costs for new dwellings. The new building can
be a highly challenging investment during an inflationary period due to the high cost of
borrowing and the increased construction expense.
8. Travel is typically swiftly removed from the budget when times are tough. Retirement
communities, touristic areas, and vacation rentals could not perform as well as other real estate
SMART Investing During High-Inflation Markets
Real estate investing is usually greatly influenced by the market and the property’s location.
However, in a high-inflation economy, the following real estate investments perform better than
• Demand and returns for rental property, including residential, commercial, multi-unit, and
single-family residences, are likely stronger than usual.
Banks may unload greater than usual notes, reduce competition, and drive down prices.
Real estate investment trusts (REITs) will follow the market’s needs. An increase in value
similar to that of tangible real estate can be an excellent method to spread your investment
over many different assets.
It will be crucial to have money on hand so that you may seize an opportunity when it presents
itself. Depending on the type of investment, inflation can have either a beneficial or negative
effect on real estate investments. The particular market, among other things.
As with any wise investment, research and speak with your Realtor to find the best opportunities
in your area.