Why Investing in Property is a Good Idea During Periods of Inflation

Inflation is affecting economies all over the world, with the US, Europe, and the UK all badly affected by record inflation rates in recent months. This inflation could continue over the next few months, and no one knows how bad it could get. Most analysts are predicting a recession or similar economic downturn, and this could potentially last years before the markets recover. At this time, many people are wondering how to best protect themselves, their savings, and their investments.

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Real estate has historically shown to be a reliable investment during inflation. While the stock market has seen major losses recently, property prices are expected to continue to rise. As a result, many people will look to move their investments across to the real estate market. However, there are risks associated with property investing, whether during inflation or at any other time. You can study property development and investment courses to learn more about the market and how you can benefit from it.

What is Inflation?

The rate at which the prices of goods and services in an economy are growing is known as inflation. The effects of inflation, which raises the cost of necessities like food, can be detrimental to society, making it harder for people to buy the things they need.

Almost any good or service can experience inflation, including necessities like shelter, food, healthcare, and utilities. It affects other goods such as cars, jewellery, technology and services too. Once inflation is pervasive across an economy, both consumers and companies share a common fear about the possibility of future inflation, causing markets to suffer.

Inflation is tracked by central banks in industrialised countries, particularly the Federal Reserve in the United States. If prices increase too quickly or by too much, the Fed has a target of around 2% and will introduce measures to affect inflation if it rises above this. Currently, the US is experiencing rates above 8%, while some countries in Europe have seen rates climb above 10% for the first time.

How Investing in Property Can be a Hedge Against Inflation

While inflation can lead to a recession as company shares drop due to investor and consumer doubts, real estate prices are less likely to be affected. There will always be a demand for property, including residential and commercial buildings, as well as land. However, it is often more complicated than simply buying shares on the stock market.

When investing in property, it’s important to take into account the need for liquidity and tax strategy. It’s also fair to say that managing real estate can be far more intensive than managing a stock portfolio. Either a property manager is used, or time considerations will have to be made. Despite this, property is still a favourable place to hold your money while prices are rising.

One advantage of real estate investing over investing in stocks is that the work you put in can improve the value of your investment. Flipping property is a popular way to increase the returns made on property, buying real estate in need of repair or making improvements that then increase its value. When renting out property, it’s also possible to manage the price you rent for, therefore having more control over your returns.

If you don’t have the liquidity to buy your own property, it’s also possible to invest in property funds. These funds, such as Real Estate Investment Trusts (REITs), are listed on the stock market and traded just like stocks and shares. However, the price is based on the average price of the property owned by the fund. When you invest, you’re buying a share of the property. This is a great way to potentially beat inflation while keeping your money invested.