The fear of inflation is currently a big topic, especially in Europe. This is not the only reason why the desire for an inflation-proof investment is greater than ever. Investors are therefore concerned with investing in real estate as a suitable protection against inflation.
But is this type of investment Inflation-Proof?
Real estate can be a good investment for a variety of reasons. It is a tangible asset that has the potential to grow in value over time. In addition, it can also serve as protection against inflation.
However, there are some risks associated with this type of investment as well. For example, if the market takes an unforeseen downturn and values drop, then your real estate investment will likely follow suit. In addition, if you are not financially able to afford the property or pay for its upkeep when necessary, then you might lose it to foreclosure or have to sell it for less than you paid for it.
In case of an inflation, tangible assets are worth more than their monetary value and can therefore offer owner-occupied real estate protection against inflation.
What is inflation?
Inflation is a term that is used to describe the rise in prices of goods and services. It is when the cost of living increases due to the increased availability of money.
When inflation occurs, it can affect people’s spending habits and their perceptions about their own finances. Inflation can also affect people’s investments, as well as their ability to buy certain products or services.
When this happens, there will be an increase in demand for goods and services which will cause prices to rise.
Less-dependent investment opportunities are generally regarded as inflation-proof investments. These include real estate, but also other tangible assets and precious metals.
What are the risks of investing in real estate in times of inflation?
The risk of investing in real estate is that the prices may not increase as predicted. This could be due to deflation, which would mean that prices would go down again.
Then the investor would lose money if they bought at a high price and then the price goes down.
Conclusion: Real Estate – Is It Inflation-Proof?
The answer to the question is not simple.
The real estate market is a very volatile one, and it can be difficult to predict how it will do in the future. It depends on the type of property you are investing in, and whether or not you are looking at a short-term investment or long-term one.
The extent to which investing in real estate to protect against inflation is worthwhile depends on the individual case. In general, owner-occupied, well-maintained properties are more likely to be inflation-proof, but inflation security can be difficult for properties that are rented out or in need of renovation.
The extent to which inflation protection applies to individual properties also depends on the purchase price and the supply and demand on the real estate market – not only on the development of inflation.
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