Is it safe to invest in real estate during inflation times?
Here are some points to keep in mind when making this decision:
Pros:
• Real estate is often seen as a hedge against inflation, as property values can rise with inflation, allowing investors to maintain their purchasing power.
• Real estate is not as susceptible to short-term volatility as the stock market.
• Rental income can also increase with inflation, as landlords can adjust rents to match rising costs of living.
• If you obtain a mortgage to finance the purchase of a property, inflation can help you pay off the mortgage faster, as the value of the debt decreases over time.
Cons:
• Inflation can lead to higher interest rates, which can make it more expensive to obtain financing for a real estate purchase.
• Rising inflation can also lead to higher construction costs and other expenses associated with property ownership, which can cut into profits.
• Inflation can also cause instability in the economy, leading to uncertainty about the future value of real estate assets.
Ultimately, whether it is safe to invest in real estate during inflationary times depends on several factors, including the state of the economy, the local real estate market, and your personal financial situation. It may be helpful to consult with a financial advisor or real estate expert to determine the best course of action for your specific circumstances.
Evana Valenzuela, AB life investor
