BusinessDay

How real estate remains the hedge against inflation

Over the past couple of months, inflation has been a key ‘buzzword’ in global markets as it continues to rise underpinned by factors such as the pandemic impact, and we have all seen the terrible effect of the outbreak on businesses and several industries, including the changes that came with it in terms of the transfer of wealth and opportunities.

As the world recovers from the effects of COVID-19, the global economy has experienced a strong rebound. This has been accompanied by a sharp rise in prices and wages, raising concerns that we are entering a new period marked by higher inflation and interest rates. This has brought real estate to the forefront, as it is frequently argued that “property is a good hedge against inflation.”

During these times, owning a home will never be thought of as just a place to “lay your head” anymore for a lot of people. More people are beginning to see how real estate strengthens economic development, increases wealth status, and, more importantly, is a necessity to live a satisfying life. So, for me, real estate gives me the opportunity to offer Nigerians safety, happiness, comfort and freedom.

The market has never been more desperate for affordable housing, caused by the impact that the pandemic has had on how people of different races now see the world and the uncertainties of life. Generally, real estate assets are considered as ‘safe haven’ investments given that they have little correlation to stocks and bonds, hence less reactive to market forces.

Rising demographics are currently supporting Africa’s real estate industry. The demand for housing is anticipated to increase as populations increase and cities rapidly urbanise. In light of this, many Nigerians who had previously avoided real estate investing have come to realize that it is the ideal type of investment. Real estate experts view the change as a positive step forward since real assets, like real estate, keep their worth better than paper assets, which are quickly depreciated by inflation.

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Real estate is the ideal investment since it has the potential for capital growth and keeps its core value even when inflation is high. The two main real estate tenets are buying low and selling high. Other elements include mortgage payments and rental market income flow.

You might be able to increase the rent on your investment each year to keep up with inflation if your rental property makes a profit.

Although it is only natural for there to be inflation, real estate investors don’t need to be concerned about it. It will, in my opinion, be advantageous to investors. To be clear, property owners and real estate investors are very different. Although not all property owners are real estate investors if you have a rental property that is bringing in a profit, that asset qualifies as one and you can be regarded as a real estate investor.

Property appreciation and cash flow are the results when you invest in genuine real estate property investment genuine in the sense that your property (asset) is working for you. This is great news for investors as real estate surpasses other asset classes. But beware too!