How inflation affects your real estate investment

News
 - 
07 April 2022
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Ever heard of the word ‘inflation’? News about this topic has been making headlines for the past few days, and it’s for the worst reasons.

Recently, the Philippine Statistics Authority reported a one percent increase in the inflation rate comparing the previous and the current month.

“The country’s headline inflation accelerated to 4.0 percent in March 2022, from 3.0 percent in February 2022,” the PSA stated.

According to the report, inflation was affected by several factors, including increments in the costs of food, water, electricity, gas, fuels, transport, and housing.

Meanwhile, in terms of the non-commodities, this phenomenon has positive effects on tangible assets like investments.

When does inflation occur?

Inflation occurs when there’s a decline in the purchasing power of a given currency and there’s an increase in the general prices of goods and services. 

As a currency loses its value, people also lose their purchasing power which impacts the general cost of living of the common public, often resulting in a decline in the country’s economic growth.

The average inflation rate in the Philippines has been between three to six percent over the years.

To beat inflation, one must look for investments that appreciate over time and give higher returns with minimal risks. One perfect example is real estate.

How real estate beats inflation

Several tangible assets thrive in inflationary environments, one of which is real estate. 

Inflation causes damage to fixed-rate debt as it devalues interest rates. Once the inflation rate exceeds the interest rate, loss of money is highly plausible, so choosing a suitable investment that will give you higher returns with lower risks should be your top choice to beat inflation.

Inflation has many real estate-related effects, including higher rental income and appreciation of the property’s general value.

As the prices of housing increase, real estate prices follow suit.

According to a study conducted by Stanford University, history has proven that real estate investment is a haven during inflation. For example, during the inflation in the 1970s, it was found that housing prices appreciated relative to the size of the economy.

Inflation pushes property prices making real estate an excellent way to hedge inflation. As a result, rental income would be more stable and highly profitable, and the debts of your assets would be devalued as inflation reduces the value of money owed in the future.

With fewer real estate projects rising due to labor, material, and construction costs, there will be a high demand for properties, leading to increased real estate prices.

If you are looking for a sign to invest in real estate, this is it. 

You may look into Transit-Oriented Developments located just a stone’s throw from vital touchpoints in the metro, like Empire East’s The Paddington Place near the MRT-3 Shaw Boulevard Station in Mandaluyong.

This modern cosmopolitan enclave promises a strong leasing potential and an attractive asset that you can resell at a higher value upon completion.

Another property you may consider is Empire East’s newest township in the making– the first elevated city in the country, the Empire East Highland City.

Equipped with a high-class lifestyle mall, sprawling green open park, and an exclusive sports club, Empire East Highland City is the next big thing in the east for investors and aspiring ones alike.

This condo for sale in Pasig-Cainta is also accessible to the newly-opened LRT-2 Marikina Station and the upcoming MRT-4 Cainta-Junction Station, connecting future residents to the much anticipated Metro Manila Subway.

Both developments’ value will continue to appreciate over the years, allowing you to beat the impending effects of inflation in the country.

Now, you own an Executive Studio Unit at Empire East Highland City for as low as P6,000* monthly.

Visit www.empire-east.com/promos or follow Empire East on Facebook, Instagram, and Youtube for more information about this offer.

 

Sources:

Philippine Statistics Authority

Stessa.com

Investopedia

Forbes

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