Protecting your investments in real estate property, residential property or your property values is a hedge to your well-earned money, and also protecting your real estate property is diversifying your investment leading to good profit and high return. But in any real estate investment business, there are ups and downs and inflation underway, which will greatly affect your investment in real estate property. In this article let us learn about inflation and its effect on your real estate investment and how you can protect your investment when there is rising in inflation.
What is Inflation?
These past months there are relative increases in products and services across our country, and the domino effect of rising prices led to some difficult periods for consumers. So, what is Inflation? Inflation or expansion, or escalation in simple definition terms, is the rate of price increase of goods, products, and services and an increase in the standard of living in the community. According to the Philippine Statistic Authority, a high inflation rate was recorded at 8.7 percent last January and decreased slowly last February to 8.6 percent.
Why there is inflation?
To further understand how you can protect your real estate investment from rising inflation let us understand why inflation is happening or why there is sudden inflation. The reason why there is inflation that crowds rising prices to our goods and services is simply because of INCREASE and DECREASE or HIGH and LOW of predictable and unpredictable outcomes. Here are some of the reasons and scenarios.
- Increase or fewer in the supply of money, decrease or low of the value of money.
- There is a high demand for goods and services or a low supply of goods or services.
- A rising price in production cost or low-income input of business.
- A high increase in interest rates and low product exports.
What are the Effects of Inflation on Real Estate Investment
Does Real Estate investing offer protection from inflation? In what sense does real estate investment or residential properties draw its boundary to inflation? Well, the Philippine Real Estate and its rising comeback after the pandemic and the current inflation rise in our country, REAL ESTATE rises and retains as the boundary of economic progress, has its value, and is still a business trail of earnings. Knowing that Real Estate is a tangible asset and has its property values, worth and standard status, REAL ESTATE is considered an inflation cushion in our economy.
As the rising prices and inflation, let’s discuss the effects of inflation on Real Estate Investments:
1. Real Estate investments are robust to inflation.
Real estate investments are a stable way to generate income, real estate investment is a good inflation hedge when there is inflation or rising prices, real estate increases its property value, and the seller can sell the property with high markups.
2. Real Estate investment has proven its ability statistically.
Real Estate Investment and investors have a significant effect on business ventures in the Economy. In fact, according to STATISTICA, there is a total real estate generation of 529 billion pesos gross value in the year 2021 and approximately 536.4 billion pesos as of 2022.
3. Inflation in Real Estate Market executes good Adjustments.
For rental properties, long-term leases give the owners the advantage of accustoming price increases depending on their market locations and proximities.
4. An opportunity for income growth or power of an investment.
Even in inflation, there is an opportunity for growth of your real estate investment, or property investment, thus in the year 2022, with a growth of 7.6% GDP growth, there is a strong demand for real estate across Metro Manila particularly for retail spaces and mall tenancy and occupancy. To add, real estate is a tangible asset that knowingly is an income-generating asset that can constantly provide you an income even in an open-ended inflation.
5. High Value of Labor Services and High Capital Value in Construction.
Due to rising prices of goods and services when there is inflation, there will be an increased price or rising value of materials to be used in building houses or property or materials to be used in renovating a home as well, followed by labor cost since there will be an increase in the standard of living in inflation context.
6. To what is Affordable.
To what are affordable means that the consumers may look to different alternatives in inflation rising value to ease the high prices like affordable houses and lot for properties and finding other products that their pocket can afford.
How to protect your Real Investment from Inflation?
1. Knowing your Market Real Estate Ownership and Segmentation.
Stepping or outsourcing your market into smaller groups, your target markets are labeled or divided by density, location, needs, preferences, income, and lifestyle benchmarks. In knowing your in-depth market segmentation, you can always have strong economic growth and will protect your investment by giving you an output whether you will invest in Residential, Commercial, or Industrial that falls on the criteria of your market segments that will generate income even if inflation rising prices occurred.
2. Have Real Estate Valuable Location.
One of the advantages of in investing real estate and protecting your investment is making sure that it is in a prime location, top development projects, with developed economies, real estate with firm-tested core values, a unique location, near establishment, potentially prospective, and highly essential to all, overall, this will protect your properties to retain and increase its value even if inflation strikes.
3. Look for Real Estate Investment Trust.
One of the strategic investments that are direct property income generating with regular dividends and incentives.
4. Strategize Accordingly.
How does this work in protecting your real estate investment? Strategizing accordingly means you know your blueprint. You know your plan and paradigm of following: the market trends, supply and demand, policies incurred, rising costs, maintenance costs, the movement of the economy, interest rates, and real estate prices. In short, immerse yourself in your business and its components so that you can ensure that you are ready for any obstacles, circumstances, and higher inflation. The right strategic call for your real estate can still aim for earning even in the middle of rising prices.
5. Financial Assessment.
You Continuously, Constantly, and Diligently assess your goals in investing in Real estate, making sure you are equipped with real estate funds, you know your lane to furtherly give you the right options, and the right benchmark, and protect your hard-earned money in case inflation or rising prices happens. Remember that even if the value of your property or housing prices increases in times of inflation, there is an increase in goods and services like renovation, construction materials, and labor services, and assessing your funds carefully will beat inflation and will give you that safety real estate funds that you need.
Read also: The Effect of Inflation on Real Estate
Keypoints to have a stable business and life amid Inflation
Inflation can be at your advantage in real estate investment but in the manner that you industriously assess the property you want to invest, knowing properly your margins and profit in obtaining an asset or property in real estate is your responsibility. As discussed, the opportunities and market trends are always in your window they are your key considerations to look out for as a property investor. You just have to ladder well your objectives and goals by planning, modifying, and extending your knowledge to inflations’ high and low or increase and decrease scenarios. Moreso choosing the right and prime home or property that will benefit you in return is a powerful option that relies on your proper research and knowledge.
Whether there is inflation or none, the market or consumers learn inflation protection by tending to look for choices like alternative products if there are rising prices with commodities. Consumers purchasing power lies in strategically valuing their hard-earned money by choosing a variety of affordable market products and creating some key considerations in buying in the middle of inflation.
In the residential property or real estate investment consumers have eyed affordable house and lot that is within their means and budget, and this is what Bria Homes have already been pioneering and serving Filipinos with a quality, modern, and comfortable house, and lot properties that are affordable to all Filipinos. Bria Homes are the leading developer of houses and lots with forty locations nationwide and with different types of houses and lot that are within proximity, near primary establishments like markets, schools, and hospitals, and accessible to all your needs. Bria Homes give you that protection and primer real estate home, a house and lot that is labeled with serving Filipinos with affordable homes, in which Bria Homes knows exactly what you are looking for.
Written by Rowena Lansang
