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Real estate to beat inflation: How property can protect YOUR assets

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What is inflation?

Inflation results from a permanent increase in the price level. Interest rates and prices for services and products increase, while at the same time the real value of money decreases. This means that fewer goods can be bought for the same amount of money, thus reducing purchasing power. A decisive trigger is given when the money supply grows faster than the amount of goods produced and services offered. However, a rising price can also have other triggers, for example, if the cost of materials increases, certain goods become scarce or supply bottlenecks make supply more difficult. An extreme form of monetary devaluation is hyperinflation, in which the price level increases particularly rapidly. To protect yourself from hyperinflation, it is often best for people to acquire real assets, such as real estate, as it is considered to be inflation-proof.

The top 3 ways to hedge against inflation

If you want to secure your money and protect it from inflation, real estate is a sensible option to achieve this. During inflation, the prices of real estate increase just like other products. Those who secure residential property at an early stage can use the effects of appreciation for themselves to protect their assets against inflation.

Owner-occupied properties are the ideal choice when it comes to inflation-proof investments

1 Owner-occupied real estate

Owners of owner-occupied residential Real Estate in particular benefit from the security that real estate offers as protection against inflation. Although ancillary and operating costs are incurred, which increase in the event of inflation, the value of the property also increases - and to a significantly greater extent. This makes owner-occupied real estate the ideal choice when it comes to finding the best inflation-proof investment.

2 Rented real estate

The protection against inflation is different for rented properties than for owner-occupied properties. The rising value of the property is offset here by the ongoing costs of managing and maintaining the property, which also rise in the course of inflation. In this case, the costs are significantly higher than for an owner-occupied property. Here, however, a compensation is possible through the increase in rent as well as operating and ancillary costs. In addition, positive effects occur if the purchase is financed via mortgage with a long fixed interest rate, because this is also affected by the effects of inflation, as the real value of the debt falls and you thus avoid higher financing costs.

3 Securing your retirement with real estate

A good investment for your retirement is an essential factor when it comes to financial security. The pension levels are falling, and classic savings programs are extremely low-yielding due to low interest rates. Real Estate is an ideal alternative here, and in times of inflation it offers particularly good protection for your assets. When home ownership is paid off, you have the security of your own four walls without having to pay high rents. Owners of rented properties can also use them themselves at a later date and thus secure their own property in old age, protected from the effects of inflation.

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Rising inflation and a red-hot housing market: Our financial experts are here for you!
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Olaf Grumm
Head of Finance Consulting
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