There's no doubt that inflation is on the minds of many Malaysians recently. The rising cost of living makes it hard to make ends meet, let alone save for the future and invest.
What is the best investment during inflation?
Historically, real estate has proven to be a stable investment during inflation. As the consistent demand for housing and real estate will likely always exist.
Of course, any investments will have risks. But if you choose wisely and do detailed research, investing real estate during periods of inflation can be a smart move. What is more, commercial real estate is likely to outperform in a way that other investments will not.
How Does Inflation Impact the Real Estate Industry?
Rental Rates Will Increase - landlords will be able to pass through rent increases to tenants.
Borrowing Costs Will Increase - Borrowers with fixed-rate mortgages likely won’t see the effects until they refinance. Owners with adjustable-rate loans could see their payments rise in 2022.
Here's the question: Why Should You Invest In Property During Inflation?
According to the Department of Statistics, Malaysia’s annual inflation rate has hit a one-year record high of 3.4% in June 2022 from 2.8% in May.
Because of inflation, price increases and the costs of products and services are expected to rise even further. And the value of money has decreased. It is advisable now more than ever to protect money against inflation.
According to Malaysia CPI Inflation Calculator, RM1,000 in January 1992 would cost RM 2,061.06 in January 2022. Within 30 years, there’s only an increase of RM 1,061.06. While you invest in property, a single storey house in the Pahang area cost RM 90,000 in 2006 and sold at RM 180,000 in 2012. Within 6 years, there’s an increase of RM 90,000, total of RM15,000 increased annually.
You see the difference now?
During inflation, tangible assets such as real estate increase in value, in contrast, non-tangible assets such as cryptocurrency – making it an effective and inflation-proof investment. Since there is always demand for living space and business space, owning real estate may protect against a crisis regardless of the rate of inflation.
Investors turn to real estate to safeguard their assets, and this drives the market even further as many properties are expected to increase in value in the future.
You may rent out the property or leverage its effects on appreciation - one of the best ways to protect against inflation. If you want to know more about ‘’How Does High Inflation Rates Affect Us’’, you may REFER this article as well to know further about inflation.
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