[NEWS] - How does inflation affect real estate?

In the face of inflation, there is a risk of rising because of the price of gasoline, oil, gas. The constant increase shows no sign of stopping. In the current context, many real estate experts said that the price of houses and land will have strong fluctuations warning investors to consider very carefully when investing.

According to experts, housing prices will be expensive and difficult to sell as inflation fears grow in the context of rapidly rising commodity prices, gold fluctuates sharply. In the first quarter of the year, such large fluctuations can negatively impact housing prices and fan the wave of speculation about hoarding assets.

So, what is inflation?

Inflation is the average increase in the price of goods and services in a given economy over a given period, usually calculated by year.

How has inflation affected the real estate market?

1. Construction costs

One of the most direct and obvious effects that inflation has on the real estate market is the cost of building houses and projects. The cost of building materials to build houses increased, not only wood, but also other materials such as bricks, drywall, concrete and many other things also increased. Buyers will be the ones who are directly affected as the cost of raw materials increases.

2. House prices

With that said, if the price of building materials increases then the buyer will be the one most affected by the inflation. However, this is not the only reason to conclude that if there is inflation then house prices will rise. If the State Bank increases the money supply to a country’s economy, one of the major causes of inflation, house prices will rise as well.

3. Difficulty getting a mortgage

Sometimes, inflation will also affect debts. Specifically, if the inflation rate increases, it will be more difficult to borrow money. As interest rates rise, many people may not be able to borrow money, so the number of homes purchased through mortgage loans will be less. This affects the growth of an economy.

Should you invest in real estate when you’re inflationary?

From the above analysis, many people wonder whether to invest in real estate in case high inflation occurs ...? Speaking about this question, Mr. Phan Le Thanh Long, Director of the Australian Institute of Certified Public Administration Accountants (CMA Australia) in Vietnam analyzed, in fact in the first three months of the year, the real estate market has "hot fever but only locally.

While at the same time last year, the real estate market also had the phenomenon of "virtual land fever", and many people think that this will lead to high inflation. However, CPI only increased by 1.47%, i.e., inflation is only very low.

Therefore, Mr. Phan Le Thanh Long said that there is no data showing the same correlation between inflation and real estate. "Real estate buyers need to take into account the real price factors, but inflation is not the cause of rising real estate prices, even high inflation that causes interest rates to rise, tightening currencies are the ’enemy’ of Real Estate, causing real estate to freeze, The price is down, the capital jam," Mr. Long said. Agreeing with Mr. Long, some real estate experts said that real estate is a form of long-term investment, depending on the long-term development potential of the area with real estate.

Ngoc Duc 

Compiled from VnExpress