Is inflation good for real estate investors?

Kenya’s annual inflation rate hit 9.5% in November 2022 as a result of increasing cost of food items in the country.

Inflation has the effect of reducing purchasing power over a period of time. Meaning that, the ability to invest is also affected. Perhaps you are asking how this happens.

Well, inflation affects your savings and investments because money gradually loses value.

For example, if you have Ksh 1M today in a savings account that you intend to invest in the next 3 years, chances are the value will have depreciated due to inflation rate.

Inflation rate has been gradually increasing over the past few years and stands at 9.6% whereas most savings account interest rate is mostly below 8 % meaning that, the value of your money will be less in future and you will need to pay extra when investing.

Further, poverty levels increase during inflation due to increasing cost of living. Additionally, most people tend to spend more on basic items thus leaving zero to very low allocations on savings.

For anyone with some savings, the best way to beat inflation is to invest in assets that have a higher appreciation rate compared to inflation rate. A good example is real estate which appreciates and can also generate an income.

Maybe at this point, you are asking whether inflation affects real estate prices. In most cases, the prices of housing and other real estate assets rise as inflation goes higher.

Meaning that as an investor other than putting your money in a savings account you can put it in a well-selected real estate product and enjoy appreciation.

For example, Nakuru City enjoys an average appreciation of land prices of 12. 7 percent. This is according to County Land Prices, which analyses prices of land across the country.

This means that even when the inflation rate is at 9.5% the property appreciation rate is higher at 12.7%. What this means is that if you invest in plots for sale Nakuru, you are likely to receive value for your money as a result of the appreciation factor because you will beat inflation.

Further, when inflation rises, research shows that rent also goes up. This means that landlords and landladies tend to still increase their incomes while tenants have to pay more for the same service, house or environment.

The effects of inflation also cause high mortgage rates. When inflation rates are high, most people are unable to afford mortgages due to the rates charged.

The situation is worsened by the fact that there is low purchasing power. This translates to more people renting which is a plus for property owners.

As a smart investor, you need to be well aware of some of the fastest ways in which your money will lose value during inflation.

Some examples are; putting money in a current account, savings accounts, table banking and merry go rounds with zero investments, loans invested in loss-making ventures among others.

In conclusion, Reuben Kimani, CEO, Username Investments a property-selling company in Kenya, advises that the best way to survive these challenging times is to invest in high returns investments such as real estate.

Additionally, you can take advantage discounts being extended for various properties for sale such as plots for sale in Kisumu and invest in high appreciating assets in this case land. Last but not least get an extra source of income to supplement your income.