Skip to main content

Lag Time Between Inflation and Increase in Real Estate Price

 

 Visit Our Website 


When a real estate investor buys land or a house, it is expected for the property to potentially preserve and even grow in value. This value may be a response to high inflation or positive appreciation from an economic or developmental standpoint. The lag time for real estate to respond to these changes in value is dependent on a lot of factors.

 

When an investor speculates on land, this may give good appreciation if carefully thought through. Land appreciation may be the result of scarcity, location, or several ongoing new developments around the community like new buildings, and government infrastructural development. However, buying or building a rental property for medium to long term hold will appreciate based on the city, location, serenity, security, and good infrastructures in the community (drainage, good road network, streetlights, schools, hospitals, power, water, sanitation, etc).

 

Inflation will lead to a rise in rental rates and subsequently have an impact on the values of properties. The lag time for rental income to adjust to inflation can vary based on lease terms and market conditions. Lag time can be more in areas where tenants pay ahead for several months or years. Most times there is a significant lag time for real estate to respond to changes in inflation. High inflation can negatively impact real estate demand for example, when the central bank gradually raises interest rates over a certain period to combat inflation, this can erode the purchasing power of investors and reduce real estate affordability in the long term because borrowing is more expensive. Inflation can also lead to high construction costs and a rise in goods and services.

 

However, the effect of supply and demand cannot be left out as it greatly affects the lag time for price adjustment in real estate. When the demand for real estate is low, this may force the price to drop. Higher demands instantly increase the price of real estate as many buyers are in search of a property while too much supply of properties to the market can reduce the price of real estate.

 

Some other factors that can influence real estate values and their response to inflation are government policies like subsidies, tax incentives, legislation, infrastructural development, etc. These determine if investors should invest or not in real estate.

 

Changing demographic factors like mortality, migration, age at marriage, fertility, etc can have both short-term and long-term impacts on real estate prices.

 

Unemployment is an important factor to consider when talking about inflation lag time. When more people have jobs, this can quickly increase the demand for real estate thus leading to an increase in price. This means a shorter lag time even when inflation is low.

 

In conclusion, sometimes real estate prices may be stable, and the impact of inflation may be less pronounced. However, real estate markets are localized so the lag time can differ from one location to another. There is no fixed or uniform lag time for real estate values to respond to inflation because this varies based on a given market and economic conditions. Real estate is considered a long-term investment and price adjustments may occur gradually over time rather than in response to short-term fluctuations in inflation. So, I will advise investors and property owners to monitor local conditions, economic indicators, and inflation statistics to make an informed decision to buy or sell their properties.


Disclaimer
Any views or opinions represented in this blog belong solely to the blog writer/owner and do not represent those of people, institutions or organizations that the writer/owner may or may not be associated with, in a professional or personal capacity unless explicitly stated.
Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual. All content provided on this blog is for informational purposes only. The writer/owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
The writer/owner will not be liable for any errors or omissions in this information nor for the availability of this information. The writer/owner will not be liable for any losses, injuries, or damages from displaying or using this information.
Comments are welcome. However, the blog writer/owner reserves the right to edit or delete any comments submitted to this blog without notice due to the following:
- Comments deemed to be spam or questionable spam.
- Comments including profanity.
- Comments containing language or concepts that could be deemed offensive.
- Comments containing hate speech, credible threats, or direct attacks on individuals or groups.
The blog owner is not responsible for the content in the comment section.

This blog disclaimer is subject to change at any time.










Labels:

Comments

Post a Comment

Other interesting posts

The Relevance of a High Oversite Concrete/Foundation of a House

Visit Our Website Oversite concrete (often referred to as German floor by the laymen) is a layer of concrete used to seal the earth under the ground floor of a house. Before pegging and digging the foundation of the proposed building. The first thing is to determine how high the oversite concrete of the house should be raised above the natural ground level. Note that there will be many different levels on a sloped land. It is very important to check the topography of the area. More important is the level of the land with respect to the road. If the road is tarred, use it as a reference for determining how high to fill the land when the building is completed for proper grading of the yard for surface drainage. But if the road is not tarred, endeavor to put into consideration how high in the future you think the road will be filled or excavated during construction and use that as a guide or reference. Having a good knowledge of how high the land should be filled to ena...
Post a Comment
Read more

Effective Strategies To Increase Your Property's Value

  Visit Our Website  Improving a property to make it more appealing to potential buyers or renters is a sound investment tactic. There are several cost-effective ways to add value to your home, from simple cosmetic updates to more significant renovations.   One of the easiest ways to increase a property's value is by enhancing its curb appeal. Freshening the exterior with a new coat of paint can instantly make the house look more inviting. Additionally, well-maintained landscaping, including neatly trimmed lawns and colorful flowers, can leave a positive first impression. If local regulations allow, consider adding extensions for an extra room, bathroom, garage, or carport, which can significantly boost the property value.   Key areas within the home, such as the kitchen and bathroom, are crucial to potential buyers. Upgrading the kitchen with modern countertops, cabinets, and appliances can be a wise improvement plan. Similarly, renovating the bathroom by replacing ...
Post a Comment
Read more

How to prioritize your budget to get back the best sale or rental value

Visit Our Website In general, considerations for the location of a building comes first when choosing a house or building to stay or invest in. An excellently finished house interior can however make a huge difference on the perceived and true value (satisfaction of occupants or rental/sale value). When putting finishing touches to your building, consider using quality tiles, doors, cabinets, windows, electrical fitting, plumbing fixtures as well as beautiful and inviting paints. If the cost versus benefits of using expensive top quality finishing is not properly considered, you might increase your budget for the house but this may not translate to higher sale value  or rental rates. If the building or house is for rent, an investor should also note that this does not guarantee better maintenance by the tenants. It is wise to spend more of your budget in areas of the house people are most interested in and therefore value more. I would recommend that the most importa...
Post a Comment
Read more

Real Estate as a Store of Value

Visit Our Website Store of value is a function of an asset that can be saved, retrieved and exchanged at a later time without any risk of losing it and also retains its purchasing power into the future. Wealth is the total of all stores of value monetary and non-monetary assets. The most common store of value in modern viewpoint has been currency, precious metal (Gold, silver etc.) and real estate. The underlying reason for using this storing medium is that it has a better way of managing the risk associated with it. Most people would say money is one of the best ways to store value because of the ease of exchanging it for other goods and services without time wastage, but it can quickly be affected by hyperinflation mostly in developing world. However, real estate is a better means of storing value for investors if the property is strategically located in choice areas, well-built (architecturally and structurally) and free from any form of disaster. A good house will gain ...
8 comments
Read more

What You Should Know About Real Estate Speculation

Visit our website Real estate speculation  is the purchase of a real estate asset (building or land) with the hope that it will become more valuable in the future. It is a passive approach to making profit based on forecasts  and educated guesses of future real estate market trends not substantiated by firm evidence . Speculation leaves no room for the speculator to influence the profit outcome,  because there is not much you can do as a speculator to drive, influence or accelerate the appreciation of the land or building(s).  Real estate speculation can be likened to investments in stocks or sports betting in this respect. On one hand, real estate investments generally involve a degree of speculation on the potential for appreciation in the value with time due to changing market conditions (demand versus supply) and/or improvements in face value (infrastructural, social, economic, security) in the locality. On the other hand, it is important to note that ...
Post a Comment
Read more