Real Estate. One of the best ways to protect against inflation

In today’s blog, we will talk about the advantages of owning real estate. One of the main benefits of real estate is that it keeps up with inflation at its highest rate in over 20 years. In 2000, it was at 1.99%; today, it has risen to 4.7%. Inflation impacts your purchasing power, and we see it reflected in the increasing price of services, fuel and food.  Real estate in the GTA has appreciated for the past 20 years. Since 2022, inflation in the Toronto real estate market has risen by 28.4%, which is a substantial upsurge. Nationally it has increased by 6.11% throughout Canada.  So even the medium inflation rate of the total housing market in Canada is higher than the inflation rate. The only asset class that is keeping up with inflation is real estate.

As a wealth advisor, I deal with this issue regularly with my clients and prospective clients. We highlight lifestyle spending to calculate how much they can afford to save.  I have seen lifestyle costs rise to 60% as people spend more on rent, mortgages and associated utility running costs. These are essential costs people need to live on. As a wealth advisor, I find these costs concerning because if you spend more than 30% of your income on housing, it puts pressure on your ability to pay other bills.  How much is left to pay for your car and eat if you spend 50% of your net income to support housing?  I will tell you a little story that has nothing to do with real estate but is about cooking.

If you are cooking a frog, you will not put him directly into a pot of boiling water as he will immediately jump out due to shock. However, if you place him in a pot of room temperature water and slowly increase the heat, the frog won’t jump out.  The boiling water is a shock to the system, and this is how I see the current situation we are in now. Everybody is drowning in debt. And they’re spending too much money on housing costs, not because they want to but because they are caught up in a vicious circle of rapidly rising costs linked to inflation. So what does that have to do with real estate? If you had purchased an investment property a few years ago, how much would it have appreciated? Quite a lot, right? So my point is that there is no better way to get started in real estate.

How do real estate investors make money? What is the best way to get started in real estate? It seems a safe and prudent investment opportunity as property prices rise. If you turn around and sell the property, you can buy a similar property. You gain appreciation, which is always going to keep up with inflation. In my opinion, inflation will keep rising into the foreseeable future as governments pump money into the economy, recovering from the pandemic and the costs of the Ukraine War with Russia.

On the other hand, people’s salaries are not keeping up with inflation, leaving a deficit in disposable income. So that’s why it’s crucial to consider investing in real estate as soon as possible but do so by doing your research in the market. You need to take control of costs and expenditures, keep a tight record of your spending, and shop around for value in life insurance policies and utility service providers. Many people are feeling the pressure of rising inflation costs right now. The best way to protect their savings is to invest in real estate that offers a haven for their cash and otherwise depreciating salaries due to inflation. There are many ways to get started with a small or large amount of money. But don’t wait; please take a look at it now. There is a saying that the best time to buy real estate was 20 years ago, but the next best time is now. So get started soon. And if you have any questions, let me know.

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