Inflation is at an all time high so does it make sense to buy a house right now? Is making a real estate investment still a good idea?
No doubt, you are feeling the pinch on your wallet at the gas pump or the grocery store and you may be wondering if buying a home right now is a good investment. While the Bank of Canada is working hard to bring down inflation toward their target range between 1 and 3% they still have a ways to go.
While there is no denying it’s more expensive to buy and finance a home this year than it was last year, it doesn’t mean you should pause your home search. Homeownership is historically a great hedge against inflation. And here are three reasons why:
#1: Property Values Increase Over Time
Unlike stocks and bonds, real estate is a physical asset that can’t be devalued by inflation. Tangible assets like real estate get more valuable over time, which makes buying a home a good way to spend your money during inflationary times. In fact, real estate usually increases in value as inflation goes up.
#2: Lock In your Mortgage with a Fixed Rate
As inflation rises, the cost of everything goes up, including real estate. As inflation increases, mortgage rates will likely climb, so if you lock in a lower rate now you can avoid paying higher interest rates later. Then the cost of your home – an appreciating asset – will stay the same as the value of your property rises.
#3: Lower your Exposure to Rising Rents
If you happen to be renting, you won’t be exposed to rising rents. Rent prices increase with inflation and homeowners are shielded from mounting rental prices because their cost is fixed, regardless of what’s happening in the market.
So there you have it, 3 reasons why homeownership is a great hedge against inflation. If you are making a real estate investment, it is important to consider long term benefits.
If you found this information helpful, check out my blog where I explain the current Real Estate Market Shift and what this looks like in St. John’s.