Written by: Linda B. Bolido
In the space of just one month, the Philippines’ annual inflation rate soared to 6.1% in June from 5.4% in May, according to the Philippine Statistics Authority (PSA).
Based on PSA statistics, this is the highest level of inflation since October 2018, beating the market consensus of 5.9%. It goes without saying that commodity prices have also increased.
Inflation does not only mean a rise in the general level of prices for goods and services. It also means that the purchasing power of the peso is falling.
People lose value for their money, instead of making it grow, even without doing anything by simply keeping it.
In times of inflation, foreign and local financial gurus are almost unanimous in suggesting that investing in real estate can be one of the best ways to preserve and increase the value of currency.
Mark P. Cussen, writing for Investopedia, acknowledged: “Inflation is a natural phenomenon in an economy, but inflation hedging can be used to offset an anticipated decline in the price of a currency, thereby protecting the decline purchasing power. Inflation hedging, he said, could help protect the value of an investment.
Cussen said real estate generally does well in inflationary climates, adding, “It often acts as a good hedge against inflation because there will always be a demand for homes, regardless of the economic climate, and because inflation goes up, so does property value. . .”
Colin Lizieri, economist and professor of real estate finance at the University of Cambridge, said in a Bloomberg Asia Edition article: “On average, house prices over a longer period, like 100 years, have followed the rate of inflation. – even exceeding it by 2% or 3% in developed economies.
According to Dan Weil (https://www.thestreet.com/investing/survey-inflation-property-stocks-gold), even though real estate investment was also struggling in the United States due to inflation, investors still viewed real estate as a good hedge against inflation.
This was confirmed, he said, by a Deutsche Bank survey of more than 560 investors. The bank asked which asset respondents would “most want to buy and hold” during a period of inflation. Real estate was the number one pick with 43% of respondents choosing it over second-tier developed market stocks (33%).
Forbes Business Council member Patrick Grimes wrote in Forbes magazine: “When it comes to investing for your future, considering the effects of inflation on your assets can help you mitigate inflation before it depletes the purchasing power of your retirement accounts. .”
The founder of Invest on Main Street, a private equity firm managing passive multi-family investments in emerging markets, said it would be a better hedge against inflation if people invested in real estate that would earn steady income .
“By investing in income-generating real estate, you can hedge your bets against inflation and protect your retirement dollars over the long term,” Grimes said.
Many Filipinos in finance and investment share the opinions expressed by these foreign experts on the value of real estate as a hedge against inflation.
As Inquirer Business columnist Henry Ong recently wrote, real estate would be a strong hedge against inflation, as it would prevent an investment from losing value due to the declining purchasing power of the peso.
Real estate, he pointed out, had followed and maintained their values during periods of inflation.
And, as Grimes suggested, real estate investments could help generate income. People could make more money by buying real estate they didn’t need for themselves and renting or renting it out. With the gradual and steady opening of the economy and the resumption of face-to-face classes by schools, demand for real estate and rental property is expected to increase.
This was to be expected, as commuting for workers and students remains a major difficulty, sometimes requiring them to spend two to four hours on the road. Public utility vehicles are not enough to meet demand and traffic jams are once again commonplace.
Property values keep pace with inflation over time despite rising prices for building materials and supplies and other expenses. Thus, investing in real estate protects the value of the investor’s money from the decline in purchasing power caused by inflation.
For Filipino Overseas Workers (OFW), this is a particularly good time to protect and grow their hard-earned money by buying Filipino real estate at the current peso to dollar exchange rate.
As the Philippine economy struggles to overcome the ravages caused by Covid-19, many developers are offering attractive payment terms to support the industry’s recovery.
Now is the best time for investors to invest their money in something that will withstand current and future inflationary situations and capitalize on the recovery in the real estate sector.
When looking for a real estate investment, location is one of the main considerations. It must be able to provide accessibility, comfort, completeness and convenience.
SMDC properties are known for their prime locations. They are located next to or near SM malls, and most of its properties also have their own lifestyle establishments within the development, allowing owners and tenants to have easy access to the necessities of life. , to a multitude of restaurants, retail and entertainment options. More so, SMDC communities are close to business districts, major arteries, and transportation hubs, providing access to all the essentials and, in turn, helping people save commuting time. Good examples are SMDC’s Light Residences and Fame Residences, which are connected or a few meters from the MRT-Boni station.
As one of the most trusted real estate developers, SMDC empowers more Filipinos to live their best lives through its properties’ lobbies and concierge services, world-class amenities and, of course, a excellent property management.
With its reasonable price and attractive payment terms, SMDC properties not only allow you to live a luxurious lifestyle, but also allow you to own a long-lasting investment that can protect and increase the value of their money.
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