Monday, Jan 25, 2010
Some pertinent advice
The Zimbabwe Telegraph: Buying a home in Zimbabwe helps to beat inflation
Inflation and hyper-inflation has characterised Zimbabwe over the last six years. In an inflating economy it makes sense to buy almost anything today, and pay tomorrow. And it is the same with a home, the biggest item of expenditure in most budgets.
Look at what has happened to those who bought in Zimbabwe with a mortgage six years ago. The value of that home may have gone up six or seven times. However for those that remortgaged their overseas properties, the monthly cost of the mortgage has remained relatively unchanged. As inflation continues the house buyer will see mortgage payments reducing as a proportion of the capital value of their home going up, while those who choose to rent face soaring monthly payments.
Posted by little professor @ 11:05 PM (876 views) Add Comment
3 Comments
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1. fallingbuzzard said...
That would previously have been such good advice in Zimbabwe if the main item of monthly expenditure hadn't been food!
2. quiet guy said...
Recently, I was looking at this on the forums:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=135342
There is a link to a MoneyWeek article that discussed the effects of hyperinflation in Weimer Germany, among other things:
http://www.fsponline-recommends.co.uk/page.aspx?u=mwkrally4&tc=MMYKK906&PromotionID=2147066487&
It's quite a long article so I'll cut out the bit I wanted to highlight (referring to Weimar Germany during hyperinflation.)
"Property was a good place to be if you had a mortgage. This might fly in the face of what we’ve said previously about the weak UK property market. What you need to realise is that we’re saying property may halve within 12 months. The worst of the inflation storm will come after that. In Germany, inflation pretty much wiped out everyone’s mortgage debt. But don’t get too carried away here... After the German economy’s recovery, heavy new taxes and the urgent need for cash forced most holders to remortgage their property, often more heavily than originally. In other words, their gains were an illusion. Many Germans were forced into selling property to raise cash. Rents were frozen by the Government, so landlords lost their income virtually overnight."
Property is relatively easy to tax.
I do not expect to see hyperinflation in the UK and property has historically done well in this country as an inflation hedge but I believe fallingbuzzard is correct that food is the main problem for Zimbabweans right now - not rents. Also, I note that this piece was written by an obvious VI: http://www.joinaproperties.com.
If we somehow manage to kick off hyperinflation emigrating might be a better response, if you're prepared of course.
3. rumble said...
Not so great if there isn't wage inflation too.