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Property Not Such A Good Inflation Hedge

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Quoting from the book Dying of Money

Real estate is a classic hedge against inflation. The name is apt. Real estate is a real value. The intrinsic value of real estate is indestructible, except by depreciation or physical damage. If a man owns a piece of land to live on, it is equally good for living on before, during, or after an inflation. Its intrinsic value for living on is not affected by prices, even land prices. As an investment, however, the value of real estate is not so invulnerable. The value of real estate for investment depends on its market price and not merely on its continued usability for a particular purpose. In an inflation, prices of real estate are as inflated as any other prices, some kinds of real estate more than others. Real estate as an investment is by no means neglected in an inflation, and its quality as a real asset is by no means unnoticed. There are usually no price controls on real estate, and there are no natural restraints like foreign competition to hold down real estate prices. Real estate prices therefore inflate more rapidly in an inflation than do other prices. From those inflated levels, real estate can easily fail to hold its relative market value as other prices rise. Particular kinds of real estate which may have been especially favored by the inflationary prosperity, such as luxury dwellings and overblown commercial developments, conceivably might be even more prone to lose real value in the breakdown of an inflation. Real estate thus has no broad immunity from all loss of value, even though real estate is more real and less capable of loss than, say, money wealth. A some is still a home no matter what, but beyond that real estate is right out in the battlefield along with all other forms of investment, fighting to defend itself.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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