How can investing in real estate help secure your money against inflation?

Buying a house in Germany isn’t (just) about finding your dream home. It can also help protect your financial assets from inflation and secure your future. The real estate experts at InmoVidaInvest explain how it works. 

Inflation is a hot topic at the moment. As you may have seen in the headlines, inflation in Germany is currently running at the highest level in nearly 30 years - fuelled by the economic recovery in the wake of the coronavirus lockdowns last year - and it’s a similar story all around the world.  

Investing in real estate has long been considered a solid investment, but it becomes especially attractive amid major inflation spikes like these. Here’s why investing in real estate is a good idea when the inflation rate is high. 

What does inflation mean? 

Inflation is the gradual rise in prices for goods and services. It's a natural occurrence, but when it begins to climb rapidly, it can be quite concerning. In times of inflation, your money is losing its purchasing power as things become more expensive. 

If you have money in savings or investment accounts, it will likely not grow at the same rate or faster than the cost of goods. That means that any money left sitting in the bank will gradually decrease in value.

Real estate: A stable investment

Coronavirus plunged the whole world into a state of crisis at the beginning of 2020. Many feared that a recession was inevitable, and would bring about a major crash in the real estate market. 

But nearly two years later the situation looks relaxed for real estate owners. Individual emergency sales might have caused a short-term price drop, but only a few months after the outbreak of the pandemic there was once again very high demand for investment properties on the real estate market. In A-grade locations around Germany’s big cities, the price level has remained completely unchanged or has even risen compared to the pre-crisis level. 

Indeed, even in times of uncertainty, real estate continues to be a stable investment. Regardless of the global situation, people will always need houses. 

Housing in Germany rarely loses value

If you plan to live in your property, inflation can help protect your money. As demonstrated above, property values tend to stay on a steady upward trend. As the price of a home rises over time, it lowers the loan-to-value of your mortgage debt, thus increasing your equity on the property while your mortgage payments remain the same. 

However, if you’re not on a fixed-rate mortgage, you may face rising interest on your loan, diminishing these benefits. Maintenance costs for all homeowners will also rise in line with inflation. 

The benefits of buying real estate as an investment

The situation is different if you buy real estate as an investment. The benefits are greater for those who earn income from the property as a rental. This is because, as inflation increases and property values rise, you as landlord can charge more in rent, keeping pace with the rise in inflation. 

If you’re able to adjust the rent upwards while keeping your mortgage payments the same, you may even be able to build up wealth, whilst protecting yourself against inflation. 

How can a real estate expert help?

Finding a property in Germany that’s suitable for a profitable investment requires some finely-tuned thinking. This is where a real estate agent can help with their invaluable knowledge of the local market. 

InmoVidaInvest’s experts have quick access to off-market opportunities and can help you make a successful real estate investment in Germany. If you’re thinking about investing in real estate, read what their customers have to say, read their guide on how to invest in real estate in Germany in less than three months, or book a free 30-minute video call.