Why Is Real Estate an Inflation Hedge Asset?

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In this tutorial, we'll explain why real estate is considered an inflation hedge asset, and why it's historically been one of the most reliable inflation hedge assets.

An inflation hedge asset is an asset that maintains its income and price during an inflationary environment. For example, an inflation hedge asset is able to increase income by increasing prices, and/or is able to increase the value of the asset itself because it is scarce during an easy money period.

Real estate is such a great inflation hedge asset precisely for the reasons mentioned above. During an inflationary period, real estate investors have typically been able to increase rents charged to tenants to keep pace with inflation, often times more than inflation. This is important to maintain profit margins as the costs of holding real estate will typically rise during an inflationary environment (i.e. property taxes, HoA fees, costs of labor etc.).

Furthermore, because real estate is by definition a scarce asset, when there is more money chasing the same amount of assets during an inflationary environment due to money printing, then by definition the value of finite assets such as real estate will increase in value. So in that sense, real estate is a great inflation hedge asset because it maintains its value with inflation, and sometimes much more depending on the market.

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Hauseit Group LLC, Licensed Real Estate Broker
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