How to Buy a Home Amid High Inflation

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The price of everything has skyrocketed this past year, so there’s no denying the impact of inflation on real estate. But that doesn’t mean you can’t purchase a home.

If you’re planning on buying a home in these uncertain times, there is light at the end of the tunnel.

As the head of the household, it’s your responsibility to ensure your family lives comfortably amid rising expenses as well as to secure a safe future for them. Therefore, you need to be careful about where you invest.

In order to make the right investments, you need to plan a strategy that enables you to stay within budget and buy a home. But before we start on how to invest safely during times of high inflation, let’s take a closer look at inflation in Pakistan.

Inflation at a Glance

The rate at which prices are increasing is alarming. According to a press release issued by the Pakistan Bureau of Statistics, , the National CPI for August 2022 recorded an increase of 27.26% as compared to the previous year i.e. August 2021.

During the same period, the report highlighted an increase of 27.77% in construction input items, such as bricks, cement, steel, etc.

The Impact of Inflation on Real Estate

There are several ways inflation influences the real estate market. Let’s look at a few of them in more detail.

• Rise in Cost of MaterialBuilding a home during inflation is more expensive due to the considerable spike in the price of building materials, machinery, and labor wages. It has become a major contributing factor to the increase in property rates.
• Cost of Borrowing Shoots UpBanks also increase interest rates as inflation increases. That means borrowing from the bank to finance a real estate investment becomes more expensive, and acquiring funds to buy a new home can become more challenging.
• Rent IncreasesPeople who depend on rental income demand more rent to cover their expenses. So those who live in or work in rented properties will have to bear the brunt of increased rent, whether or not they have an increase in income.

What Happens to Housing Prices During Inflation

Unfortunately, as you can see, inflation affects people with low incomes more than others. For instance, the price of properties increases, and borrowing becomes more difficult.

But it’s not all bleak and dismal for everyone. In fact, investing in real estate during inflation has its perks. Investors will find that the value of real estate appreciates more than stocks, bonds, or gold.

More specifically, investors of residential properties benefit the most during high inflation. Since people have reduced purchasing power, they are more inclined towards renting a home than buying one. So the demand for assets such as apartments and single-family homes typically outperforms other investment options.

Should You Buy a House During Inflation?

Buying a home is a good way to build wealth. As home prices rise, your net worth increases as the value of your home increases.

But with the cost of basic necessities increasing and the price of today’s real estate market constantly on the rise, is real estate a good investment during inflation?

Well, the answer depends upon your current financial circumstances.
It’s the ideal time to buy a home if:

• You have enough money to make the down payment.
• The mortgage payment is less than your monthly rent.

However, it may be wiser to wait if:

• You don’t have enough savings for the down payment.
• You are currently dealing with another debt.
• Renting is cheaper than the mortgage.

How to Buy a Home During High Inflation

If you decide to buy a home, you need to mitigate the impact of inflation on real estate. Here are a couple of tips that will get you started in the right direction.

• Know Your LimitsBefore you set out to buy a home, look closely at your finances. What is your budget? Will you be able to make the complete payment? Or, if you plan on taking a loan, do you have enough savings to make the down payment and continue paying mortgage payments on time?
• Research the Market Different areas in the city have different real estate rates. Researching the market can help you find a home that aligns with your budget and give you an idea of how much a home typically costs in the area you want to invest.Remember to compare the prices of similar homes in different areas. This will help you decide whether the house you want to buy is a good bargain.
• Maximize SavingsIf you plan to buy a home during times of high inflation, you need to save. As they say, every penny counts. So the more you save, the quicker you’ll be able to buy one.One of the easiest ways to save is to monitor your expenses. Curb activities that drain your savings, like eating out every weekend, going to the movies, unnecessary bulk buying, etc. Simple lifestyle changes can encourage saving money and make it easier to pay the down payment.
• Be Flexible Sometimes, your heart may be set on a particular type of property. But in order to be a smart home buyer, you need to be able to adapt to changes caused by the impact of inflation on real estate.For instance, if you have been planning on buying a new family home but haven’t found one that fits your budget, consider buying a property that is past its prime but is in a good location. You can fix up the property yourself and improve its value.
• Don’t Keep Your Money IdleWhile you search for the ideal home, don’t shy away from good investment opportunities that come your way. Investing in other real estate properties, such as a flat or shop in an up-and-coming development project, can help increase the value of your current savings.And when you do find the right home, you can easily sell the property and cash out your savings.

Buy the Home of Your Dreams

The impact of inflation on real estate can be felt far and wide. But if you’re thinking about entering the current housing market, you need to do your research and invest smartly.

Your best option is to consider a reliable real estate developer like Chapal Builders. The  affordable, high-quality residential properties can help generate positive returns in the long run. Consider booking a flat or villa in any of the Chapal’s developmental projects at various locations around the city and enjoy the perks that are part of a safe investment opportunity.