March 24, 2021, by Grant Alexander Wilson
According to the latest Statistics Canada data, the year-over-year inflation rate was 0.7%. Some experts are suggesting that inflation is currently underestimated. Demand for essential goods and services is high, as their prices are tracking above average. The current “basket of goods” in Canada’s consumer price index — used to assess inflation — includes many non-essential categories that did not appreciate in the last year.
Real estate has long been considered a hedge against inflation, as rent and property values tend to increase with inflation. Historical empirical evidence supports real estate and farmland as effective inflation hedges.
Accordingly, anticipating a period of inflation, savvy investors are significantly expanding their real estate portfolios. Although rising prices, let alone investments, can never be fully anticipated, the best known predictor of the future is the past.
In these extraordinarily uncertain times, prudent investors seek to protect the value of their money. Previously, Canadian residential real estate and farmland have proved to be strategic inflation hedges.
After all, as billionaire industrialist Andrew Carnegie once stated: “90% of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined.”
What does this mean?
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