Monday, May 11, 2015
Land Investment is an Ideal hedge Increased Federal Rising Interest Rates and Coming Inflation
The global central banks have been printing money as a means to stop the most recent financial crisis. The biggest three money printing central banks have been the Federal Reserve, Japan and the European Central Bank. Gold has diminished in value instead of increasing the last five years during the QE (Quantitative Easing) era. The US Federal Reserve has ended qualitative easing and will increase rates soon likely in months according to experts. Higher interest and all this money printing to avoid deflation will likely soon cause inflation. The US debt is so large that other countries may also move away from the dollar as the sole reserve currency. There are recent news reports that outline this. These factors will all lead to inflation, and likely very high inflation. Gold is usually a very popular investment to combat inflation as it appreciates in value against a currency during inflationary times. Real estate is also a great investment at any time, and it is even better during times of rising inflation. Real Estate housing prices will likely drop with higher interest rates as the cost to buy a home will be more. The limited availability of land and rising population growth will increase housing demand and hence real estate in general has the potential to beat inflation in the long term. A reason why land is a good inflation investment hedge is because it will not lose value to zero like a stock can. Land doesn’t go bankrupt If you buy land in cash then the value may go lower, but overall will have value if it was a decent purchase price in an area that will see growth with future development. It doesn’t mean all land has value. If a person overpaid for land then the value may take decades to generations to produce a return on investment. Precious metals like Gold and Silver can increase dramatically in inflationary periods so your investment can profit much more than land. But buy land at a good price and the investment can hold its value in inflation. You can also sell it as other may want it as their inflation hold in such an environment.