Hyperinflation and Property Investment

Yoganmahew, I would agree with TIPS as an inflation hedge except for the following points - A lot of TIPS are tied to a CPI, and in an inflation environment it is possible that a government could understate the real inflation rate. The CPI is not a perfect tracker of inflation either. Therefore, you may not be getting a true hedge.

I mean buying property with debt. By holding other people's money (the banks!), you get to turn the downside risk of inflation to your advantage.
 
Damian85 said:
I mean buying property with debt. By holding other people's money (the banks!), you get to turn the downside risk of inflation to your advantage.
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In that case I would look for a yield on a long-term fixed interest rate, don't think that interest rates won't rise if inflation starts to. Make sure there is no CPI linkage in the mortgage (mortgages in Iceland, for example, are adjusted by CPI; while I've never heard of this anywhere else, it doesn't mean it won't happen in future!).
 
yoganmahew said:
In that case I would look for a yield on a long-term fixed interest rate, don't think that interest rates won't rise if inflation starts to. Make sure there is no CPI linkage in the mortgage (mortgages in Iceland, for example, are adjusted by CPI; while I've never heard of this anywhere else, it doesn't mean it won't happen in future!).
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Absolutely. Long term fixed low interest rate debt is essential to take advantage of inflation destroying debt. Remember, locking in now at a rate can keep you at that rate for 20 or 30 years. A lot can happen in that time frame!!
 
Damian85 said:
Absolutely. Long term fixed low interest rate debt is essential to take advantage of inflation destroying debt. Remember, locking in now at a rate can keep you at that rate for 20 or 30 years. A lot can happen in that time frame!!
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You are, of course, risking that we won't go Japanese where interest rates stay low for twenty years and rents stay static or decline over those twenty years...
 
Thats it then,I've decided I'm building a Gold House and renting it out. Could double as a temple where people can congregate and pray during times of hyperinflation. Any topless model will tell you that assets devalue over time unless the deflationary (sic) effects are counteracted by artificial inflation to prop them up and make them look attractive to stakeholders!
And with that nugget (sic again) I'll bow out of this debate
 
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