I accept your argument but I accept i do always see the cup half full. Ii had a similar view in the early 90’s when property stayed flat for a few years and i was wrong – and it cost me a fortune as I liquidated my portfolio. I can promise you prices of property will run again, maybe not this year but the effect of the market is such that excess stock will be soaked up creating shortfalls, and then before you know it prices are on the rise again. Developers, and builders cannot produce new stock at yesterdays prices, and even the cost of renovations creates a cost push situation in the second hand market.

Ill put money on it…whoops, have done so already?

PS: inflation has one cause: money crration by the monetary authorities.

PPS: I did see the crash coming, and was out of all property investments by July 2007, in anticipation of the crash.

But the example only has merit over a very long term. i.e. @ 6% inflation doubling the value of your asset is going to take a while.

You probably breaking even over the first 10 years with a loan of 800k costing you approx 1,9m after 20 years.

@Brennan yes I agree
Commercial property is the way to go but commercial is very expensive to get into…

As Justin has said in his example, but I would add that Inflation wipes out debt.

Remember the last couple of years where a property boom like no other and speculators where chasing short term capital appreciation gains.

However property is a long term investment and most seasoned investors are not looking to sell but are in it for the rental streams these properties bring.

I suspect you are refering to the property called your home. You may think this is an investment however its not its just a home. I just chuckle when agents are trying to sell owner occupier homes as investments. Good sales pitch yes, but not an investment.

You have R200 000 now, you buy a property worth R1m and bond the R800k shortfall. Your tenant pays R8000 per month now.

After a period inflation has pushed the value of your property to R2m but your bond is still R800k – and your equity has grown to R1.2m. Also your tenant is paying the same proportion of his income, but now this is R16 000 per month.

If you kept your money in cash, even with compounding interest it would have only grown to say R400k?

Inflation can be your friend.

Yes, your property is now at a higher value than previously. But you would pay the inflation percentage more to replace the asset.

Also all goods and services that you require and have to pay for have increased by the inflation percentage.

The only advantage -> If you kept yourself liquid your cash would be devalued by the inflation percentage. But you wouldnt have this problem if you didnt have inflation in the first place.