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You cannot out-think the Housing Market – Canadian Business

As long as the world operates on fiat currencies, there will likely be inflation in houses and real assets. And as argued in one of my previous columns, “Real estate as an inflation hedge,” we could be nearing a resumption of the inflationary environment given the historic amounts of currency that have been printed by central banks around the world.First-time buyers (with adequate downpayment) delaying the purchases are focused on avoiding the well-publicized risk of sliding prices. But this inaction exposes them to a risk that’s less often in the spotlight—that of having no hedge when inflationary tendencies resurface.

In past housing cycles, many first-time buyers acquired properties that needed fixing up or could be partly sublet. This approach provides protection against inflation yet offers some comfort against market setbacks. In the case of fixer-uppers, renovations boost market value. As for subletting part of one’s house, the rent provides a supplementary stream of income.

Buying a property with an income suite may have an edge over the fixer-upper in the event the tail risk of a housing crash materializes. In the aftermath of the U.S. meltdown, the ranks of renters swelled, which caused rents to escalate.

Instead of worrying about market timing, homeowners can stay focused on the long-term tendency of real-estate prices to appreciate and ignore the media noise.

For the rest of the article: Canadian Business – Housing markets and market timing.

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