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Here is how real estate can protect you against inflation
Cities such as Jinja, Entebbe, and Mbarara are growing and offer investment opportunities in various property types. PHOTO/TONYMUSHOBOROZI
What you need to know:
As the urban population grows and the middle class expands, the demand for residential and commercial properties has increase.
More than 30 years ago, a litre of milk cost almost nothing, today, it is almost Shs4,000. This phenomenon is called inflation. Over the past five decades, all industrialized nations have experienced inflation. A typical rate of inflation is around two per cent and indicates a stable economy.
Although Murray Rothbard, a 20th-century economic historian and political theorist, argues that the natural tendency of the state is inflation, it has its drawbacks.
For example, if prices increase too fast, you lose purchasing power. To this end, Milton Friedman, a Nobel Prize-winning economist, observed that inflation is taxation without legislation.
Inflation in Uganda 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.
To expand their real estate portfolios, Ugandan investors should consider several approaches tailored to both emerging opportunities and existing market conditions. To expand your portfolio, start by exploring emerging markets outside Kampala, which can be lucrative.
Cities such as Jinja, Entebbe, and Mbarara are growing and offer investment opportunities in various property types. Suburban and satellite towns around major cities are also gaining popularity due to their lower costs and improved infrastructure.
Diversifying property types is another effective strategy. Investing in different types of residential properties, such as single-family homes, multi-family units, and rental apartments, can attract various segments of renters or buyers.
Hedge against inflation
To individuals, losing purchasing power as a result of inflation is perhaps the most salient feature of increasing prices. Anticipating those increases, prudent investors explore ways to hedge against inflation. An inflation hedge involves investing in an asset that is expected to maintain or appreciate in an inflationary period.
Hopefully, its appreciation exceeds or is at least comparable to, inflation. Real estate has long been considered a hedge against inflation, as rent and property values tend to increase with inflation. In Uganda, real estate and farmland have both been viewed as viable investment options, particularly as hedges against inflation and economic volatility.
Real estate in Uganda, especially in urban areas such as Kampala, Entebbe, Jinja, and Mbale among others, has seen a steady rise in demand. As the urban population grows and the middle class expands, the demand for residential and commercial properties has increased. This growth has generally driven property values higher, making real estate a potentially lucrative investment. Rental income has also been a strong factor, as the demand for housing provides steady returns
By Grant W. Alexander
