Real Estate Investment VS Inflation

As for real estate prices, these move at a negative correlation with inflation, for which they have historically served as a refuge against the latter (curiously this trend did not happen in the US or in Europe during the golden years in the nineties, where the real estate market continued to rise with low inflation rates)

In the United States, the real estate investment market in 1990 equaled 100% of the total stock market, considering our own house as a part of the portfolio. Insurance companies, as well as pension funds are some of the strongest institutional investors in this market, directing the assets towards office flats and retail stores. However, increasingly more private investors take part in this types of assets.

 According to an article published in The Wall Street Journal in July, 2002, we can read that: “Money entering in real estate projects in the United States has reached its fastest pace in years. So far this year, US$ 2,410 million have entered real estate funds, according to AMG Data Services, before only US$307 million in the same period in the prior year.” It is calculated that by 2003, private investors (in the US) whose patrimony go over a million dollars keep 17% of their total assets in real estate and 35% in stock.

On the other hand, real estate in America, except Chile, have not regained their value in five years, since most economies were strongly affected when the “Asian crisis” happened in July 1997 and then we were affected by the “Russian crisis” and the “Brazilian” (in financial jargon, they were known as the “vodka effect” and the “samba effect”). Purchasing power downtrend problems and low investment and trust levels, along with deep social inequality and violence problems, governability, corruption, amongst others, are retracing interest and trust in real estate investment.

Finally, emigration towards countries with better future perspectives influence in the fact that this market continues depressed; however, this emigration is also creating an extremely positive situation for America, since those countryman that have gone to other companies seeking a better life quality, send money to their families who in turn purchase land, houses and departments, where those who left dream of returning.