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During inflation… Is real estate investment the right choice?

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The real estate market has always been of interest to Egyptians, as it is a tangible asset and a safe haven that preserves the value of money. However, with the occurrence of economic crises such as inflation that affects everything, we have started to think more than once before putting our money into any investment, as this is not the right time for any wrong choices. So, is real estate investment still the right decision during the inflationary periods we are experiencing?

To answer this question, we need first to address three important questions:

1- What is inflation?

Inflation simply means that the money you have today won’t be able to buy the same things that you bought with it yesterday. This means that prices have increased and the purchasing power of your money has decreased. Inflation has many causes, the most important of which are:

Global crises, such as the COVID-19 pandemic, and the Russo-Ukrainian War, which have had a major impact on global buying and selling activities.

A significant increase in demand for goods or services can occur for various reasons such as population growth or monopolistic practices by some businesses. In all cases, this leads to a situation where demand exceeds supply, causing prices to rise and the currency’s value to decline, which results in inflation.

All of this has a significant impact on the economies of countries and all sectors. For example, the banking sector in the United States experienced the second-largest bank collapse in the country’s history when Silicon Valley Bank filed for bankruptcy in March 2023. Real estate, like any other sector, is also heavily affected by inflation. This leads us to the second question…

2- How does the real estate market get affected by inflation?

When inflation occurs and interest rates increase, the cost of mortgage loans also increases. This leads to a decrease in demand for real estate, as not everyone can afford to borrow at a higher interest rate.

Additionally, during the COVID-19 pandemic and the Russia-Ukraine conflict, the Egyptian real estate market experienced a significant slowdown in early 2020. According to Morder Intelligence, sales decreased by 30-40% due to the high increase in the prices of basic building materials such as cement and iron, as well as supply chain disruptions and import price hikes. All of these factors led to an increase in the final price of real estate for consumers.

During this time, there was also a significant comparison and confusion between the most important saving and investment tools, namely real estate, banks, and gold. This leads us to the third question…

3- How did gold and banks get affected by inflation?

A- Bank Certificates: 

If you had invested your money in an 18% certificate right after it was announced on March 21, 2022, let’s see how it will be affected by inflation. We can calculate the real return on your investment, which equals (the expected return – the annual inflation rate at the time you receive your return). If you receive your return at the inflation rate announced in February 2023, which is 40.3%, then the real return on your investment would be 18% – 40.3% = -22.3%. This means that you have lost 22% of your purchasing power.

B- Gold: 

Gold prices are unstable over the years because they are heavily tied to the US dollar. Gold prices dropped by 2% in March 2023 after the hearing session conducted by the Federal Reserve Governor, Jerome Powell, who stated that he would raise interest rates. This greatly affected the price of gold now and is expected to affect it even more later. This is because inflation is not contracting, and unfortunately, the value of your money decreases if it is in gold.

As a result of the losses that people have experienced from bank certificates and gold, money started to move toward real estate. Based on all the information we have mentioned above, we can now answer our main question…

 Is real estate investment the right choice in times of inflation?

The answer is yes because real estate prices in Egypt increased by 7.5% in late 2020 “according to a report issued by the global real estate consultancy company (Knight Frank)”. In the first 9 months of 2021, the real estate market witnessed a growth of 59%, followed by a slowdown in sales activity in early 2022. However, by the end of the year, real estate prices increased by 17% “according to a report by JLL, the global real estate services company”. All of this makes the real estate market one of the fastest-growing markets in the world. You can imagine the significant returns for investors who bought during the pandemic or afterward. This confirms the statement by former US congressman Will Rogers who said “Don’t wait to buy real estate, buy real estate and wait”; because you will reap many benefits from your investment later.

Inflation has a positive effect on real estate, and they have a reciprocal relationship because as inflation increases, real estate prices increase. Here, you benefit from inflation in two ways:

Selling your unit: Recently, President Abdel Fattah El-Sisi removed all restrictions on foreigners’ ownership of Egyptian properties, which makes selling real estate easier and faster due to the devaluation of the Egyptian currency against foreign currencies. This opens up a new field for investment and encourages foreigners to buy in Egypt, thus ensuring the quick sale of your unit at a significant profit for you. Of course, you can also sell it normally to Egyptians and still benefit from the continuous increase in real estate prices.

Renting your unit: The rental market is very active now because many people prefer to rent due to the high ownership prices, thus ensuring a steady and guaranteed income from your property.

Also, what ensures that you will achieve a profit in light of the rising prices is that the demand for real estate has increased by 25-30%, and building materials prices have increased by 5%. This means that the demand and profit are higher than the cost you pay.

 

The best investment on earth is the earth itself because the need for housing is a basic human need that cannot be dispensed with. This is especially true in light of the high rates of marriage and population growth, and regardless of any crisis the world may go through, you are guaranteed that your investment is protected and secure and that it will bring you continuous and high profits as long as humanity exists on the planet. So, if you want to invest your money in a secure investment and don’t know how to start or where to begin, contact us and we will guide you step by step in choosing the most suitable units for you that will bring you the highest return, to after-sales services.

TAWABEQ…we elevate your dreams to new horizons.

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The most important and famous 3 types of investments to preserve your money from inflation.

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Investment is a fundamental element in securing your financial future and achieving your long-term goals. In the previous article, we discussed the difference between investment and saving in general, and how to balance them to preserve your money. In this article, we will focus on types of investment because they are numerous and diverse, and each choice has advantages and disadvantages. We will help you understand more about the most important and popular investment methods.

A- The Stock Market:

Simply put, it is a market where the seller and the buyer meet, but it is not a market for goods, rather it is a market for securities such as stocks, bonds, and investment funds.

1- Stocks:

Suppose there is a company that wants to increase its capital or expand further. It can do something called an “Initial Public Offering” (IPO), which means that the company is listed on the stock market, and therefore anyone can buy a part of this company. You can become a buyer and own a share. As the company makes a profit, you will have a percentage of the profits since you are a shareholder. As the value of the company grows, the price of your share increases, and you can benefit from it by selling it.

Advantages of investing in stocks:

  • It helps combat inflation because you are putting your money into a valuable financial asset that grows over time.
  • It is easy to buy and sell, thus providing you with financial liquidity.
  • As the economy grows, your investment grows.

Disadvantages of investing in stocks:

  • The stock market is always volatile and risky, so the value of your shares can decrease significantly and unexpectedly, causing you to lose all your money. Therefore, there is no guarantee of return on your investment (you are a partner in profit and loss).
  • You need much experience and knowledge of the stock market, financial data, market trends, company performance, economic conditions, and political events.
  • There are fees and currencies on your returns.

2- Bonds.


If a government or company wants to fund a specific project and needs money, but doesn’t want a partnership like stocks, they issue bonds. With bonds, you lend the company a certain amount for an agreed-upon period, and in return, you receive periodic interest in the form of coupons. At the end of the period, you receive the full amount you initially invested.

Advantages of bonds:

  • They provide a fixed income through periodic interest.
  • Their risks are lower than stocks.

Disadvantages of bonds:

  • The return is low because there is no risk (as a general rule, the higher the risk, the higher the return).
  • The value of your investment may decrease due to inflation since your money is tied up for a specific period.

3- Mutual Funds (found in the stock market and banks): 

If you want to invest in bonds or stocks but don’t have the expertise or time, and you also want to guarantee your money in certificates or bank deposits, then mutual funds are the solution. They are a fund with money from a large number of investors, managed by experts on your behalf. They have a strategy to achieve profits, and the fund invests in multiple financial instruments, such as stocks, bonds, certificates of deposit, or a combination of these based on the fund’s type and direction. They provide periodic or cumulative returns.

Advantages of mutual funds:

  • You can withdraw your money at any time without penalty, unlike certificates.
  • Professionals with expertise manage your investment, so you don’t have to spend time or effort tracking it.
  • Diversification and investment in multiple things at the same time.

Disadvantages of mutual funds:

  • They have administrative fees and expenses, which are deducted from your investment, whether the fund makes a profit or not, reducing your return rate.
  • The profits are not fixed or guaranteed.

B – Real Estate.

It is one of the safest commodities at any time and in any place because the need for housing is always a priority for human needs. This means that when you invest in real estate, you ensure that you will achieve a high return because it is a permanent investment as long as there are people. The real estate market is one of the markets that is characterized by its growth, especially in Egypt. According to a report by the global real estate consulting company, Knight Frank, “Real estate prices in Egypt rose by 7.5% in 2020, making it one of the fastest-growing real estate markets in the world.”

Advantages:

  • It provides a steady and continuous income if you buy a property and rent it out.
  • Its value increases over time, which means that you can earn more money if you decide to sell it.
  • It is one of the investments that preserve your money and face inflation to a great extent.
  • You have complete control over your investment, unlike stocks and funds.
  • There is no risk involved.
  • It is a tangible asset and easy to deal with even without much experience.
  • It is a permanent and continuous investment for you and your family.
  • There is great diversity in the real estate market so that you can invest in residential, commercial, medical, or industrial units.

Disadvantages:

  • Unlike stocks, you cannot sell a part of it if you need some money.
  • It requires effort to manage the property, collect rent, and maintain it.
  • If you choose a property in an unremarkable location or one with many problems, it will be difficult, effortful, and time-consuming to sell it later on.


C- Gold.


It is one of the precious metals, known for its importance since ancient times. It is a store of value, which is why it is used for investment purposes.

Advantages:

  • A physical asset that can be stored, unlike stocks and bonds.
  • A haven asset, as it tends to retain its value.
  • One of the most widely demanded financial assets globally. The global demand for gold in 2021 was more than 815 tons.
  • Its market trends and future prices can be easily identified, as it is linked to the price of the dollar.

Disadvantages:

  • It does not generate any continuous cash flow like interest and profits from certificates and stocks. You buy it and wait for the price to rise before selling it and making a profit from the price difference.
  • It is greatly affected by political situations, causing significant fluctuations in its prices.
  • If you store gold in a bank vault, for example, you will incur storage and insurance fees.
  • You may face difficulty selling it.

There are many types of investments, each with its advantages and disadvantages. It is natural to be unsure of the best decision to make and which one will help you invest your money properly and earn more. However, real estate investment remains the safest and most profitable investment, and your money will increase year after year, as real estate prices always experience continuous growth due to high demand. This is according to a report issued by “Knight Frank” a real estate company, which stated that real estate prices in Egypt have been rising since 2020, with apartment prices increasing by 14%, villas by 8%, and lands by 20%. Therefore, economic experts always advise investing in real estate because it protects your money and provides high returns in the short and long term. In the next article, we will provide more information about investing in real estate, as well as tips for investors who want to start and succeed in this field. Stay tuned.

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Type of investment, financial investments, real estate investment, stock investment, commodity investment, digital currency investment, investment in investment funds, gold investment, wealth management, investment

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The best way to protect your money… saving or investing?

by with No Comment Uncategorized

-One of the most fateful choices in your life is “choosing the path where your money is going,” and the topic is critical because it affects not only you and your future but also the people responsible for you, especially at this time because prices continue to rise and the value of the currency continues to fall.. So you need to calculate it correctly.. do you save your money or invest it.

 First of all, what is saving?

It is thrift. You save money on the side so that you can use it in the short term, in addition to these funds being supportive for you in emergency cases such as travel, medical bills, car repair, and so on. It is a short-term saving, but if you are saving for retirement, for example, or your children’s education, it is a long-term saving.

SAVING can be either mandatory or optional. Mandatory saving is applied to you by laws or regulations to benefit you later on. For example, the company you work for deducts a portion of your salary throughout your employment to benefit you in retirement as social insurance or pension fund.

Optional saving is when you voluntarily save money and deposit it into bank accounts or certificates of deposit, which are among the most popular savings methods, and there is a significant difference between them.

(Bank deposits and savings certificates).

 Bank deposits: Simply put, it’s when you leave your money with a bank as a deposit, and they keep it for a certain period of time, which could be (a week, a month, 3 months, 6 months, a year, or more) depending on what you want. The bank then pays you interest on a daily, monthly, quarterly, or another basis, depending on the type of deposit you have chosen. You can break the deposit at any time, but you will lose a portion of your money.

 As for savings certificates, they are like deposits in that they are savings instrument that holds your money and pays you interest for the duration of the certificate, which can range from one to ten years. The advantage of savings certificates is that they offer a higher return than deposits, but you cannot withdraw the certificate until six months have passed. Additionally, you will lose a portion of your money if you break the certificate.

(Pros of saving)

 In general, saving is of great importance and has many advantages, as Benjamin Franklin, one of the founders of the United States, emphasized when he said, “A penny saved is a penny earned.” It is an emergency fund that can help you in any crisis,  and finance any short-term goal, and there is no risk or need for speculation, as your money is secured in a deposit or certificate. Moreover, it is a liquid asset that can be easily used at any time.

(Cons of saving)

money is fluid and easy to use at any time. so it can be spent on unnecessary things and to a large extent, money cannot be controlled.

 The biggest disadvantage of savings, in general, is that the amount you have saved for more than a year, for example, it is possible to lose its value in moments, and this happens due to inflation, the “hidden thief of savings” as Margaret Thatcher, the former British prime minister, called it.

 For example, imagine that you saved 2 million pounds and decided to buy a property, found something that you liked at the same price as yours, and said that you would buy it in a few months. Suddenly, inflation occurred, which means that prices rose and the value of your money fell. Therefore, you need to add funds to the funds that you have in order to be able to purchase the property. In general, you have lost a significant part of your money, and it is still in place.

(Investing)

On the other hand, there is (investing): it is any way that increases your money and maintains its value, such as employing it in a certain area, making a long-term profit, and focusing more on this long-term aspect. If you focus on the short term, you may engage in speculation, which is when you know that a certain item will become more expensive in the future, so you buy it before the price rises, and then sell it for profit. This is based not on market analysis and its study, but on rumors. Speculation is not guaranteed, and its risks are high.

In turn, the investment should last for a long time, and you should make your decision based on a thorough analysis and study, and all this ensures that any risks or losses that may occur are minimized. The advantage of investing is that it secures your future and responsible life from you, provides you with a big profit with little effort, and most importantly, protects your money from any crisis or inflation because your money increases with any rise in prices.

This makes about 75% of financial advisers in America in 2020 recommend their clients to invest (according to market watch), and on this basis, the Federal Reserve surveyed in the same year, and the result recommended was: that the average household net worth in the United States was 121.700 dollars, and this is because the majority of citizens are investors in real estate.

 It is also applicable to real estate investment in Egypt because the real estate market increased by 17% in terms of price in 2020 – according to the report issued by JLL, the international real estate services company – and it brought a large income, and provided capital to people who invested in real estate.

 Why do most people prefer saving to investing?

Because, as humans, we like to always feel safe, we spend money on certificates, deposits, etc. Ways in which there is no risk. And we are afraid to invest even if it is more profitable; because it involves high risks, although risks are always associated with interest and large returns.

 Why do some people fail to invest?

1-because he needs patience and continuity.

2-lack of knowledge and experience (and do not worry from this point because we will make a whole series about investing).

 In general, the purpose of saving and investing is to accumulate funds and use them in the future. They are two sides of the same coin, but it can remain the same coin, and it can be more than one.

(The solution).

Save to invest, as Grant Cardone, a real estate investor, and entrepreneur, said, “investing puts money into the business, and the only reason to save money is to invest it”.

 This is what Warren Buffett did when he was 11 years old, he saved 114 dollars, and instead of keeping them in a savings account, he invested these funds, and he kept investing until he arrived now and became one of the 10 richest men in the world with a net worth estimated at more than 100 billion dollars.

 The basic rule before investing is that you save enough for your needs and the needs of your home for 3:6 months.

(Conclusion) 

Saving is important in that it covers you for any short-term commitment or any urgent need, but it will not be able to protect you from inflation that occurs continuously, and therefore investment thinking is the solution; Because it will provide you with a high return, through which you can achieve all long-term goals such as retirement, or educating your children and securing their future.

  In general, always ask yourself: Why do you save when you can invest? What types of investment? Advantages and disadvantages of each type! And what is the most suitable thing for you? Wait for the next article to know all this and more.