Dustin Rennie discusses inflation and the impact of global economies on the Belize real estate market
Dustin Rennie of RE/MAX Belize is one of the region’s top real estate and investment professionals. Covering real estate in Belize and current market conditions.
SAN PEDRO TOWN, BELIZE, July 5, 2022 /EINPresswire.com/ — Recession and inflation are not new things, they are part of any economy. The United States has just come out of a long bull market.
Just because inflation and recessions occur does not mean that investing stops, strategic investors are turning to new avenues and taking advantage of profitable ways to place capital.
When economies turn, people are no longer looking for return on investment, they are looking for return on investment.
When looking at a real estate investment there are usually 2 elements of cash flow and appreciation. Dustin Rennie says savvy real estate investors tend to dive a bit deeper and there are basically 4 pillars that strategic real estate investors look for;
Yield (cash flow),
Fortunately, when you invest in Belize, you are able to tick all 4 boxes. You also get the added benefit of limited supply and scarcity, in a growing demand market.
When considering a strategic investment strategy, it’s important to remember that money doesn’t just “disappear,” it moves. A recession, by definition, “is a macroeconomic term that refers to a significant decline in general economic activity in a given region. It had been generally recognized as two consecutive quarters of economic decline, as evidenced by GDP. In the age of globalization, markets are more dependent on each other, but they also remain independent. What happens in one country does not mean that it will be the same in another. Just because one region experiences an economic decline does not mean that another region will suffer the same effects.
Currently, the US economy is experiencing the highest inflation rates in over 40 years. This largely fuels what is happening in the global economy. Real estate, however, is one of the only inflation-indexed assets and investments. When considering a more inflation-proof investment, you want something whose price adjustments match or are indexed to the rate of inflation. If you have investment assets that adjust for inflation, while producing cash flow, you are well positioned and diversified.
Typically, the most inflation-resistant investments are able to pass on price increases to their customers. This remains true in Belize. I’m not saying we’re recession proof by any means, but Belize (especially real estate) is in a good place, all things considered.
One important thing to note is that real estate values and rental income tend to follow inflation over time, and investors who invest in real estate tend to outperform the market during periods of inflation. For example, in 2021, inflation hit a 40-year high and real estate (both rental income and asset appreciation) outperformed the S&P.
Typically, real estate assets and investments perform best when inflation rates exceed 7% (which is the current situation). The inflation-hedging capacity of real estate stems from the relationship between GDP growth and demand for real estate. As economies grow and people move or relocate, demand for real estate pushes up rents. When you have a mix of residents looking for rentals combined with the vacation rental market, you are able to adapt. Higher rents with better occupancy, in turn, translate into higher capital values. Therefore, real estate tends to maintain the purchasing power of capital by transmitting some of the inflationary pressure to tenants and incorporating some of the inflationary pressure in the form of capital appreciation.
Compared to other investments, real estate tends to hold up well against inflation. But it is important to realize that there are many types of real estate investments and not all have the same resistance to inflation. When looking for more inflation resistant real estate assets, it is important to research;
1. Short-term leases: This allows you, as an investor, to quickly adjust rents (market rent and net rent) to meet demand and inflation. A primary vacation rental market is perfect for this. As a general rule, the average rental on Ambergris Caye is 6 days, and prices can be adjusted very quickly. You can also offer monthly rental rates, which avoid locking in below-market rent for a year.
2. Price fed: Can you control and quickly adjust the price when needed to match inflation? Vacation rentals give you high control as you can continually adjust rates to keep up with inflation and/or demand. Many other rental markets have implemented restrictions (controls) on vacation rentals or rent controls. Belize does not, making it a great property control investment.
3. Resilient or increasing demand: Belize has experienced double-digit tourism growth every year, except in 2020 (COVID restrictions). The country has just entered the global radar and has often topped the list when it comes to emerging vacation destinations.
4. Fewer regulations: Belize has no rent controls. This allows you to manage your rentals according to your needs. We are also one of the few “pro-ownership” countries in the region. We do not recognize squatters, and as the property owner you can dictate who stays there and for how long.
5. Favorable taxation: Belize is a tax haven. We have very low property taxes. Low corporate tax. No capital gains tax. And no property tax.
Recessions and inflation are not permanent. Real estate investors make money from rental income and appreciation.
Good real estate investments offer passive income, stable cash flow, tax benefits, diversification, and leverage.
During economic downturns, many investors turn to tangible assets like real estate and gold. During times of economic uncertainty and stress, it’s important to seek not just ROI, but ROI as well.
Property in Belize is a cost effective way to get both. Real estate on Ambergris Caye offers investors a way to own a finite commodity that is a tangible real asset with future demand.
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USD Inflation and Real Estate in Belize