What is devaluation in regards to economics or real estate?
Devaluation is the reduction in the official value of a currency in relation to other currencies. It’s important to note that in Nigeria, the most important factor for purchasing real estate asides from the decision to buy is MONEY.
Nigeria’s central bank devalued the naira by 7.6% against the dollar as authorities in Africa’s biggest oil producer migrated toward a single exchange-rate system for the local currency.
There are various effects of devaluation especially when you consider that Nigeria imports more than they export.
The main effects are: Exports are cheaper for foreign customers. Imports are more expensive. In the short term, a devaluation tends to cause inflation, higher growth, and increased demand for exports.
The current devaluation of the naira as of 2021 is 17.75% with this, people begin to wonder why they should even invest in Nigeria in the first place and I strongly reason with them.
The truth is Nigeria is still a third-world country and development is going to get here whether we like it or not. So if you must invest why not in real estate?
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The benefits of investing in real estate are numerous. With well-chosen assets, investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification and it’s possible to leverage real estate to build wealth.
Real estate investors make money through rental income, appreciation, and profits generated by business activities that depend on the property.
Benefits of Investing in Real Estate
The benefits of investing in real estate include passive income, stable cash flow, tax advantages, diversification, and leverage.
Real estate is a distinct asset class that’s simple to understand and can enhance the risk-and-return profile of an investor’s portfolio. It offers cash flow, tax breaks, equity building, competitive risk-adjusted returns, and a hedge against inflation.
Real estate can also enhance a portfolio by lowering volatility through diversification.
The inflation hedging capability of real estate stems from the positive relationship between GDP growth and the demand for real estate.
As economies expand, the demand for real estate drives rents higher and translates into higher capital values.
Therefore, this sector tends to maintain the buying power of capital bypassing some of the inflationary pressure on tenants. And by incorporating some of the inflationary pressure in the form of capital appreciation.
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