Real inflation

The inflation rate in the Czech Republic has reached five-year highs, with inflation measured by the increase in the consumer price index (CPI) reaching 2.9% in August, according to the Czech Statistical Office.

One of the most important items for every household is the cost of housing.However, the CPI basket does not take into account the prices of older properties, which are predominantly sold nationwide. Meanwhile, the prices of new properties are captured in the index only indirectly through rents. In a situation where property prices have risen by tens of percent in recent years, it can be assumed that the actual inflation rate will be significantly higher than the officially reported 2.9%. Another factor supporting the above statement is the shortening life cycle of many products represented in the consumer basket. Previously, a consumer product such as a washing machine or a vacuum cleaner lasted ten or even fifteen years. Today, we replace these appliances with new ones much sooner, and often spend a lot of money on repairs and maintenance. Some manufacturers even fit so-called cartridges to appliances so that it is necessary to buy a new one shortly after the two-year warranty period has expired. These effects, which increase real inflation, are of course not captured in the consumer basket.

Inflation reduces the value of property. The question then arises as to how to invest so that inflation does not reduce the value of the asset, but rather increases it. You need to invest in assets that increase in value with inflation. This certainly does not include savings and bank accounts, where the real value of the funds deposited declines rapidly and interest is negative despite inflation.

It is worth investing in foreign real estate where up to 8% of the invested funds are guaranteed to appreciate

For more information, feel free to call us. We will be happy to advise you and discuss other options.