COVID is like the annoying relative you just can’t seem to get off the phone. Always in your day-to-day business. We simply must deal with it. In real estate, COVID has annoyingly impacted the supply chain. While not completely responsible for the supply chain malady, it doesn’t help the situation any.
What is supply chain exactly? It is a network between a company and its suppliers to produce and distribute a specific product or service. When there is a breakdown in this network, expect construction prices, durables, and wages to increase, while schedules are pushed out. In a booming real estate market, this a wrench in the wheel.
Investor and consumer demand is very high. Retail and manufacturing have been impacted severely by supply chain issues. The combination of supply and demand fluctuations determines long-term real estate performance. Supply chain shifts generate demand and, in the absence of supply constraints, increased supply. In areas with supply constraints, they instead produce rapid rent growth.
It is now apparent Inflation, driven by supply chain issues, is not transitory and seems to be here for the near future. Real estate has always been considered an inflationary hedge. This is a slippery slope. As inflation increases, interest rates follow. As inflation climbs, the theory is to save more and spend less with the hope returns from higher interest rates are more attractive. With less spending, inflation will ease.
To learn more about how property tax issues can affect your investing strategies, please reach out to Tim Feagans directly at firstname.lastname@example.org.