Thinking Argentina or Turkey in the recent years – if the local inflation is so severe that the price of grocery in the morning vs evening (on the same day) is different, how do people make large purchases like a house or a car? How is the price determined and who would provide the long term financing?
In: Economics
Can inflation help longer term though with large purchases, isn’t that to an extent what the housing market and even government debt is built on.
Assuming I brought a house £100k, interest rate is quite high let’s call it 10%.
Inflation in whatever country is running away and creeping up year on year, 15% then 20% let’s say.
As currency devalues and wages have to climb dramatically year on year so people can afford to live.
If I’m locked in at 100k and my wages are going up let’s say 10+% year on year, after a few years my monthly payment is becoming a smaller and smaller % of my salary.
I know this is not perfect at the extreme end, but the anology of my parents brought a house for 10k 30 years ago plays out to some extent to being worth alot more partly due to inflation.
I know there are many other factors that drive house prices but inflation is a massive factor.
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