Inflation’s impact on real estate investments has become an increasingly common theme in IELTS Writing Task 2 essays. Based on analysis of past exam questions from 2019-2023, this topic has appeared in various forms approximately 8-10 times, particularly in questions about economic policies, housing markets, and investment strategies. Similar to how inflation influences personal financial planning, this subject requires candidates to demonstrate deep understanding of economic concepts.
Today’s Sample Question
Some people believe that rising inflation makes real estate a safer investment compared to other assets. To what extent do you agree or disagree with this statement?
Question Analysis
This question requires candidates to:
- Take a clear position on whether real estate is a safer investment during inflation
- Support arguments with relevant examples and explanations
- Consider both advantages and disadvantages of real estate investment during inflationary periods
- Provide a balanced discussion while maintaining their stance
Sample Essay 1 (Band 8.0)
While how high-interest rates affect real estate is complex, I strongly agree that real estate generally serves as a more secure investment during inflationary periods compared to other investment vehicles.
Real estate provides a natural hedge against inflation through multiple mechanisms. Firstly, property values typically appreciate alongside inflation, as construction costs and land prices increase. For instance, during Vietnam’s high inflation period in 2011, real estate prices in major cities rose by approximately 15-20%, preserving investors’ wealth. Additionally, rental income from properties usually increases during inflationary periods, providing investors with growing cash flow that helps maintain purchasing power.
Moreover, real estate offers tangible value that many other investments lack. Unlike financial instruments such as stocks or how to invest in bonds during inflation, property provides utility through residential or commercial use. This inherent value helps protect against the severe devaluation that can affect purely financial assets during economic turbulence. For example, during the 2008 financial crisis, while many financial investments became worthless, properties retained significant portions of their fundamental value.
However, real estate investment during inflation does present certain challenges. High interest rates, which often accompany inflation, can increase mortgage costs substantially. Furthermore, property maintenance expenses tend to rise with inflation, potentially squeezing profit margins for investors. Nevertheless, these drawbacks are generally outweighed by the long-term benefits and stability that real estate provides.
In conclusion, while no investment is entirely risk-free, real estate’s inherent characteristics make it a relatively secure option during inflationary periods. The combination of value appreciation, rental income potential, and tangible utility creates a robust investment vehicle that can effectively preserve wealth amid rising prices.
Real Estate Investment as Protection Against Inflation
Sample Essay 2 (Band 6.5)
I agree that real estate is safer than other investments when inflation is high. The impact of inflation on personal savings shows why people need better ways to protect their money.
The main reason why real estate is good during inflation is because house prices usually go up. When prices in general increase, the cost of buildings and land also increases. This means people who own property don’t lose money to inflation. For example, in my country, people who bought houses 10 years ago have seen their property value increase a lot.
Another good thing about real estate is that you can get money from rent. Landlords can increase rent when inflation is high, which helps them keep their income at the same level. This is better than keeping money in the bank where the effects of inflation on savings can make it worth less over time.
However, there are some problems with real estate investment. It costs a lot of money to buy property, and bank loans are expensive when inflation is high. Also, things like repairs and taxes can cost more during inflation.
In conclusion, I think real estate is safer than other investments during inflation because property values usually increase and you can earn rent, even though there are some challenges to consider.
Scoring Analysis
Band 8.0 Essay:
- Clear position with sophisticated arguments
- Excellent use of specific examples
- Complex sentence structures
- Wide range of vocabulary
- Coherent paragraphing with clear progression
Band 6.5 Essay:
- Clear but simpler arguments
- Basic examples
- Mix of simple and complex sentences
- Limited but adequate vocabulary
- Basic coherence and progression
Key Vocabulary
- hedge (n.) /hedʒ/ – protection against financial loss
- appreciate (v.) /əˈpriːʃieɪt/ – increase in value
- tangible (adj.) /ˈtænʒəbl/ – physical, real
- devaluation (n.) /diːˌvæljuˈeɪʃn/ – reduction in value
- inherent (adj.) /ɪnˈherənt/ – existing as a natural part
- turbulence (n.) /ˈtɜːbjʊləns/ – unstable conditions
- robust (adj.) /rəʊˈbʌst/ – strong and healthy
- squeeze (v.) /skwiːz/ – pressure or restrict
Practice writing your own essay on this topic and share it in the comments for feedback. Similar topics might include the impact of inflation on different investment types, government policies for controlling housing prices, or the relationship between economic growth and property markets.
