Inflation and its adulteration through government Interventionism at the example of Germany – impacts on Real Estates
||Inflation and its adulteration through government Interventionism at the example of Germany – impacts on Real Estates
||24th Annual European Real Estate Society Conference in Delft, Netherlands
||Interest rates are determined by the market participants at the expectation of infla-tion of the currency and the risk they bear. Based on it the profitability and risk of a calculated venture the allocation of capital is planned. For example CAPM is based on a risk free investment, which normally should represent the actual inflation, but currently there are negative interest rates. The difference between the risk free in-vestment and the risk adjusted preferred investment is the overperformance. When the assumption especially in terms of inflation are wrong or manipulated it forts to a misallocations of capital. Also real economic growth has to be bigger than the real inflation, otherwise the capital stock depreciates. To keep the value of the capital stock it has to grow with the devaluation of the currency. Stable and sustainable growth needs a stable capital stock and reliable information during the planning hori-zon. Inflation in Germany is measured by the HVPI. It makes no differences between the various sectors of the economy. By the trickle-down effect and the spill-over in the economy there is a time lag between the asset price inflation and the consumer price inflation, reinforced through the principal-agent conflict, in our case the government and the market participants. We take a look on the actual measurement of inflation in Germany and analyse the increase in fiscal spending respektively taking and in gen-eral the increasing interventionism. Further the true cost of energy, property and real estate without statist intervention and its increase in the time. Added the risk alloca-tion of interest rates inflation adjusted in different economic sectors. Seeing Real Es-tate dynamic and hedge the law- and inflation risk. Summarized with an alternative measurement of inflation and a short-, mid- and long term perspective for Germany under the influence of inflation and its effects on real estate.
||Inflation; Interventionism; Adulteration; Germany; Interest rates
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||Real Estate Markets & Economics
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