During a recession, when the economy is contracting and businesses are struggling, there is typically a decrease in demand for real estate, which can lead to a decrease in property prices and rental rates. This is because people tend to have less disposable income during a recession, and may be more hesitant to make large purchases such as buying a house or taking on a long-term lease.
However, when a recession occurs during an inflationary period, where the general price level is rising, the effect on real estate market can be more complex. Inflation can cause home prices to increase, but at the same time, the recession can decrease the overall demand for housing, which can lead to a decrease in property prices and rental rates.
Additionally, high inflation can also make borrowing more expensive, which can make it more difficult for buyers to afford a home. This could lead to a decrease in demand for housing, which can further decrease property prices.It's important to note that real estate markets can be local, and the impact of recession and inflation on real estate can vary depending on the location, the type of property and the stage of the real estate market.
It's also important to consider that the impact of recession and inflation on real estate can be mitigated by government policies such as monetary and fiscal policies that can help stabilize the economy during the recession.