New topical paper: Does European real estate offer inflation protection?

The impact of recent high inflation on monetary policy has significantly affected real estate capital values, which prompted the INREV Research Committee to hold a debate on real estate’s inflation hedging properties. The paper discusses when real estate property offers an inflation hedge, what is different in this cycle and implications for investors. 

Key highlights: 

• Real estate's inflation hedging properties refer to both components of return, income and capital values, but are temporal and depend on the time horizon
• The recent high inflation resulting in unaffordable rents is an important factor that has resulted in real estate as a less effective hedge. Landlords are likely to be forced to make a choice on whether to maintain occupancy or revenue, possibly ignoring the inflation clauses in lease agreements. Furthermore, the inflation-hedging properties of an individual building, sector or market can be affected by structural changes in occupational markets
• Investors may be taking bets on the cycle in order to find supply-demand imbalances in the short term, as well as explore sector maturity and the vehicle structure as a way to enhance inflation hedging potential of real estate

To learn more download the short paper or view the presentation that was given by Vanessa Muscarà, Europa during the Young Professionals Conference 2023.