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Real Estate as a Hedge against Inflation: Learning from the Swiss Case

Martin Hoesli (Lecturer in Finance and Real Estate, Department of Management Studies, The University of Geneva, SwitzerlandLecturer in Finance and Real Estate, Department of Management Studies, The University of Geneva, Switzerlan)

Journal of Property Valuation and Investment

ISSN: 0960-2712

Article publication date: 1 September 1994

Abstract

Tests the inflation‐hedging ability of Swiss real estate over the 1943‐1991 period and, for comparison purposes, that of stocks. Results show that in the long run real estate seems to provide a better hedge against inflation than common stocks. When the inflation rate is broken down into its expected and unexpected components, all coefficients are negative for stocks, whereas some coefficients are positive for real estate. This is particularly true for unexpected inflation. These results are interesting in that the proxy used for real estate (i.e. data pertaining to real estate mutual funds) should be a much better indicator of changes in the underlying real estate than indices which have been used so far. Moreover, the data exists for a very long time period, which makes it possible to test the long‐term ability of real estate to hedge against changes in the purchasing power.

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Citation

Hoesli, M. (1994), "Real Estate as a Hedge against Inflation: Learning from the Swiss Case", Journal of Property Valuation and Investment, Vol. 12 No. 3, pp. 51-59. https://doi.org/10.1108/14635789410063913

Publisher

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MCB UP Ltd

Copyright © 1994, MCB UP Limited